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Kerala General Sales Tax Act - sale by brand name holder or trade mark holder to be first sale for purpose of Sec 5(2): Supreme Court

By TIOL News Service

NEW DELHI, APR 22, 2014: THE appellant is the registered brand owner of 'CRYPTM'. Pursuant to an agreement dated 01.04.1995 entered into between the appellant and the manufacturing company viz. M/s. Bristo Foods Pvt. Ltd., the manufacturing company had license and right to use the appellant's name 'CRYPTM'.

The assessing authority had completed the assessments for the assessment years 1998-1999 and 1999-2000 and had levied sales tax under Section 5(2) of the Kerala General Sales Tax Act, 1963. This was upheld by all higher authorities including the High Court.

The assessee is in appeal before the Supreme Court.

Supreme Court noted that in order to attract Section 5(2) of the Act, the following conditions are to be satisfied:

(i) Sale of manufactured goods other than tea;

(ii) Sale of the said goods is under a trade mark/brand name and;

(iii) The sale is by the brand name holder or the trade mark holder within the State.

If the above three conditions are satisfied, the sale by the brand name holder or the trade mark holder shall be the first sale for the purpose of the Act.

Supreme Court held,

"According to the appellant/assessee who is a branded name holder, M/s. Bristo Foods Pvt. Ltd. has license and is permitted to use the branded name "CRYPTM". The licensee manufactures the goods, namely, confectioneries and effects supply of sale to the brand name holder. It is the brand name holder, who affects the sale of the confectioneries which are to be taxed as Item 39 of the First Schedule to the Act within the State. Therefore, it is the brand name holder, who has to pay tax under section 5(2) of the Act. If for any reason M/s. Bristo Foods Pvt. Ltd. has paid the tax while affecting the supply of the manufactured commodity to the appellant/assessee, the appellant/assessee and M/s Bristo Foods Pvt. Ltd. can approach the authorities for claiming the refund of the tax paid by them."

The Supreme Court did not find any infirmity in the impugned judgment and order passed by the High Court. Accordingly, the appeal is dismissed.

(See 2014-TIOL-46-SC-CT)


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