IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 31ST MARCH 2009 / 10TH CHAITHRA 1931 ST.Rev..No. 76 of 2008() ------------------------ TA.40/2007 of S.T.A.TRIBUNAL,ADDL.BENCH,KZD. .................... REVN.PETITIONER/RESPONDENT/REVENUE ------------------------------------------------------ STATE OF KERALA, REP. BY JOINT COMMISSIONER (LAW), IN-CHARGE, COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI. VINOD CHANDRAN RESPONDENT(S): APPELLANT/ASSESSEE --------------------------------- ASSOCIATED CEMENT COMPANIES LIMITED, COIMBATORE. BY ADV. SRI. JOSEPH VELLAPPALLY, SENIOR ADVOCATE ADV. SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE SRI.SAJI VARGHESE SRI.RAMESH CHERIAN JOHN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 10/02/2009, ALONG WITH STRV NO. 81 OF 2008 THE COURT ON 31/03/2009 DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & K. SURENDRA MOHAN, JJ. -------------------------------------------- S.T. Rev. Nos. 76 & 81 OF 2008 -------------------------------------------- Dated this the 31st day of March, 2009 JUDGMENT Ramachandran Nair,J. The question raised in the connected S.T. Revision cases filed by the State is whether respondent assessee is liable to pay tax under Section 5(2) of the Kerala General Sales Tax Act, hereinafter called the Act, on the sale of cement manufactured by another company by name Cochin Cements Ltd. in the brand name of the respondent under an agreement between the respondent-assessee and the company. Assessments involved are the local sales tax assessments completed on the respondent under the Act for the assessment years 1998-99 and 1999-2000. We have heard Special Government Pleader appearing for the State and senior counsel Sri. Joseph Vellappally appearing for the respondent. 2. Respondent, a reputed manufacturer of cement, entered into an agreement with another company by name Cochin Cements Ltd. for 2 manufacture and sale of cement under the brand name, ACC, which is the registered brand name of the respondent. Cement manufactured at Newsprint Nagar in Kottayam District was with fly ash generated in the manufacture of newsprint by Hindustan Newsprint Limited as one of the ingredients. Government of Kerala, treating the use of fly ash in the production of cement as a pollution controlling measure, granted sales tax exemption to Cochin Cements Ltd. on the cement produced and sold by them. Even though manufacturing company namely, Cochin Cements Ltd., was granted exemption on the sale of cement by them to the respondent, while completing the assessment of the respondent the assessing officer levied tax on the sale of cement by the respondent as the sale by the brand name holder is the deemed first sale liable to tax by virtue of fiction provided in Section 5(2) of the Act. Even though assessment was confirmed in first appeal, on second appeal by the respondent the Sales Tax Appellate Tribunal cancelled the assessment made in the hands of the respondent on the ground that assessment under Section 5(2) is permissible only on "brand name holder" and not on "brand name owner", which admittedly the respondent is. The only question to be considered in the revisions filed 3 by the State is whether a " brand name owner" which admittedly the respondent is, is the "brand name holder" as well liable to pay tax under Section 5(2) of the Act. In order to appreciate the contentions raised, we have to necessarily refer to Section 5(2) of the Act, which is as follows: Notwithstanding anything contained in this Act, in respect of manufactured goods other than tea, 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 purposes of this Act. 3. Special Government Pleader appearing for the State contended that "brand name holder" referred to in the Section includes "brand name owner" and so much so respondent admittedly being the brand name owner, which has purchased cement from Cochin Cements Ltd. and sold the same under brand name, is the deemed first seller in terms of Section 5(2) of the Act and so much so they were rightly assessed. According to him distinction drawn by the Tribunal between "brand name owner" and "brand name holder" has no application herein because owner of the brand name in this case is the holder as well. Senior counsel Sri. Joseph Vellappally appearing for the respondent on the other hand submitted that the purpose of Section 5(2) is not to deny 4 exemption granted to the product by the Government under notification issued under Section 10 of the Act and so much so by virtue of the exemption granted on the first sale of the product at the hands of the Cochin Cements Ltd., second sale cannot be assessed by resorting to Section 5(2) of the Act. Counsel has relied on the decision of this Court in ST Rev. 217 and 218 of 2007 wherein this Court has allowed the revisions filed by the Cochin Cements Ltd. granting sales tax exemption. Special Government Pleader has also relied on the decision of this Court in CRYPTOM CONFECTIONERIES (I) P.LTD. V. STATE OF KERALA, (2007) 8 VST 21 (Ker.) and E.I.D. PARRY (INDIA) LTD. v. COMMISSIONER OF COMMERCIAL TAXES, (2008) 16 VST 1(Ker.) and contended that levy of tax on brand name holder treating them as deemed first seller is perfectly in order and the decision of the Tribunal to the contrary is illegal and liable to be quashed by this Court. 