M/s Duphar Interfran Ltd. vs. The State Of Maharashtra [Sales Tax Reference No. 9 Of 2012] Dated 21 November 2025

Bombay High Court held that the situs of a trademark assignment depends on the location of its owner, following the principle mobilia sequuntur personam.

BRIEF FACTS OF THE CASE

• The Applicant, engaged in the business of manufacturing and marketing of pharmaceuticals and consumer healthcare products, owned and held the trademark "Crocin" which was registered under the Trade and Merchandise Marks Act, 1958 (TMM Act), with the Registrar of Trademarks, Mumbai.
• The Applicant entered into a Brand Acquisition Agreement with SKB Play PLC, London (SKB), a company incorporated under the laws of the United Kingdom with its registered office in Middlesex, UK. Through this Agreement executed in London, the Applicant sold the trademark "Crocin" to SKB. Pursuant to the execution of the Agreement, SKB, being the buyer/assignee of the trademark "Crocin", applied to the Registrar of Trademarks, Mumbai, to register itself as the new proprietor of the trademark.
• The Commissioner of Sales Tax, Mumbai, issued a determination order dated 31 August 1998, holding that the assignment of the ‘Crocin' trademark was a local sale within Maharashtra liable to 4% sales tax under Schedule Entry C-I-26 of the Bombay Sales Tax Act, 1959 (BST Act). Being aggrieved by the aforesaid determination order, the Applicant filed an Appeal before the Tribunal.
• During the pendency of the Applicant's appeal against the determination order, an Assessment order dated 11 March 1999 raised the demand of Rs. 99,67,880/-, primarily due to the 4% tax on the brand acquisition consideration. The Applicant filed an appeal against the assessment order before the Deputy Commissioner, which was dismissed on 16 February 2000.
• The Applicant challenged the order dated 16 February 2000 before the Maharashtra Sales Tax Tribunal, which was decided along with the Appeal preferred against the Determination order. The Tribunal, by a common order dated 26 June 2008, dismissed both appeals, holding that the sale was a local sale within Maharashtra and was taxable at 4%. The Tribunal reasoned that the situs of the trademark was determined by its place of registration, which was India.
• The Tribunal, by order dated 5 May 2010 in Reference Applications, referred the questions whether the sale of the trademark ‘Crocin' was a sale within Maharashtra liable to 4% tax or a sale in the course of export under Section 5(1) of the Central Sales Tax Act, 1956, (CST Act) and therefore not liable to tax, which required the determination of the "situs" (location) of the intangible asset (trademark) and whether its assignment to a UK-based company constituted an export transaction exempt from state sales tax, to the High Court.

KEY OBSERVATIONS OF THE HON'BLE BOMBAY HIGH COURT

• The Hon'ble Bombay High Court held that the Brand Acquisition Agreement dated 18th January 1996 in respect of the trademark "Crocin" entered into between the Applicant and SKB London was an Agreement to Sale. Such a sale was not a sale within the State of Maharashtra but shall be deemed to have taken place in the course of export of the trademark "Crocin" outside India, as contemplated under Section 5(1) of the CST Act. Consequently, the transaction was not liable to sales tax in Maharashtra.
• The Court applied the legal principle of "mobilia sequuntur personam" (movables follow the owner) to determine the situs of the intangible asset. Relying heavily on the coordinate bench decision in Mahyco Monsanto v. Union of India¹ , the Court held that the situs of an intangible asset like a trademark follows the situs of its owner. Since the assignee SKB was a UK-based company with its registered office in Middlesex, UK, the situs of the trademark ‘Crocin' moved to the UK upon assignment. This movement of the trademark outside India, following the situs of the owner, constituted an export within the scope and ambit of Section 5 of the CST Act.
• The Court rejected the Revenue's contention that the place of registration of the trademark determines its situs. The Court held that registration under the TMM Act is not compulsory, though legally advisable, and that registration is not the sole determinant of situs. The Court observed that upon assignment, the assignee acquires title to the registered trademark by virtue of the assignment itself and not by registration. The acquisition of title is not postponed to the stage of registration by the Registrar of Trademarks. Once the trademark was assigned to SKB, all prior rights of the existing owner (the Applicant) were extinguished, and the assignor thereafter had no subsisting rights.
• The Court noted that post the 6th Constitutional Amendment in Article 286, effective from 11 September 1956, the state shall not impose any tax on the sale or purchase of goods when it takes place in the course of export outside the territory of India. The protection under Article 286(1)(b) read with Section 5(1) of the CST Act was available to the Applicant. The Court observed that the sale of the intangible trademark ‘Crocin' through the Brand Acquisition Agreement was a sale in the course of export outside India, and not a sale within the State of Maharashtra, and therefore not liable to sales tax at 4% under Schedule Entry C-I-26 of the BST Act. The Sales Tax Reference No. 9 of 2012 was accordingly disposed of in favour of the Applicant.

AURTUS COMMENTS

• The judgment reinforces that registration of a trademark is not mandatory for trademark rights to exist, and trademark rights arise from use and can be enforced through common law remedies (passing off) even without registration. An assignment of a trademark is valid and effective upon execution of the assignment agreement. Registration is merely an administrative act that provides evidential value and statutory remedies. For tax and jurisdictional purposes, the situs of a trademark (and by extension, other intellectual property) follows the location of its owner, not the place where it is registered or used. This provides crucial clarity that cross-border assignments of IP can qualify as exports for tax purposes, even though the IP is registered in India and may continue to be used in India under licensing arrangements, thereby attracting immunity from state sales tax under Article 286(1)(b) of the Constitution.
• In Ambalal Sarabhai Enterprises Ltd. v. Sales Tax Officer² while expounding on the principle laid down in 20th Century Finance Corporation Ltd. v. State of Maharashtra³, held that "the incidence of taxability arises at a place where the property in goods is actually passed", thereby establishing that the subject matter's location is not determinative for tax purposes.
• While the GST regime has largely overtaken the CST Act and State sales tax laws for current transactions, this type of legal reasoning remains highly relevant. The GST law treats the permanent transfer of intangibles as a supply of “goods”. The concept of export of goods under GST requires the physical movement of such goods outside India, which, in the case of intangibles, is difficult to substantiate and can be evidenced only by the transfer of documents of title.
• Although GST has replaced CST/VAT, the conceptual framework established in such judgments may inform the interpretation of GST provisions relating to place of supply for cross-border IP transactions, classification of IP-related supplies as goods or services, and export of services provisions under Section 2(6) of the IGST Act.

Footnotes

1. 2016 SCC OnLine Bom 5274

2. (2006) 145 STC 523

3. (2000) 119 STC 182

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