TMI Blog2006 (11) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... consumer goods are got manufactured by M/s. Applicomp India Ltd. and as per the agreement M/s. Applicomp have to manufacture the products under the brand name "Whirlpool" and sell them exclusively to the appellant. M/s. Applicomp is not the registered user of the brand name "Whirlpool". Moreover, the sales made by M/s. Applicomp to the appellant, are not sales to the exclusive marketing agent or distributor or wholesaler or any other dealer but are only sales of manufactured branded goods to the brand owner. Hence, the sixth proviso and Explanation III to section 5(3)(a) are clearly not applicable. - Civil Appeal No. 5150 of 2006, S.T.A. No. 70 of 2003 - - - Dated:- 22-11-2006 - SINHA S.B. AND MARKANDEY KATJU JJ. Sanjay R. Hedg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 trade mark 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 trade marks. Manufacturer shall not affix trade mark to any products manufactured and/or sold to any thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the taxable turnover of sales of such dealer in each year relating to such goods". Refrigerators fall under entry 6 of Part R of the Second Schedule, the rate of tax being 20 per cent from April 1, 2002, and washing machines as electrical goods, falls under entry 2(v) of Part E of the Second Schedule, the rate of tax being 16 per cent from June 1, 2003. The third proviso and the sixth proviso to section 5(3) as also Explanation III thereto, which are relevant to this case are extracted below: "Third Proviso to Section 5(3)(a). Provided also that where any goods liable to tax under this Act are produced or manufactured by a dealer with the brand name or trademark, of any other dealer and which are not used by the latter as raw materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 trade mark either directly or through another on his own account or on account of others, who is exempt from tax by any notification issued under section 8-A or section 19-C, the expression 'tax already paid' means the tax payable under this section on such sale if the sale had been effected by any other dealer." It was submitted by Shri Harish Salve, learned senior counsel for the appellant, that the transaction between Applicomp and the appellant falls under the sixth proviso read with Explanation III to the section 5(3)(a), w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. It is submitted that Applicomp as a matter of fact has not paid the sales tax as it is exempt from such payment. In our opinion this argument is clearly untenable. In our opinion, it is the third proviso and not the sixth proviso which applies in this case because the goods are manufactured by the dealer (Applicomp) using the branded name of another dealer (appellant). These goods are not used as raw materials, components or packing materials. Hence, the sale by Applicomp to the appellant cannot be deemed to be the sale by the first dealer liable to tax under this section, but it is the subsequent sale of such goods by the dealer having the right either as proprietor or otherwise (appellant) which has to be deemed to be the first ..... X X X X Extracts X X X X X X X X Extracts X X X X
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