The transfer of right to use a trade mark is a "sale" within the meaning of the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for Any Purpose Act, 1985.

The judgment of the Court was delivered by

DR. B. P. SARAF, J. - By this reference under, section 61(1) of the Bombay Sales Tax Act, 1959 read with section 8 of the Maharashtra Sales Tax on the Transfer of the Right to use Any Goods for any Purpose Act, 1985, the Maharashtra Sales Tax Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue :

"Whether, on facts and in the circumstances of the case, was the Tribunal justified in holding that the transaction between the respondent and M/s. Salstar Foods & Beverages Ltd., under agreement dated September 6, 1985 and evidenced by Debit Note No. 94/A dated September 13, 1988 for Rs. 1,500 in respect of royalty charges collected by the respondent did not amount to "sale" as defined in section 2(10) of the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for Any Purpose Act, 1985 and, therefore, the respondent is not liable to get registered under the said Act ?"

2. The material facts giving rise to this reference are as follows :

The assessee, M/s. Duke & Sons Pvt. Ltd., is a company registered under the Bombay Sales Tax Act, 1959 as also under the Central Sales Tax Act, 1956. It is a holder of registered trade marks, viz., Duke's, Mangola, Pineola, Tango. The assessee manufactures concentrates for manufacturing aerated waters, beverages, etc., and sells the same to bottlers in the State of Maharashtra as also outside the State of Maharashtra for use in manufacture of aerated waters, beverages, etc. Such transactions between the assessee and the purchasers of concentrates take place in terms of the written agreement between them. As per these agreements, the assessee sells the concentrates to the customers for use in manufacturing aerated waters, beverages, etc., at their bottling plants. Such purchasers of concentrates are also permitted to market their beverages by using the trade mark of the assessee. The assessee charges royalty for the user of its trade marks by the customers. These agreements are known as "franchise agreements". In the present case, the assessee entered into an agreement dated September 6, 1985 with M/s. Salstar Foods & Beverages Ltd. of Kondavala, Pune. By this agreement, M/s. Salstar Foods & Beverages Ltd., were permitted to use the trade mark of the assessee on the bottles of beverages manufactured by them in Maharashtra and to market the same under the trade mark of the assessee. As per the agreement, the assessee charged royalty from Salstar Foods & Beverages Ltd., for the use of its trade marks at the rate specified therein. The assessee recovered a sum of Rs. 1,500 as royalty by Debit Note No. 94/A dated September 13, 1988. With a view to ascertaining its liability to pay tax under the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for Any Purpose Act, 1985 ("1985 Act") on the amount of royalty received by it for transfer of right to use its trade mark to M/s. Salstar Foods & Beverages Ltd., the assessee applied to the Additional Commissioner of Sales Tax under section 52 of the Bombay Sales Tax Act, 1959 read with section 8 of the 1985 Act for determination of the question whether it was liable to pay tax on the amount of royalty received by it for the transfer of the right to use its trade mark under the 1985 Act. The Additional Commissioner of Sales Tax (Enforcement Branch), by his order dated March 3, 1989, held that by the agreements in question there was a transfer of right to use the trade marks of the assessee to its customer and in that view of the matter, the transaction in question amounted to "sale" within the meaning of clause (10) of section 2 of the 1985 Act and hence the assessee was liable to pay tax under that Act on the amount of royalty received by it. Aggrieved by the above order of the Additional Commissioner of Sales Tax, the assessee appealed to the Maharashtra Sales Tax Tribunal ("Tribunal"). Before the Tribunal, it was contended