CA Bimal Jain
United Breweries Limited (“the Respondent”) being owner of Kingfisher Brand entered into contracts with certain Contract Bottling Units (“CBUs”) for manufacturing of beer.
In terms of the contract:
The Respondent received payments from CBUs as ‘brand franchise fees’ and paid Service tax on the same. However, the Assessing Officer levied Sales tax on such payments by treating these as royalty.
The Hon’ble High Court of Karnataka held that it is settled law that Sales tax can’t be attracted until effective control is transferred. Since CBUs did not get effective control over the brand name as such, it could not be considered as sale of intangible goods. It was further held that since the Respondent had already paid Service tax on the amount received as brand franchise fees, double taxation on same goods is not permissible.