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2016 (10) TMI 938 - SUPREME COURT

2016 (10) TMI 938 - SUPREME COURT - TMI - Levy of tax u/s 5(2) of the KGST Act on sales turnover - sale of home appliances under the brand name “Sansui” - first sale or second sale? - Whether the appellant-Company is the holder of the brand name in respect of the “Sansui” products sold by it or not? - Held that: - the sale by the brand name holder or the trade mark holder shall be the first sale for the purposes of the KGST Act, if following conditions are satisfied: (i) Sale of manufactured goo .....

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undisputed fact that the manufactured goods sold by the appellant-Company were home appliances under the brand name “Sansui”. Thus the second condition is also satisfied. Now the last condition to be satisfied in order to attract section 5(2) of the KGST Act is that the sale is by the brand name holder or trade mark holder within the State and whether the appellant-Company is a holder of the brand name “SANSUI” - when a product is marketed under a brand name, the Assessing Authority is entitled .....

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nt-Company charged only usual margins in the trade, then there is no scope for ignoring the first sale, particularly, when the first seller was also the holder of the brand name and was free to market the products in the brand name. However, the evidence on record shows that the margin charged by the appellant-Company while making the further sale of product is unusually high. So the inter se sale between the groups of companies under the control of the same family was only to reduce tax liabili .....

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J. 1) Challenge in the above said appeals is to the legality of the impugned judgments and orders dated 25.05.2010 and 16.08.2011 in ST REV No. 36 of 2007 and RP No. 337 of 2011 respectively rendered by a Division Bench of the High Court of Kerala at Ernakulam. 2) Factual position in a nutshell is as follows:- a) The above said appeals relate to the assessment under the Kerala General Sales Tax Act, 1963 (in short the KGST Act ) for the year 1999-2000. KAIL Ltd.-the appellant-Company is a deale .....

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of Sansui and hence the turnover of the items sold under Sansui brand name will be treated as first sale under Section 5(2) of the KGST Act. c) The appellant-Company was served with a show cause notice dated 15.02.2004 by the Office of the Assistant Commissioner (Assmt.), Ernakulam against which a reply was filed on 15.03.2004 denying the averments of the notice stating that the appellant-Company is not the holder of the brand name Sansui indicating that the said brand name is owned by M/s Sans .....

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by the order dated 30.09.2004, the appellant-Company approached the Kerala Sales Tax Appellate Tribunal (in short the Tribunal ) by filing T.A. No. 736 of 2004 which was decided in favour of the appellant-Company vide order dated 12.04.2006. e) The respondent-State, aggrieved by the abovesaid order, preferred a revision petition being ST REV No. 36 of 2007 before the Kerala High Court. A Division Bench of the High Court, vide order dated 25.05.2010, allowed the revision filed by the respondent-S .....

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for the appellant-Company contended before this Court that the appellant-Company purchased the entire goods from Videocon International Ltd., Kochi Branch, after paying tax under the KGST Act. The appellant-Company is only the second seller of the goods and the Assessing Authority ought to have noted that the appellant-Company is eligible for rebate of tax under Rule 32(13B) of the Kerala General Sales Tax Rules, 1963 (in short the Rules ). There is no material on record for the respondent-Stat .....

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appellant-Company. 5) Per contra, learned senior counsel for the respondent-State submitted that the appellant-Company could not produce any valid evidence to substantiate the contention that M/s Videocon International Ltd. is the brand name holder during the relevant year. The assessing authority has rightly established by giving legitimate reasoning that the appellant-Company is the brand name holder of Sansui goods. Also from the facts and materials on record and from the observations of the .....

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ngs the goods to Kerala on stock transfer and the entire goods were sold to its subsidiary, the appellant-Company, for marketing in Kerala. Even though Videocon International Ltd. returned the entire sales as first sales on which they have collected tax from the subsidiary company, the appellant-Company was assessed for sales tax by the Assessing Officer while scrutinizing the second sale exemption as claimed by the appellant-Company and found that the goods in respect of which second sale exemp .....

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f Sansui . Since the products were sold under the brand name Sansui , assessment was made under Section 5(2) of the KGST Act after disallowing second sale exemption as claimed by the appellant-Company. 7) For deciding the controversy in issue, it would be appropriate to reproduce Section 5(2) of the KGST Act (as it stood at the relevant time) which reads as under:- Levy of tax on sale of goods.- Notwithstanding anything contained in this Act, in respect of manufactured goods other than tea, whic .....

