2016 (9) TMI 311 - SC - VAT and Sales Tax

Applicability of Section 5(2) of the Kerala General Sales Tax Act, 1963 - first sale - manufacture of cement - raw material supplied by assessee - payment received after adjustment made for clinker by assessee - goods marketted by assessee in its own brand name - is the sale by the brand name holder or the trade mark holder be treated as the first sale? - Cryptom Confectioneries Pvt. Ltd. Vs. State of Kerala 2014 (4) TMI 594 - SUPREME COURT - is this case binding precedent? - Held that - in the said decision Section 5(2) was considered and a view has been expressed and, therefore, it cannot be said that a provision has not been referred to or not considered. Hence, it is a binding precedent. Is the decision in the case Cryptom Confectioneries Pvt. Ltd. requires reconsideration? - Held that - What is limpid is that Section 5(2) is an expression of the Legislative intention that the sales at the hands of the brand name holder and trade mark holder would be treated as the first sale. On a perusal of the agreement entered into between the parties, it is not remotely suggestive of the fact that Cochin Cement Limited is a brand name holder or trade mark holder. Hence, the ambitious submission of Mr. Ganesh has to melt as a glacier, and we say so. Ergo, the decision in Cryptom Confectioneries Pvt. Ltd. does not require reconsideration. Appeal dismissed. Decided against appellant.

Summary

Issues:
1. Interpretation of clauses in an agreement between two parties regarding the sale of cement and clinker.
2. Determination of whether the sale by the brand name holder or trade mark holder is the first sale for taxation purposes under Section 5(2) of the Kerala General Sales Tax Act, 1963.

Issue 1: The judgment involved interpreting clauses in an agreement between the appellant and Cochin Cement Limited regarding the sale of cement and clinker. The agreement detailed the supply rate of clinker, quality assurance responsibilities, branding, marketing services, complaints handling, and post-termination restrictions. The assessing officer concluded that Cochin Cement Limited was only a manufacturer, and the appellant was marketing and selling the cement produced by Cochin Cement Limited under the brand name 'ACC'. The assessing officer found that the cement was marketed solely by the appellant, and any sales by Cochin Cement Limited were not accounted for under the appellant's tax assessment.

Issue 2: The appellant contended that Cochin Cement Limited was the brand name holder, making the sales at its hand the first sale for tax purposes under Section 5(2) of the Act. The appellant relied on provisions like Section 5(2A) and 5(2B, which exempted dealers selling to brand name holders from tax if certain conditions were met. The Supreme Court analyzed the legislative intent behind Section 5(2) and referred to a previous case where a similar provision was interpreted. The Court rejected the appellant's argument, stating that the agreement did not establish Cochin Cement Limited as a brand name holder or trade mark holder. The Court upheld the lower authorities' decisions and dismissed the appeals, emphasizing that the sales by the appellant were correctly treated as the first sale for tax purposes under the Act.