2010 (5) TMI 773 - HC - VAT and Sales Tax

Cancelling the assessment under section 5(2) of the Kerala General Sales Tax Act 1963 on the products sold under brand name Sansui that was confirmed in first appeal seeked Held that - If the respondent s margins are unusually high then certainly first sales cannot be treated as sales under brand name and assessment has to be made on the respondent under section 5(2). We therefore allow the revision by setting aside the order of the Tribunal and that of the lower authorities with direction to the assessing officer to collect the purchase turnover and other details required and make fresh assessment in accordance with law. If assessment is again made afresh under section 5(2) on the respondent then there will be direction to the assessing officer to give credit for the tax collected and remitted by Videocon International Ltd. on the purchases made by respondent in terms of rule 30(2)B of the KGST Rules. The assessing officer is directed to complete the assessment afresh within a period of two months from the date of receipt of a copy of this judgment after giving opportunity to the respondent also

Summary

Issues:
Assessment under section 5(2) of the Kerala General Sales Tax Act, 1963 on products sold under the brand name "Sansui."

Analysis:
The case involved a revision filed by the State against the Tribunal's order canceling the assessment under section 5(2) of the Act on products sold under the brand name "Sansui." The respondent, a registered dealer in Kerala, marketed products purchased from Videocon International Ltd. under the brand name "Sansui." The assessing officer disallowed the second sale exemption claimed by the respondent, leading to an assessment under section 5(2). The Tribunal allowed the claim, stating the respondent was not the "holder" of the brand name "Sansui" in India, which was contested by the State.

The Government Pleader cited a Division Bench judgment supporting brand name assessment under section 5(2) and argued that the respondent did not hold the brand name rights. The respondent contended that Videocon International Ltd. had the rights to use the brand name "Sansui" in India, not the respondent. The court found evidence confirming Videocon International Ltd. as the brand name holder, allowing the respondent to use the brand name. The court emphasized that the brand name holder is significant when goods are marketed publicly.

The court disagreed with the Tribunal's finding that the respondent was not the brand name holder, as Videocon International Ltd. had the rights to use the brand name in India, extending to its subsidiary, the respondent. The court directed a fresh assessment by the assessing officer, emphasizing the need to consider purchase turnover and margins to determine if the first sales were genuine. The court allowed the revision, setting aside the Tribunal's order and directing the assessing officer to complete the assessment within two months, crediting tax collected by Videocon International Ltd. on purchases made by the respondent.

In conclusion, the court's decision highlighted the importance of brand name ownership in sales assessments, emphasizing the need for thorough evaluation of purchase turnover and margins to prevent tax evasion. The judgment clarified the rights of subsidiaries to use brand names held by their parent companies and underscored the assessing officer's responsibility to ensure fair and accurate assessments under the law.