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2010 (1) TMI 1112 - HC - VAT and Sales TaxWhether the manufacturer is the brand name holder? If manufacturer is not the brand name holder, whether the assessee is the brand name holder? Whether assessee s sale can be treated as first sale under section 5(2) of the Act? Held that - It is the admitted position that consistent with the agreement, namely, the memorandum of understanding between the assessee and the manufacturer, the entire production was purchased by the assessee and the assessee marketed the products in the State in their brand name. We, therefore, hold that the Tribunal has erred not only in their conclusions, but has failed to appreciate even the facts of the case and their findings are absolutely incorrect and untenable. We, therefore, allow the revision case by reversing the order of the Tribunal and by restoring the order of the Deputy Commissioner issued under section 35 directing revision of assessment for bringing to tax the sales turnover of moulded plastic chairs sold under the brand name Nilkamal in the hands of the respondent-assessee in the revision case.
Issues:
1. Interpretation of Section 5(2) of the Kerala General Sales Tax Act, 1963 regarding liability to pay sales tax as a brand name holder. 2. Determining whether the assessee, who purchased and sold plastic moulded chairs under the brand name "Nilkamal," is liable to pay sales tax as a brand name holder. 3. Analysis of the agreement between the assessee and the manufacturer regarding the production and sale of the goods. 4. Examination of the ownership and licensing of the brand name "Nilkamal" in relation to the assessee's sales. Issue 1: Interpretation of Section 5(2) of the Kerala General Sales Tax Act, 1963 The court analyzed the provisions of Section 5(2) of the Act, which states that the sale by the brand name holder within the State shall be considered the first sale for tax purposes. Sub-section 2A provides for exemption if the dealer produces a declaration from the brand name holder. The court emphasized the importance of ensuring tax payment on the real price of goods sold under a brand name. Issue 2: Liability of the Assessee as a Brand Name Holder The court deliberated on whether the assessee, selling plastic moulded chairs under the brand name "Nilkamal," should be considered the first seller liable to pay tax. It was concluded that the assessee, being the brand name holder, is responsible for tax payment on the first sale within the State. Issue 3: Analysis of the Agreement The court examined the agreement between the assessee and the manufacturer, highlighting clauses that mandated the manufacturer to produce goods as per the assessee's specifications and sell the entire production to the assessee. The agreement indicated that the assessee had control over the production and marketing of goods under the brand name "Nilkamal." Issue 4: Ownership and Licensing of the Brand Name The court considered the ownership and licensing of the brand name "Nilkamal," noting that while the original owner was a partnership firm, the assessee had been granted a license to use the brand name without royalty payment. The court determined that the assessee's sales under the brand name constituted the first sale, making them liable for tax payment. In conclusion, the court allowed the revision case, reversing the Tribunal's order and directing the assessment of sales turnover of plastic chairs sold under the brand name "Nilkamal" in the hands of the assessee. The writ petitions challenging the assessments were dismissed, upholding the applicability of Section 5(2) of the KGST Act to the assessee's sales.
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