2014 (4) TMI 594 - SC - VAT and Sales Tax

Leviability of Tax Sales tax on Brand name holder & Licensee - Tax u/s 5(2) the Kerala General Sales Tax Act, 1963 Interpretation of Section 5(2) of KVAT Act - Brief Facts - M/s. Bristo Foods Pvt. Ltd. has license and is permitted to use the branded name CRYPTM , of the assessee herein - The licensee manufactures the goods, namely, confectioneries and effects supply of sale to the brand name holder - It is the brand name holder, who affects the sale of the confectioneries which are to be taxed as Item 39 of the First Schedule to the Act within the State - Held that - The said sub-Section speaks of a sale made by a brand name holder or the trade mark holder within the State - The Legislature deems that such a sale by the brand name holder or the trade mark holder shall be the first sale within the State - In the opinion of SC this is the only possible construction that can be given to Section 5(2). It is the brand name holder, who has to pay tax u/s 5(2) of the Act - If for any reason M/s.Bristo Foods Pvt. Ltd. has paid the tax while affecting the supply of the manufactured commodity to assessee, assessee and M/s Bristo Foods Pvt. Ltd. can approach the authorities for claiming the refund of the tax paid by them There is not any infirmity in the impugned judgment and order passed by the High Court - Accordingly, the appeal is dismissed Decided against assessee.

Summary

Issues: Interpretation of Section 5(2) of the Kerala General Sales Tax Act, 1963

Analysis:
1. The appellant, a registered brand owner of 'CRYPTM', had an agreement with a manufacturing company allowing them to use the brand name.
2. The assessing authority levied sales tax for the years 1998-1999 and 1999-2000 under Section 5(2) of the Act.
3. The First Appellate Authority confirmed the tax levy based on the appellant being the "registered owner or holder" of the brand name.
4. The appellant appealed to the Kerala Sales Tax Appellate Tribunal, which partially allowed the appeal and reduced the tax amount.
5. Further appeal to the High Court was dismissed, leading the appellant to approach the Supreme Court.
6. The main issue before the Supreme Court was the interpretation of Section 5(2) of the Act.
7. Section 5(1) of the Act deals with the levy of tax on the sale or purchase of goods, specifying conditions for tax payment.
8. Section 5(2) states that sales under a brand name within the state shall be considered the first sale for tax purposes, subject to specific conditions being met.
9. The sub-section starts with a non-obstante clause, emphasizing the priority of sales by the brand name holder within the state.
10. The Court analyzed the transaction between the appellant and the manufacturing company to determine the tax liability.
11. The appellant argued that the manufacturing company, as a licensee, supplied goods under the brand name 'CRYPTM', making the appellant liable for tax under Section 5(2).
12. The Court upheld the tax liability on the appellant as the brand name holder, stating that any tax paid by the manufacturing company could be refunded through proper channels.
13. Consequently, the Court found no error in the High Court's decision and dismissed the appeal, affirming the tax liability under Section 5(2) of the Act.