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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a dealer who is only a licensed user of a trade mark, and not the registered proprietor, can be treated as the first dealer in the State for purposes of the third proviso to section 5(3)(a) of the Karnataka Sales Tax Act, 1957.
Analysis: The proviso creates a legal fiction in respect of goods manufactured by one dealer under the brand name or trade mark of another dealer. The expression "otherwise to use the said name or trade mark" is of wide import and is not confined to a registered user under the Trade and Merchandise Marks Act, 1958. A permitted user who obtains the right to use the trade mark by licence, and who arranges for manufacture of the goods under that mark, falls within the statutory scheme. The manufacture of goods under the trade mark for such licensed user, followed by sale to that user and subsequent sale by that user, attracts the deeming provision treating the latter as the first sale liable to tax.
Conclusion: The licensed user was rightly treated as the first dealer in the State and the sales were exigible to tax under the third proviso to section 5(3)(a) of the Karnataka Sales Tax Act, 1957.
Ratio Decidendi: For the third proviso to section 5(3)(a) of the Karnataka Sales Tax Act, 1957, a permitted/licensed user of a trade mark need not be the registered user under the trade mark law; the statutory fiction applies where goods are manufactured under the trade mark for such user and the subsequent sale by that user is deemed to be the first sale.
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