IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 10TH FEBRUARY 2010 / 21ST MAGHA 1931 ST.Rev..No. 1 of 2010 ------------------------------ [TA.NO.190/2009 OF KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ERNAKULAM] .................... REVISION PETITIONER/RESPONDENT/REVENUE: ----------------------------------------------------------------------- STATE OF KERALA, REPRESENTED BY JOINT COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI. MOHAMMED RAFFIQ. RESPONDENT/APPELLANT/ASSESSEE: --------------------------------------------------------- EUREKA FORBES LTD., PALARIVATTOM. BY ADVS SRI.ANIL D. NAIR, SRI.NIVEDITA A.KAMATH. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 10/02/2010, ALONG WITH S.T.REV. NO. 4/2010 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: prv. C.N.Ramachandran Nair & P.S.Gopinathan, JJ. ============================================ S.T.REV.Nos.1 and 4/2010 ============================================ Dated this the 10th day of February, 2010. ORDER Ramachandran Nair, J. 1.The question raised in the connected revision filed by the State is whether the Tribunal was justified in cancelling the brand name assessment made on the respondent assessee under Section 5 (2) of the K.G.S.T.Act for the assessment years 1998-99 and 2003-04. 2.We heard Government Pleader appearing for the petitioner and Adv.Sri.Anil D.Nair appearing for the respondent. 3.The contention of the Government Pleader is that the two items involved, namely, water purifier and vacuum cleaner were sold under the brand name STRV 1&4/10 -:2:- “Acquaguard” and “Euroclean” respectively by the assessee and so much so, the assessee, which has control over the brand name, is liable for assessment under Section 5(2) of the KGST Act. The Tribunal, however on facts, found that the brand name for the two products were not owned by the assessee. However, after hearing both sides, we are not able to sustain the Tribunal's order, because, we are not being appraised of the true facts. In the first place, acquaguard is a brand name owned by M/s.Acquamall Water Solutions Ltd., its manufacturer, which is a 100% subsidiary of the assessee. If the brand name owner is a 100% subsidiary of the assessee, then certainly assessee has got control over the affairs of the subsidiary company and it is for the officer to find out the trade margin received by the assessee in their sales after purchase of the items from the manufacturer, which also had STRV 1&4/10 -:3:- sales outlet in Kerala. Since policy decision of the subsidiary company is under the control of the holding company, the transaction has to be closely watched and if the local sale by the subsidiary company to the holding company is at a low price, then certainly even without recourse to Section 5(2) of the Act, assessee's sales can be assessed as first sales, which is the genuine sale of the product in the market. The gross profit obtained by the assessee itself would prove beyond reasonable doubt as to whether the transaction between the companies was intended to evade payment of tax. The brand name used by the assessee was not considered by any of the authorities. The position is same in so far as the sale of the other product, namely, vacuum cleaner under the brand name “Euroclean” where the brand name is said to be owned by M/s.FAL Industries Ltd., which was controlled by Forbes STRV 1&4/10 -:4:- Gokak Ltd. of which the assessee is a subsidiary. In fact, it is seen that M/s.FAL Industries Ltd., the manufacturer, has now claimed brand name and the said company later got amalgamated with Forbes Gokak Ltd. Since the respondent is only a subsidiary of Forbes Gokak Ltd., which controls the brand name owned by its subsidiary, which was later amalgamated with it, the transaction between subsidiary companies and related companies, namely, the two subsidiaries of the very same company, which are M/s.FAL Industries Ltd. and the assessee have to be examined. Here again, we make it clear that the trade margin obtained by the assessee or the gross profit received by them will be indicative of the brand name - right and genuineness of the transaction between the related companies. We, therefore, set aside the orders of the Tribunal and that of the first appellate authority and remand the STRV 1&4/10 -:5:- cases to the assessing officer for detailed consideration after giving an opportunity to the assessee of being heard. The assessing officer will also go through the website details produced by the Government Pleader in court. C.N.Ramachandran Nair, Judge. P.S.Gopinathan, Judge. sl.