4. We are unable to accept the contention of counsel for the respondent that exemption granted to the selling unit will entitle the respondent also for exemption on the cements purchased and sold by them under their brand name. In fact exemption granted is not on the 5 product as claimed by counsel for the respondent, but is on the selling dealer, namely, Cochin Cements Ltd. Government has not granted exemption on all cements manufactured with fly ash as an ingredient and sold in Kerala. Consequently exemption granted is only in favour of Cochin Cements Ltd. for the sale of cements manufactured by them. Supreme Court in STATE OF TAMIL NADU V. M.K. KANDASWAMY, 36 STC 191 explained the scope of purchase tax, wherein clear distinction is drawn among taxable incidence, taxable goods and taxable persons. The fact that selling dealer is entitled to exemption does not mean that goods sold are exempt at the hands of all the dealers purchasing and selling the same. Cement is an item taxable at the point of first sale in the State. By virtue of Section 5(2) sale by brand name holder is deemed to be first sale in the State. Therefore tax is payable in respect of cement sold under brand name, only when the brand name holder makes the sale. In other words, sales of branded products including cement other than by brand name holders will be exempted from tax as the incidence of tax under Section 5(2) is at the point of sale by brand name holder. This would mean that Cochin Cements Ltd, not being the brand name holder of ACC, would not have 6 been liable to pay tax on their sales to the respondent even without exemption notification obtained by them from the Government. Therefore respondent's liability to pay tax as brand name holder being the deemed first seller of the goods is not affected by virtue of exemption granted to the manufacturing dealer. There is no dispute that respondent is the owner of the brand name, "ACC" and the only question to be considered is whether as owner they are "holders" as well. Tribunal has, by referring to Section 2(i)(r) of the Trade Mark Act, held that trade mark can be assigned or permitted to be used by others. The Tribunal accordingly was of the view that only an assignee or permitted user of trade mark is the holder of the same. We are unable to uphold this finding because when trade mark is not assigned or allowed to be used by others, owner continues to be the holder of the trade mark. Dictionary meaning of "holder" is "possessor of title". Even though respondent has a case that Cochin Cements Ltd. itself made sales to it's customers and the agreement permits it, we notice that turnover of sales exclusively to customers of Cochin Cements Ltd. is insignificant and the lion share of the production, packed in the brand name of the respondent, was purchased and sold by the 7 respondent in the market by adding their margin. Even though agreement provides for payment of Rs. 75/- per tonne by the respondent to Cochin Cements Ltd. the same does not involve assignment or transfer of brand name by the respondent to Cochin Cements Ltd. On the other hand there is no dispute that cement packed in the brand name of the respondent was purchased and marketed by the respondent. We are of the view that respondent being brand name owner is the brand name "holder" as well and therefore their sales are deemed first sales assessable under Section 5(2) of the Act. Besides the common question on merits decided above for 1998- 99, the Tribunal cancelled provisional assessments for the reason that the same was made after the end of the year. If regular assessments cannot be made on account of pendency of assessment for earlier years or for any other reason, we do not think, there is any bar against making provisional assessment even after the close of the year, if the same is otherwise justified based on returns filed. In any case since in this case we have decided the issue on merit, the assessing officer will make regular assessment for 1998-99 in the place of the provisional assessment cancelled by the Tribunal. The ST Revisions are allowed 8 vacating the orders of the Tribunal and restoring the regular assessment for 1999-2000 and with direction to the assessing officer to make regular assessment for 1998-99, if not already done. (C.N.RAMACHANDRAN NAIR) Judge. (K. SURENDRA MOHAN) Judge. kk 9