IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN FRIDAY, THE 29TH JULY 2011 / 7TH SRAVANA 1933 ST.Rev..No. 50 of 2011() ------------------------ TA.12/2009 of S.T.A.T.ADDL.BENCH,ERNAKULAM .................... PETITIONER/APPELLANT ----------------------------- M/S. HENKEL SPIC (I) LTD., THAIKKATTUKARA, ALUVA, COCHIN (NOW HENKEL INDIA LTD., BY MERGER) BY ADV. SRI.JOSE JOSEPH RESPONDENT/RESPONDENT: --------------- THE STATE OF KERALA. BY G.P. SRI.MOHAMMED RAFEEQ THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 29/07/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX ANNEXURE I: TRUE COPY OF AGREEMENT BETWEEN HENKEL KGaA AND SPIC FINE CHEMICALS LTED. (PETITIONER) DT.25.1.1989. ANNEXURE II: TRUE COPY OF AGREEMENT BETWEEN PETITIONER AND CALCUTTA CHEMICAL COMPANY LTD. DT.12.4.2001. ANNEXURE III: TRUE COPY OF INVOICE NO.C-62/K30007 OF CALCUTTA CHEMICAL COMPANY LTD. DT.31.5.2003. ANNEXURE IV: TRUE COPY OF CERTIFICATE OF CHARTERED ACCOUNTANT DT.14.6.2004. ANNEXURE V: TRUE COPY OF ASSESSMENT ORDER FOR THE YEAR 4.11.2008. ANNEXURE VI: TRUE COPY OF ORDER OF THE SALES TAX APPELLATE TRIBUNAL ADDITIONAL BENCH, ERNAKULAM IN T.A. NO.12/09 DT.27.10.2010. TRUE COPY P.S. TO JUDGE C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... S.T. Rev. No.50 of 2011 .................................................................... Dated this the 29th day of July, 2011. JUDGMENT Ramachandran Nair, J. The question raised in the revision filed by the assessee is whether the Tribunal was justified in confirming Section 5(2)- assessment on the turnover of detergent powder sold under the brand name "Mr.White" at the hands of the assessee for the year 2004-2005. We have heard Sri.Jose Joseph, counsel for the petitioner and Government Pleader for the respondent. 2. The assessee's case is that detergent powder under the brand name Mr.White was manufactured and supplied by Culcutta Chemical Company Ltd. and assessee purchased it from the depot of the manufacturer in Kerala and made second sales which are exempt from tax. However, the department's case is that assesseee is the brand name holder by virtue of the licence obtained from Henkel KGaA which is the registered brand name holder of “Mr.White” in India. Assessee in turn gave a sub-licence to Culcuta Chemical Company Ltd. which manufactured and sold the products to the assessee for marketing in S.T.Rev. 50/2011 2 Kerala. 3. Before proceeding to consider the liability on merits, Government Pleader brought to our notice that the Calcutta Chemical Company Ltd. was acquired by assessee and later with effect from 1.7.2004 the manufacturer and the assessee were merged together to form Henkel India Ltd. It is further stated that even before amalgamation, the name of Calcutta Chemical Co. Ltd. was changed into Hekel India Ltd. and it was virtually owned by the assessee- company. Admittedly assessee and the manufacturing company are one and the same organisation with effect from 1.7.2004. Even prior to the effective date of amalgamation, the Culcutta Chemical Company was taken over by assessee by acquisition of shares. There cannot be sale between the same company merely because they retained separate registrations under the Sales Tax act in two names even after 1.7.2004. In fact, the registration of the manufacturing company should have been cancelled with effect from 1.7.2004 as that company and the assessee became one and the same. However, registration could not have been cancelled only because the Madras High Court approved amalgamation only on 26.4.2005 with retrospective effect. By virtue of the acquisition of shares and control of the manufacturing company by S.T.Rev. 50/2011 3 the assessee and later the amalgamation between the two companies, the sales between these two companies cannot be said to be at market price which is the turnover intended to be assessed under Section 5(2) of the KGST Act by virtue of decision of this court in S.T.Rev. No.67/2011. The manufacturing company started office here only to make bulk sales to the assessee, which again is to provide cover of exemption to petitioner-assessee as a second seller. It is only to get over attempt of parties to reduce the incidence of tax on branded items by making the actual sales to market as second sales, Section 5(2) was introduced to levy tax on the real sale i.e. when the product is introduced in the market by the brand name holder. Therefore, in our view, the assessee's sales are rightly treated as deemed first sale falling under Section 5(2) of he KGST Act. We, therefore, do not find any merit in the revision case and the revision is accordingly dismissed. C.N.RAMACHANDRAN NAIR Judge P.S.GOPINATHAN Judge pms