M/S Lunar Rubbers Pvt. Ltd. v. State of Kerala

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** **&** **THE HONOURABLE MR. JUSTICE ASHOK MENON** **THURSDAY ,THE 06TH DAY OF SEPTEMBER 2018 / 15TH BHADRA, 1940** **OT.Rev.No. 121 of 2013** **AGAINST THE ORDER/JUDGMENT IN TAVAT 113/2011 of KERALA VAT APPELLATE TRIBUNAL, ERNAKULAM DATED 26-02-2013** ## **REVISION PETITIONER/S:** **M/S LUNAR RUBBERS PVT. LTD. THODUPUZHA, REPRSENTED BY ITS MANAGING DIRECTOR, ISSAC JOSEPH.** **BY ADV. SMT.S.K.DEVI** ## **RESPONDENT/S:** **STATE OF KERALA REPRESENTED BY IT FINANCE SECRETARY SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **BY SR. GOVERNMENT PLEADER SRI V.K.SHAMSUDDIN** **THIS OTHER TAX REVISION (VAT) HAVING BEEN FINALLY HEARD ON 06.09.2018, ALONG WITH OT.Rev.122/2013& OT.Rev.123/2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** O.T Rev. Nos.121,122 & 123/2013 2 **O.T.Rev. Nos. 121, 122, & 123 of 2013** **O R D E R** ## **Vinod Chandran, J** **The issue raised in the above revision is whether the transfer of trade mark to sister concerns would lead to a transfer of right to use, thus making the transaction taxable under the Kerala Value Added Tax Act, 2003 (for brevity “the KVAT Act only). The learned Counsel for the revision petitioner would submit that the issue is no longer** _**res integra**_ **covered by** _**[(2013) 63 VST 497 (Ker)] Malabar Gold Private Limited v. Commercial Tax Officer, Kozhikode.**_ **It is pointed out that the very judgment of the learned Single Judge which was reversed in the afore cited decision by a Division Bench of this Court was relied on by the Tribunal to find transaction of transfer of trade mark to be taxable under the KVAT Act as transfer of right to use.** O.T Rev. Nos.121,122 & 123/2013 3 **2. The learned Senior Government Pleader, however, would contend that** _**Malabar Gold**_ **has been challenged before the Hon'ble Supreme Court wherein a Civil Appeal is now pending against the said decision. It is also submitted that the Bombay High Court had taken a contrary view with respect to transfer of right to use the trademark in** _**[(2015) 80 VST 173 (Bom)] Tata Sons Ltd., v. State of Maharashtra and another.**_ **An appeal has been filed by the assessee therein to the Hon'ble Supreme Court wherein in SLP No.7768/2015 by order dated 23.11.2015 there was a stay granted, but only insofar as the penalty imposed by the Assessing Authority. It is also pointed out that the Division Bench in** _**Malabar Gold (supra**_ **) did not properly appreciate the binding declaration in** _**[(2009) 24 VST 333 (Ker)] Kreem Foods Pvt. Ltd., v. State of Kerala;**_ **by a coordinate bench of this Court.** **3. We see from** _**Kreem Foods**_ **(supra) that** O.T Rev. Nos.121,122 & 123/2013 4 **therein specific franchise granted for manufacture and sale of ice creams was held to be taxable turnover under Kerala General Sales Tax Act, 1963 ( for brevity “the KGST Act” only). A different stand was taken only for reason of the transaction of franchise being covered under the Finance Act, 1999 as taxable service from 2003 onwards under Section 65(47) : franchise which reads as under:-** **““franchise” means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be , is involved.”** **4. Left to ourselves we would have been persuaded to follow the judgment in** _**Tata Sons**_ O.T Rev. Nos.121,122 & 123/2013 5 _**Ltd(supra**_ **) but for the difficulty insofar as the said judgment having only persuasive effect while** _**Malabar Gold**_ **is binding on us. Appropriately we would have then referred the case for decision by a larger bench, especially noticing the fact that the aspects theory as propounded by the Hon'ble Supreme Court in** _**Federation of Hotel and Restaurant Association of India vs Union Of India. (1989) 3 SCC 634**_ **having not been taken into account by the Division Bench in** _**2013 VST 497 (Ker)**_ **. However, we notice that the conflicting decisions from this Court and the High Court of Bombay are pending before the Hon'ble Supreme Court which is on identical question of law. In such circumstances, we would not attempt a reference and would as of now concede respectfully to the decision of the Division Bench of our Court in** _**Malabar Gold.**_ **In so conceding we have to notice that the Division Bench had specifically looked at the agreements and** O.T Rev. Nos.121,122 & 123/2013 6 **terms which the assessee herein also says are identical in the assessee's case. We should then observe that the agreement was not looked into by any of the fact finding authorities for reason of the binding declaration of the learned Single Judge, in favour of the Revenue, which stood reversed by the Division Bench in** _**Malabar Gold .**_ **5. In such circumstances, it is only appropriate that there be a remand to the last fact finding authority, the tribunal to further examine the facts; specifically the terms of the agreement of franchise. The assessee shall produce the agreement before the Tribunal and the Tribunal shall examine the same looking at the Division Bench decision of this Court in** _**Malabar Gold**_ **. We make it clear that both the assessee and the State would have right to file a revision from the order of the Tribunal since we have not expressed anything on the merits of the matter, especially on** O.T Rev. Nos.121,122 & 123/2013 7 # **account of the issue pending before the Hon'ble Supreme Court.** **The revisions would stand disposed of with the above order of remand. No order as to Costs.** **Sd/-** **K. Vinod Chandran, Judge** **Sd/-** **Ashok Menon, Judge** **jma** O.T Rev. Nos.121,122 & 123/2013 8 ## **APPENDIX** ## **in OTRev.No.121/2013** **PETITIONER'S/S EXHIBITS:** **ANNEXURE I TRUE COPY OF THE ASSESSMENT ORDER NO. 32060400175/2005-06 DATED 19.05.2010** **ANNEXURE II TRUE COPY OF THE FIRST APPEAL ORDER NO KVATA NO. 2016 TO 2018/2010** **ANNEXURE III** **TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL TA(VAT) NO.113/11, 114/11 & 115/11 DATED 26.02.2013** //true copy//