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2016 (9) TMI 311 - SUPREME COURT

2016 (9) TMI 311 - SUPREME COURT - TMI - Applicability of Section 5(2) of the Kerala General Sales Tax Act, 1963 - first sale - manufacture of cement - raw material supplied by assessee - payment received after adjustment made for clinker by assessee - goods marketted by assessee in its own brand name - is the sale by the brand name holder or the trade mark holder be treated as the first sale? - Cryptom Confectioneries Pvt. Ltd. Vs. State of Kerala [2014 (4) TMI 594 - SUPREME COURT] - is this ca .....

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rk holder would be treated as the first sale. On a perusal of the agreement entered into between the parties, it is not remotely suggestive of the fact that Cochin Cement Limited is a brand name holder or trade mark holder. Hence, the ambitious submission of Mr. Ganesh has to melt as a glacier, and we say so. Ergo, the decision in Cryptom Confectioneries Pvt. Ltd. does not require reconsideration. - Appeal dismissed. Decided against appellant. - Civil Appeal Nos. 2678-2679 of 2010, Civil App .....

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ther type of cement as per the marketing need from time to time. The price of clinker will be linked to the price of cement in the Kerala market and will be reviewed every six months on this basis. The formula for such price adjustments will be as detailed in Annexure 'A' attached to and forming part of this Agreement. For the sake of easier operation of the contract it is agreed that a specific quantify of clinker supplied by ACC for any six months period will have a co-relation with th .....

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of Cocem with a view to ensure that quality of cement produced is as per the internal norms/standard of ACC. Fees to be paid by Cocem to ACC for this service shall be mutually agreed upon by the parties separately. 4. Cement produced by Cocem under ACC's brand same shall only be marketed by ACC and shall not complete with cement directly supplied to the Kerala market by ACC. 5. Clinker ground into cement shall be purchased by ACC at a mutually agreed price which will include the cost that A .....

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for 5 years and will be subjected to revision thereafter on mutual terms. xxxxx xxxxx 7. Any complaints/claims arising out of quality of cement, damages, shortages, poor packing due to negligence on the part of Cocem would be debited to Cocem. xxxxx xxxxx 11. Cocem shall not use ACC's Trade Marks/brand names in any form after the termination or expiry of this Agreement. 2. On the basis of the aforesaid Agreement, the appellant - assessee put forth his stand before the Assessing Officer that .....

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that the report of the concerned intelligent officer has met with approval up to the revisional stage. To have a complete picture we may usefully reproduce the finding recorded by the assessing officer in the order of assessment:- "As per schedule to the agreement, Associated Cement Cos. is charging ₹ 150/- per ton for marketing and service charges and only after deducting that amount, Associated Cement Co. need pay the balance to Cochin Cement Ltd., after adjusting the price of clink .....

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g the cement produced by Cochin Cement Ltd., lies with Associated Cement Co. From the above, it is evident that Cochin Cement Ltd. is only a manufacturer of cement and that too by using the raw material supplied by the Assessee with specified quality of ACC standard and entire cement manufactured are to be delivered at different depots of the Assessee. Only Assessee is marketing the cement and Cochin Cement Ltd. is not entitled to sell out even a single bag of cement in the market over and above .....

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if Cochin Cement Ltd. is selling goods to others by itself, the question of coming those transaction into the books of accounts of the Assessee does not arise at all. In the circumstances, the contention of the Assessee that Cochin Cement Ltd. is marketing cement to the customers by itself falls to the ground." The said authority has further opined:- The question of brand name in this case arose in respect of goods manufactured by Cochin Cement Ltd., and sold by the Assessee. It is, only f .....

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and name holder is a very feable augment. Sub.sec 2 of Sec. 5 reads Notwithstanding anything contained in this Act in respect of goods other than tea sold in auction in the state, which are sold under a trade mark or brand name, the sale by the brand name holder or the trade mark holder within the state shall be the first sale for the purpose of this Act . The impugned transaction is a typical one coming under the above provision. The Cement sold by the Assessee is one which is manufactured by C .....

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ads as follows:- "Every dealer (other than a casual trade or agent of an non-resident dealer) whose total turnover for a year is not less than two lakh rupees and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover of that year." 4. Mr. S. Ganesh, learned senior counsel appearing for the appellant, has laid immense emphasis on Section 5(2), which reads thus:- "Notwithstanding anything contained i .....

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appropriate to refer to Section 5(2A) and 5(2B) of the Act, which read thus:- "5(2A) Where a dealer liable to tax under sub-section (1), sells any goods to a trade mark or brand name holder for sale a trade mark or brand name, no such dealer shall be liable to pay tax under the said sub-section, if he produces before the assessing authority a declaration in the prescribed form from that trade mark or brand name holder. 5(2B) Where a trade mark or brand name holder consumes the goods purchas .....

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le that the Legislature has clearly expressed its intention to treat the sale by the brand name holder or the trade mark holder as the first sale. In the case of Cryptom Confectioneries Pvt. Ltd. Vs. State of Kerala (2014) 73 VST 498 (SC, Section 5(2A) came up for consideration and a two-Judge Bench, analysing the anatomy of the provision, has laid down thus:- "The aforesaid sub-section commences with a non obstante clause i.e., irrespective of Section 5(1) of the Act or any other provision .....

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M/s. Bristo Foods Pvt. Ltd." 7. On a scrutiny of the facts of the said case, it is manifest that the issue that squarely fell for consideration is whether the sale at the hands of the appellant therein would be treated as the first sale. Dealing with the stand of the appellant, this Court stated:- "According to the appellant/ assessee who is a branded name holder, M/s Bristo Foods Pvt. Ltd., has licence and is permitted to use the branded name "CRYTM". The licensee manufactu .....

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/assessee and M/s Bristo Foods Pvt. Ltd. can approach the authorities for claiming the refund of the tax paid by them." 8. On a careful appreciation of the aforesaid decision, we find the factual matrix therein is explicitly the same as is in the present case. However, Mr. S. Ganesh, learned senior counsel, would submit that in the said case, there has been no consideration of the concepts like brand name holder and trade mark holder and, therefore, the said decision should not be treated a .....

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