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TMI Blog2004 (1) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portions of clauses 4, 5 and 6 of the agreement are extracted below: " ..The manufacturer is exempted from payment of sales tax for the goods manufactured at its factory at Hosur Road, Attibele . 4.. The buyer hereby warrants that the buyer is the owner of all rights in the trademark 'Whirlpool' and has the exclusive right to use the said trademark in India. Buyer hereby authorises the manufacturer to use and affix the said trademark to the products which are sold to the buyer in accordance with the specifications of the buyer. 5.. Manufacturer acknowledges that this agreement does not include any licence of buyer's trademarks. Manufacturer shall not affix trademark to any products manufactured and/or sold to any third party other than that to the party of the second part in respect of the manufactured products. 6.. Buyer has the right to inspect samples of the products to verify that the use of the trademark conforms to buyer's specifications and also inspect/audit the quality of the products manufactured ." (emphasis supplied) Thus Applicomp is neither a registered user nor a licensee in respect of the trademark "Whirlpool". The agreement just enables App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -'A' has registered a trademark for manufacture of certain goods. He gets the said goods manufactured by 'B' under the said trademark. The sale by 'B' to 'A' of the said goods is not the first sale but the sale by 'A' or by any other person on his account is the first sale. Sixth Proviso to section 5(3)(a).-Provided also that where goods are sold, under a brand name by the trademark holder or the brand name holder or any other dealer having the right as proprietor or otherwise to use the said name or trademark either directly or through another on his own account or on account of others, exclusively to a marketing agent or distributor or wholesaler or any other dealer, subsequent sale of such goods by the latter shall also be liable to tax under this section and the tax so payable shall be reduced by the amount of tax already paid on the sale of such goods by the former. Explanation III.-For the purpose of the sixth proviso to clause (a), where goods are sold, under a brand name by the trademark holder or the brand name holder or any other dealer having the right as proprietor or otherwise to use the said name or trademark either directly or through another on his own account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention. It is of the view that the transaction is squarely covered by third proviso. In view of the perceived difference, the appellant, filed an application for confirmation of its view, before the Authority for Clarifications and Advance Rulings under section 4 of the Act, by posing the following question: Rs. 10.00 "Whether the brand owner who is an exclusive purchaser of goods manufactured, using its brand name, by a manufacturer who is exempted under section 8A or 19C is entitled to claim set-off on the deemed tax paid on the purchases made from such manufacturer and is required to pay tax under section 5(3)(a), only on the value addition thereof." 7.. The authority, by order dated October 27, 2003 has given a clarification holding that the transactions between Applicomp and the appellant are governed by the third proviso to section 5(3)(a). It held that the benefits contemplated under sixth proviso and Explanation III to section 5(3)(a) are not available on the following reasoning: "In the sixth proviso 'any other dealer having the right as proprietor or otherwise to use the said name or trademark either directly or through another on his own account or on account of ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consequence when goods are sold under the brand name of "Whirlpool" by Applicomp to the appellant, and appellant in turn sells the goods, the subsequent sale of such goods by the appellant will also be liable to tax, but the tax so payable shall be reduced by the amount of tax already paid on the sale of such goods by Applicomp. It is submitted that having regard to Explanation III the expression "tax already paid" would refer to tax payable but exempted by notification under section 19C. 9.. The sixth proviso to section 5(3) will apply, only if the following three conditions mentioned therein exist: (i) The goods must be sold under a brand name. (ii) The sale should be by (a) the trademark holder or (b) the brand name holder or (c) any other dealer having the right as proprietor or otherwise to use the said name or trademark either directly or through another on his own account or on account of others; (iii) The sale should be exclusively to a marketing agent or distributor or wholesaler or any other dealer. 10.. The basic requirement to attract the sixth proviso, is that the sale of goods should be under a brand name. A trademark owner or user getting certain goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind of right in Applicomp with reference to the trademark. Applicomp cannot manufacture or sell any goods with the trademark "Whirlpool" to anyone other than the appellant. Applicomp is also not entitled to use the trademark Whirlpool to any of its products independent of the agreement with the appellant. Therefore, when Applicomp affixes the trademark to the products sold to appellant, it is not doing so because of any right it possesses in regard to the trademark, but as a part of the specification in regard to the product to be incorporated while manufacturing the product. Therefore, Applicomp does not fall under the category of "any other dealer having the right as proprietor or otherwise to use the said name or trademark either directly or through another on his own account or on account of others" referred to in the sixth proviso. Therefore the second condition for applicability of the sixth proviso is also not fulfilled. We find no error in the finding of the authority that sixth proviso is inapplicable. 12.. On the other hand the transaction between Applicomp and appellant squarely attracts the third proviso to section 5(3)(a). Third proviso applies where (a) any goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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