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2014 (9) TMI 31 - HC - VAT and Sales TaxClassification of goods - Whether the Tribunal is justified in classifying 'Odonil' sold by the assessee as an item falling under entry 85 of the First Schedule as against the stand of the Department that the commodity would fall only under entry 127 of the First Schedule to the Kerala General Sales Tax Act - Held that:- Items so specifically mentioned are all relating to items which are used on the human body for beautification, grooming and having cosmetic qualities or properties. The product Odonil which is admittedly a room/cup-board freshener, cannot be brought under the description of perfumery in entry 127. Obviously, the product will not answer the description of any of the items listed in the entry; nor can it be said to be perfumery or cosmetic, more so when it is not an item used on the human body. Just as words take colour from each other, when used in conjunction; they should be understood in the common analogous sense and not in a general sense. Construing entry 127 and the words employed therein, we are unable to agree with the assessing officer; applying the rules of "ejusdem generis" and "noscitur a sociis". The contention of the State that the product would fall under the said entry hence, according to us, cannot be sustained. Liability at the rate of eight per cent under section 85 of Schedule I - Held that:- Entry 85 of Schedule I specifically refers to mosquito repellents and insect repellents. The expansive definition is not relevant, since this product is not an electric or electronic gadget. The contention of the assessee is that the vital component being para-dicholoro benzene, the composition of which in the product, is more than 99 per cent., the same is an insecticide. True, the chemical paradicholoro benzene is an insecticide under the Insecticides Act. However, a query regarding licence obtained under the Insecticides Act was answered in the negative by the assessee. Product "Odonil" has been consistently put forth as a moth repellent and the sweet fragrance is said to be an additional quality to mask the bad odour of the chemical. The wrapper of the product indicates that it is an air freshener and also a moth repellent. The predominant function is not discernible from the records. There is also no warrant for assumption that the product is only used for its repellent qualities. The assessee too has understood it as an air freshener and also a moth repellent. The fragrance provided is projected as masking the bad odour of the chemical and also for avoiding bad odour in rooms/covered space. In such circumstances, it cannot be said that the dominant use of the product is that of a moth repellent and the same would fall under entry 85 of Schedule I. In that view of the matter, we hold that the product "Odonil" is liable to tax under the residuary entry, at the rates specified for the residuary entry under the First Schedule to the Act. The exigibility under section 5(2) - Held that:- assessee is trade/brand name holder of certain products, more specifically tooth paste and tooth brush sold in the trade name "Promise" and "Meswak". The assessing officer found that the claim of second sale was not admissible by virtue of section 5(2) of the KGST Act, since the sale by the assessee would be deemed to be the first sale exigible to tax under the Act. The assessing officer, however, granted deduction for the tax paid on the purchase of the said products from the manufacturer. The assessing officer rejected the contention of the assessee that the manufacture was by another entity, by name M/s. Besta Cosmetics Limited, with which the assessee had an agreement and the said manufacturer was also granted licence to manufacture products under the trade name. Section 5(2) is also an anti-evasion measure and it contemplates the liability to be at that point of sale in the case of sale of manufactured goods other than tea, within the State, (i) made under a trademark/brand name (ii) by a trademark/brand name holder. The sale, hence, should be not only by a trademark/brand name holder, but it should also be under trade/brand name. In the instant case, the sale between the manufacturer and the assessee being between two trade/brand name holders, it cannot be said to be a sale under a trade/brand name. Section 5(2) applies with its full force in such a transaction and deems liability to be, to that sale made by the assessee. The first sale by the manufacturer to the assessee, latter of whom is also a trade/brand name holder is of course sale by a trade/brand name holder, but not a sale under trade/brand name. Hence, the second sale effected by the assessee being again a sale by a trademark/brand name holder and also a sale under trade/brand name, is liable to tax under section 5(2). We respectfully follow the Division Bench judgments cited above with the additional reasons enumerated in the above discussion. We are unable to sustain the order of the Tribunal confirming the order of the first appellate authority. Decided partly in favour of Revenue.
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