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n petition decided by the High Court which are as under:- Government Pleader produced before us the files, which show the respondent s correspondence even with the Department with letter head printed in the name of Sansui with their logo and trademark. He has further produced cuttings from Financial Express published on 25.1.2000 wherein, the newspaper has reported that Kitchen Appliances Ltd., a wholly owned subsidiary of Videocon International Ltd. has acquired manufacturing facility from Phil .....

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national Ltd., which marketed the entire products through the respondent in Kerala. Further, from the terms of the agreement between the respondent s holding company and Sansui Electric Ltd., Japan, extracted in Tribunal s order, we notice that Videocon International Ltd. and their subsidiary companies are allowed to use the trademark and brand name of Sansui in India. So much so, Videocon International Ltd., which made the first sales to the appellant, is also the holder of the brand name Sansu .....

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irst sale for the purposes of the KGST Act. 10) Applying the aforementioned conditions to the facts of the present case, it is an admitted fact that the goods sold by the appellant-Company are manufactured goods other than tea. The first condition is satisfied. The next condition to be satisfied is that the sale of goods is under a trade mark or brand name. It is an undisputed fact that the manufactured goods sold by the appellant-Company were home appliances under the brand name Sansui . Thus t .....

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ility from Phillips India Ltd., Calcutta. The position got more clear from the affidavit filed in the High Court by Shri Venugopal Dhoot, a family member of the Dhoot family, who holds a controlling interest in the appellant-Company as well as in M/s Videocon International Ltd., wherein he honestly admitted that Dhoot family, directly or indirectly, is having shareholding control in the appellant-Company and Dhoot brothers are also the promoters of Videocon International Ltd. The relevant paragr .....

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y to file an affidavit explaining relationship between Videocon International Ltd. and Kitchen Appliances (India) Ltd. and about control of Dhoot family over these two companies. Accordingly, I am clarifying the position. I say and submit that Kitchen Appliances (India) Ltd. now name changed to KAIL Ltd., is a public limited company and Dhoot family, directly or indirectly, through various group companies are having shareholding control in respondent company as per the facts and various filings .....

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any. We, Dhoot Brothers are promoters of respondent company. It is closely held company. 5. I further say that Dhoot Brothers are also promoters of Videocon International Ltd. and based on the facts and the filings made by the company, from time to time, with the Stock Exchanges, the promoters together with various Videocon Group Companies were holding 35.11% of equity shares in Videocon International Ltd. as on 31/3/0000. Copy of shareholding pattern of Videocon International Ltd as on 31/3/200 .....

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ng: Videocon Appliances Limited, Videocon Communication Limited, Applicomp India Limited, Kitchen Appliances India Limited, Millennium Appliances (India) Limited and their consolidated subsidiaries. In this context, other related/relevant definitions are:- Dhoot Family Mr. V.N. Dhoot, Mr. P.N. Dhoot, Mr. R.N. Dhoot and their blood and marital relations and companies or other entities outside the Wider Videocon Group owned and/or controlled directly or indirectly by all or any such persons. Wider .....

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of the website publication produced by learned senior counsel for the appellant-Company in the High Court shows that as on 30.06.2006, 100% shares of Kitchen Appliances India Ltd. were held by Dhoot family. The given evidences are sufficient enough to show that the appellant-Company is a subsidiary and/or a group company of M/s Videocon International Ltd and hence, is also allowed to use the brand name SANSUI. Further, evidence on record shows that even the letter head used by the appellant-Comp .....

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he trade mark holder within the State. If the above three conditions are satisfied, the sale by the brand name holder or the trade mark holder shall be the first sale for the purpose of the Act. 10. The aforesaid sub-section commences with a non obstante clause i.e. irrespective of Section 5(1) of the Act or any other provision under the Act. The said sub-section speaks of a sale made by a brand name holder or the trade mark holder within the State. The legislature deems that such a sale by the .....

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e by fully owned subsidiary and/or a group company of the holding company, which was allowed to use the brand name Sansui . 14) Brand name has no relevance when the products are manufactured and sold in bulk by the holding company to its subsidiary company for marketing. However, the brand name assumes significance when goods are marketed with publicity in the market. Moreover, when the goods are sold under the brand name, necessarily, it has to assume that the marketing company is the holder of .....

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