Sales Tax – Second Sale by Holder of TradeMark – Not a Resale – Taxable as First Sale, Section 5(2) and Entry 85 and 127 of Schedule I of The Kerala General Sales Tax Act, 1963.
FACTS
The Company engaged in sale of consumer products like toothpaste, Moth repellants, etc. within the State and also holder/owner of trademark claimed second sale in respect of sale of its products like “Promise” “Meswak” “Odonil” etc. being purchased from registered dealer. The company paid tax @8% on sale of “Odonil” moth repellant under entry 85 of Schedule I the Act. The assessing authority disallowed the claim of resale u/s. 5(2) of The Act being sale of goods by trade mark Holder/Owner and levied tax thereon.
Further, the assessing authority levied tax @20% on sale of “Odonil” as the same is an “Air Freshener” would be classified as “perfumery” coming within entry 127 of the schedule I of the Act.
The Tribunal held in favour of the company for levy of tax @8% on sale of “Odonil”. The Tribunal also allowed the claim of resale of the assessee company. The State filed appeal before the Kerala High Court against the said decision of Tribunal.
HELD
The entry 127 of Schedule I covers goods like “shampoo”, “Talcum Powder” etc. The item so specifically mentioned are all relating to items which are used on the human body for beautification, grooming and having cosmetic qualities or properties. By including the specific items, the expansions to include other perfumeries and cosmetics would also be restricted to such items which would answer the description of the specific items mentioned in the entry. The principle of “ejusdemgeneris” would compel to understand the meaning of a word from the meaning of the works employed together with it. The product “Odonil” which is admittedly a room/ cup-board fresher cannot be brought under the description of perfumery in entry 127. As regards claim of the company for levy of tax at 8% under entry 85 of Schedule-I, as “Mosquito Repellents”, the court held that the predominant function is not descernible from the records. The wrapper of products indicates that it is an air freshener and also a moth repellant. The fragrance provided is projected as masking the bad odour of chemical and also avoiding bad odour in rooms /covered space. In such circumstances, it cannot be said that the dominant use of the product is that of a moth repellant and the same would fall under residuary entry of schedule I of The Act. Accordingly, the High Court held it covered by residuary entry of the Schedule I of the Act.
In respect of the second issue of claim of resale, the High Court held that u/s. 5(2) of the Act sale of goods under a trademark or name, by the brand name holder or trademark holder within the State shall be the first sale for the purpose of this Act. In this case, the company is a trademark/brand name holder of certain products more specifically tooth paste and toothbrush sold in the trade name “Promise” and “Meswak”. The company had purchased the said goods from M/s. Besta Cosmetics Limited who manufactured said goods under grant of license by the assessee company to manufacture under the said trade name. Section 5(2) of the act is an anti evasion measure and it contemplates the liability to be at that point of sale in case sale of manufactured goods other that tea, within the State:-
i) Made under a trademark or brand name,
ii) By a trademark / brand name holder
The sale hence would be not only by a trademark / brand name holder, but it should also be under trademark / brand name. The first sale by the manufacturer to the assessee company is of course sale by a trademark/brand name holder but, not a sale under trademark/brand name. Hence the second sale effected by the assessee company being again a sale by a trade mark / brand name holder and also a sale under trademark / brand name, is liable to tax u/s. 5(2) of the Act. Accordingly, the order of Tribunal allowing the claim of resale of the assessee company was set aside and the order of first appellate authority levying tax was confirmed.
