HC : Applies 'effective control' test; Beer contract manufacturing a service, no VAT exigible

Karnataka HC rules on leviability of VAT vis-à-vis service tax on ‘intangibles’ in case of contract manufacturing for United Breweries Ltd; Applies ‘effective control’ test laid down by SC in Rashtriya Ispat Nigam; Contract manufacturing of ‘beer’ as per Brand Owner’s (BO) instruction, who decides supplier of raw material as also finished goods to be sold to customer, only a ‘service’ taxable as “Intellectual Property Right”; Holds that brand is not commercially exploited by contract manufacturer using own discretion, whereby effective control rests with BO and CM only a ‘captive manufacturer’, hence said transaction not liable to VAT; However, states that in case of packaged drinking water, since bottlers/dealers have discretion to commercially exploit brand and sell products as per own choice, effective control vests with them and not BO, therefore same taxable under VAT laws; Holds that dual levy of both VAT and service tax is impermissible in view of SC ruling in case of BSNL : Karnataka HC