Brand name holder treated as first seller under Kerala sales tax law; tax liability sustained and rebate claim left for assessment.

A brand name holder who merely permits another concern to manufacture confectionery under the brand, while retaining ownership and exclusive selling rights in Kerala, remains the brand name holder for section 5(2) of the Kerala General Sales Tax Act, 1963. Sales of the branded goods by that holder are treated as the first sale, so tax liability under section 5(2) was sustained. A separate claim for reduction of tax under rule 32(13B), based on earlier taxation of the goods, was not granted in revision because the Tribunal had already directed the assessing authority to examine that claim at the assessment stage.

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Issues: (i) whether the assessee, as brand name holder of the confectionery sold under the brand name "Cryptm", was liable to tax under section 5(2) of the Kerala General Sales Tax Act, 1963; (ii) whether the assessee was entitled to reduction of tax under rule 32(13B) of the Kerala General Sales Tax Rules, 1963 on the ground that the goods had suffered tax at an earlier point of sale.

Issue (i): Whether the assessee, as brand name holder of the confectionery sold under the brand name "Cryptm", was liable to tax under section 5(2) of the Kerala General Sales Tax Act, 1963.

Analysis: Section 5(2) treats the sale of manufactured goods sold under a trade mark or brand name as the first sale where the sale is by the brand name holder or trade mark holder within the State. On the agreement, the assessee only permitted another concern to manufacture confectioneries using its brand name, while reserving its exclusive right to sell the branded products in Kerala and receiving royalty for use of the brand. The arrangement did not divest the assessee of ownership or holder status in the brand name. The branded goods were sold under the brand name by the assessee itself, bringing the sales within section 5(2).

Conclusion: The assessee was liable to tax under section 5(2) and the levy was sustained, against the assessee.

Issue (ii): Whether the assessee was entitled to reduction of tax under rule 32(13B) of the Kerala General Sales Tax Rules, 1963 on the ground that the goods had suffered tax at an earlier point of sale.

Analysis: Rule 32(13B) permits reduction of tax where the goods sold by the trade mark or brand name holder had already suffered tax at the hands of the dealer who sold the goods to such holder. The Tribunal had already directed the assessing authority to examine that claim. In that situation, no further direction was warranted in the revision.

Conclusion: No additional relief was granted on this claim, against the assessee.

Final Conclusion: The revision petitions failed on the principal taxability question, and the limited claim for reduction under the rules was left to the assessment stage as already directed below.

Ratio Decidendi: A dealer who retains ownership and exclusive selling rights in a brand name, while merely permitting another entity to manufacture goods under that brand, continues to be the brand name holder for the purpose of section 5(2), and the sale of such branded goods by that holder is treated as the first sale.

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