2015 (8) TMI 636 - HC - VAT and Sales Tax

Rate of tax on pickle Taxation of goods at lower rate Pickle sold under brand name or not KVAT - Appellant seeks declaration that item pickle sold by appellant comes under entry 49, entitling his products to be taxed at 4 per cent Commissioner found out that pickles sold by appellant under brand name would be taxed at 12.5 per cent Held that - goods can be taxed at 12.5 per cent only, if they do not fall under Schedule I or III having regard to section 6(1)(d) of Act Description of goods which come under HSN Code 2001, was exactly same as given in entry 84(29) State Legislature specifically provide for pickles and sought to tax it at four per cent unless it was sold under brand name Word pickles as used in entry 49 was distinct food product and not plant or vegetable which was preserved in vinegar or acetic acid Officer pointed out in notice that in all emblems Happy , products including pickles were shown with circle with (x) , no statutory warning was given in labels that pickles were not registered under Trade Marks Act, which indicates that either consumer was wilfully confused or falsely fascinated towards brand Going by reply given by trade mark registry, assesse obtained registration of its brand in respect of pickles to suffer tax at 12.5 per cent It was not sufficient that there was general registration obtained Though appellant may be using brand name Happy (label), there was no registration for trade mark for product pickles But, to deprive appellant of benefit of concessional rate of taxation (four per cent.) provided in entry 49, appellant must have obtained registration for trade mark in respect of pickles - Decided against the assessee. The product pickles marketed by the petitioner though it may be under a brand name, as the same has not been specifically registered under the Trade Marks Act 1999, the view taken by the assessing officer that the pickles cannot be taxed under entry 49 of the Third Schedule is unjustifiable. - Matter remanded back for adjudication in accordance with law.

Summary

Issues Involved:
1. Classification of "pickles" under the Kerala Value Added Tax Act, 2003.
2. Applicability of tax rates based on whether pickles are sold under a registered brand name.
3. Validity and interpretation of the Commissioner's clarification under section 94 of the Act.
4. Applicability of Harmonized System of Nomenclature (HSN) Code 2001 to "pickles."
5. Whether general registration of a brand name suffices for higher tax rates or specific registration of the product is required.

Detailed Analysis:

1. Classification of "Pickles" under the KVAT Act, 2003:
The appellant argued that pickles sold by them should be classified under entry 49 of the Third Schedule to the KVAT Act, which attracts a tax rate of 4%. The appellant contended that their pickles are not registered under the Trade Marks Act, 1999, and thus should not attract a higher tax rate. The court examined the legislative intent and the specific mention of "pickles" under entry 49, concluding that the legislature intended to tax pickles at 4% unless sold under a registered brand name.

2. Applicability of Tax Rates Based on Brand Registration:
The court noted that pickles sold under a brand name registered under the Trade Marks Act, 1999, would attract a higher tax rate of 12.5%. The appellant's contention that their pickles were not specifically registered under the Trade Marks Act was upheld. The court emphasized that specific registration of the product "pickles" under the Trade Marks Act is necessary for the higher tax rate to apply.

3. Validity and Interpretation of the Commissioner's Clarification:
The appellant challenged the Commissioner's clarification (Exhibit P1) that pickles sold under a registered brand name would attract a 12.5% tax rate. The court found that the Commissioner's clarification was based on the legislative scheme and intent to tax branded pickles at a higher rate. The court upheld the clarification, noting that it aligned with the legislative intent and the scheme of the Act.

4. Applicability of HSN Code 2001 to "Pickles":
The appellant argued that pickles should fall under entry 84(29) of the Third Schedule, which corresponds to HSN Code 2001 and attracts a 4% tax rate. The court examined the Harmonized Commodity Description and Coding System and noted that while pickles could fall under HSN Code 2001, the legislature had specifically classified pickles under entry 49 for taxation purposes. The court concluded that pickles sold under a registered brand name are not covered by entry 84(29) and thus do not benefit from the lower tax rate.

5. General vs. Specific Registration of Brand Name:
The court addressed the issue of whether general registration of the brand name "Happy" suffices for the higher tax rate or if specific registration of pickles is required. The court referred to the communication from the Trade Mark Registry, which clarified that specific registration of each product is necessary. The court concluded that the appellant's pickles were not specifically registered under the Trade Marks Act, and thus, the higher tax rate of 12.5% did not apply.

Conclusion:
The court dismissed the appeal and quashed the assessment orders (Exhibits P2 to P6). It held that the pickles marketed by the appellant, though sold under a brand name, were not specifically registered under the Trade Marks Act, 1999. Therefore, they should be taxed at the rate of 4% under entry 49 of the Third Schedule. The matter was remanded for reassessment in accordance with the court's findings.