Glaxo Smithkline Asia P. Ltd. vs Assessing Authority, Sepcial ...
2007 Latest Caselaw 1076 Del

JUDGMENT

Madan B. Lokur, J.

Page 2184

Rule D.B.

CM No. 8209/2006

1. The Petitioner in this writ petition had obtained a nontrademark Horlicks could give similar licenses to others and also to use the trademark itself. Even the Petitioner could exclusive license to use various Horlicks trademarks for a variety of goods. The fact that a non-exclusive license was granted, itself postulates that the owner of the sub-license its non-exclusive right. Accordingly, it appears that the Petitioner gave a non-exclusive license to SmithKline Beecham Consumer Healthcare Limited.

2. According to the Revenue, the grant of a license to SmithKline Beecham Consumer Healthcare Limited amounts to a transfer of a right to use goods and is, therefore, taxable under the Delhi Sales Tax on Right to Use Goods Act, 2002.

3. It is submitted by learned Counsel for the Petitioner that there is in fact no transfer of the right to use any goods and this submission has been made without prejudice to his contention that a trademark is not goods. Learned Counsel for the Petitioner has placed reliance on a decision of the Supreme Court in the Bharat Sanchar Nigam Ltd. and Anr. v. Union of India , particularly the concurring opinion of Hon'ble Mr. Justice A.R. Lakshmanan in which it is stated (in paragraph 97 of the Report) that to constitute a transaction for the transfer of the right to use goods, the transaction must have several attributes. According to the learned Counsel for the Petitioner some of these attributes are absent in the transaction that the Petitioner has entered into with SmithKline Beecham Consumer Healthcare Limited. For example, the Petitioner does not have exclusive right to use the trademarks and the owner of the trademark can again transfer the right to use the trademark to any other person. On this basis, it is submitted that there is in fact no transfer of the right to use goods but only a license has been granted to the Petitioner who in turn has granted a sub-license to SmithKline Beecham Consumer Healthcare Limited. At best, there is an assignment of the trade mark which is distinct from a transfer of the right to use the trademark. It may be noted that it is not anybody's case that there is in fact a sale of the trademark in favor of the Petitioner or by the Petitioner in favor of SmithKline Beecham Consumer Healthcare Limited.

4. Reference is also made by learned Counsel for the Petitioner to the distinction drawn by the Supreme Court (in the opinion of Hon'ble Ms. Justice Ruma Pal and Hon'ble Mr. Justice Dalveer Bhandari) between the case of State of Andhra Pradesh v. Rashtriya Ispat Nigam Ltd. (2002) 3 SCC 114 and Aggarwal Brothers v. State of Haryana and Anr. . Page 2185 In the former case, there was no intention to transfer the right to use goods which was machinery belonging to a contractor while in the other case there was an intention to transfer the right to use goods which in that case was shuttering materials to be used in the course of construction of buildings.

5. We are of the view, on the basis of these two distinct and specific example given by the Supreme Court (in Rashtriya Ispat Nigam Ltd. and Aggarwal Brothers) as well as the exposition of law in Bharat Sanchar Nigam Ltd. that the Petitioner has made out a prima facie case for the grant of ad interim relief.

6. Learned Counsel for the Revenue contended that the Petitioner has not come to the Court with clean hands in the sense that it has not disclosed the fact that it is a registered dealer under the Delhi Sales Tax on the Right to Use Goods Act, 2002. According to learned Counsel for Petitioner his client had in fact applied for registration but did not pursue it because it was of the opinion, based on legal advise, that the provisions of the Act were not applicable and that the transaction entered into by the Petitioner was in the nature of a service and was, therefore, liable to service tax under the Finance Act, 1994 as amended from time to time. It is further submitted by learned Counsel for the Petitioner that because his client did not pursue the registration, it was cancelled by the Revenue and in any case the Petitioner cannot be bound by an action which is incorrect in law. We are of the view that it cannot be said, under these circumstances, that the Petitioner has not come to Court with clean hands.

7. The question of alternate remedy has also been pressed by learned Counsel for the Revenue but we are of the view that since the questions involved are of some importance and we need to interpret the words "transfer of right to use any goods", which occur not only in the Delhi Sales Tax on the Right to Use Goods Act, 2002 but also in Article 336(29A)(d) of the Constitution, this interpretation must be decided by this Court and cannot be left exclusively to the statutory authorities.

8. Learned Counsel for the Petitioner has submitted, by way of an additional argument, that since his client has also been paying service tax as postulated by the Finance Act, 1994 as amended from time to time and rate of tax paid by it, though to the Union, is about 131/2% as against a rate of tax of 4% under the Delhi Sales Tax on the Right to Use Goods Act, 2002, the balance of convenience would be in favor of the Petitioner in as much as the Petitioner is paying three times the amount of tax to the Union. Learned Counsel for the Petitioner also relies upon this to demonstrate the bona fides of the Petitioner who is not trying to avoid any payment of tax.

9. We are prima facie in agreement with the contention of learned Counsel for the Petitioner and, therefore, are of the view that the Petitioner has made out a good case on the question of balance of convenience also. Similarly, we are of the view that undue hardship will be caused to the Petitioner if it is required to pay tax not only under the Delhi Sales Tax on the Right to Use Goods Act, 2002 but also service tax under the Finance Act, 1994 as Page 2186 amended from time to time, more particularly since the Petitioner is dealing in consumer items.

For all these reasons, we are of the view that the interim order passed on 7th July, 2006 requires to be confirmed.

We confirm the order dated 7th July, 2006.

10. We put it to learned Counsel for the Petitioner that without prejudice to his rights and contentions, a statutory appeal may be preferred under the Delhi Sales Tax on the Right to Use Goods Act, 2002 but learned Counsel for the Petitioner states, on instructions that his client would not like to prefer an appeal and would willingly suffer the consequences of the assessment order as it exists today in case the writ petition is dismissed.

11. Considering the importance of the question, while disposing of this application, we direct the matter be listed for directions on 9th August, 2007. The Bench hearing tax matters may then take a view whether to expedite the hearing of the writ petition or not.