2009 (10) TMI 881 - HC - VAT and Sales Tax

Whether the respondent is not liable to pay sales tax under section 5(2) of the Kerala General Sales Tax Act on the resale of plastic moulded chairs under the brand name Regal which the respondent got manufactured by an SSI unit in Kerala? Held that - There is nothing to indicate in the agreement that the manufacturer in Kerala was entitled to produce and market plastic chairs in the brand name Regal which was the brand name exclusively used by the respondent and that is the reason why they got stickers printed with brand name affixed on the chairs before marketing the same. In fact not only brand name was affixed but rubber bushes were also fixed to the chairs after purchase by the respondent. Obviously the respondent wanted to maintain a distinct quality for the product sold under their brand name and that is why improvements were made like fixing of rubber bushes to the chairs before sale by them. We are therefore of the view that after being unsuccessful in challenge against statutory provisions the respondent distorted the facts and misled the Tribunal to get favourable orders. We therefore allow the S. T. Revisions filed by the State by reversing the order of the Tribunal and by restoring the assessment confirmed in first appeal.

Summary

Issues:
1. Interpretation of section 5(2) of the Kerala General Sales Tax Act regarding liability to pay sales tax on resale of plastic moulded chairs under a brand name.
2. Determination of whether the brand name holder is liable to pay tax at the point of sale.
3. Classification of stainless steel gas stoves under entry No. 28 of Schedule A of the Punjab General Sales Tax Act.

Analysis:
1. The case involved connected revisions filed by the Revenue against the Tribunal's orders regarding the liability of the respondent to pay sales tax under section 5(2) of the Kerala General Sales Tax Act on the resale of plastic moulded chairs under the brand name "Regal." The respondent got the chairs manufactured by an SSI unit in Kerala, affixed their brand name, and sold them. The court considered the history of the case, previous decisions, and the nature of the transactions. It was established that the respondent affixed the brand name stickers and rubber bushes before selling the chairs, irrespective of whether the brand name was originally present. The court held that the respondent distorted facts and misled the Tribunal to obtain favorable orders, leading to the reversal of the Tribunal's decision and restoration of the assessment confirmed in the first appeal.

2. The judgment delivered by another judge addressed the issue of whether stainless steel gas stoves are principally covered by entry No. 28 of Schedule A of the Punjab General Sales Tax Act. The Sales Tax Tribunal referred the question of law regarding the classification of gas stoves primarily made of stainless steel. The court analyzed the components of the gas stoves, including burners, pipes, knobs, hot plates, rubber, nickel, and plastic items, to determine their material composition. It was concluded that the attachments crucial for the functioning of the gas stove were made of non-stainless steel materials. Relying on a previous decision, it was held that the stainless steel body is an accessory, and the essential components of the gas stove were made of alloy or non-stainless steel material. Consequently, the gas stoves were not classified under entry No. 28 of Schedule A, resulting in a judgment in favor of the assessee and against the Revenue.