9911796707
TMI Blog2006 (11) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... st the judgment of a division Bench of the Karnataka High Court dated January 20, 2004 in S.T.A. No. 70 of 2003, by which the appeal was dismissed. Heard learned counsel for the parties and perused the record. The appellant is a registered dealer under the Karnataka Sales Tax Act, 1957 ("the KST Act", for short). The appellant is the licensee and registered user of the trade mark "Whirlpool" in terms of the trade mark and trade name licence agreement dated February 24, 1995 executed between M/s. Whirlpool Corporation, USA, which is stated to be the proprietor and owner of the said trade mark and the appellant. The licence granted to the appellant to use the trade mark is non-transferable. On February 4, 2003, the appellant entered into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irlpool". The agreement just enables Applicomp to affix the trade mark of the appellant to the products which are manufactured by it to the specifications of the appellant, and which are exclusively to be supplied to the appellant, and not to any other product of Applicomp. The State Government, by notification dated July 20, 2000 issued in exercise of power under section 19C of the KST Act, exempted the tax payable under the said Act by Applicomp on the sale of finished goods manufactured by it, for a period of 10 years from the commencement of commercial production subject to the restrictions and conditions stated in the said notification. Hence the sales by Applicomp to the appellant are exempt from payment of any tax under the KST Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly or through another, on his own account or on account of others shall be deemed to be the sale by the first dealer liable to tax under this section. Illustration.- 'A' has registered a trade mark for manufacture of certain goods. He gets the said goods manufactured by 'B' under the said trade mark. 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 trade mark either directly or through another on his own account or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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." The authority by its order dated October 27, 2003 has given its clarification holding that the transactions between Applicomp and the appellant are governed by the third proviso to section 5(3)(a) and not by the sixth proviso and Explanation III to that section. Aggrieved, the appellant filed an appeal to the High Court, which was dismissed and hence this appeal. In our opinion, there is no merit in this appeal and we agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst sale." Applying the above illustration to the facts of the present case, 'A' would be the appellant and 'B' would be Applicomp. The incidence of tax on the first sale would be on the appellant and not on Applicomp. Moreover, a reading of clauses 4 and 5 of the agreement dated February 4, 2003 between the appellant and Applicomp makes it clear that Applicomp is neither a registered user nor a licensee of the trade mark. Thus it is not selling the goods as either a trade mark holder or as one having any rights as the proprietor of the trade mark or otherwise. Hence the sixth proviso clearly does not apply and any sale by Applicomp to the appellant does not give the benefit of any reduction in tax to the appellant. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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