Branded goods first-sale rule under Kerala sales tax law cannot be defeated by seller exemption or shared brand use.

Section 5(2) of the Kerala General Sales Tax Act deems the sale of branded goods by the brand name or trade mark holder within the State to be the first sale. The Court held that this statutory character is not displaced merely because the seller was exempt from tax for the relevant period, or because both entities were authorised to use the same brand. Inter se brand arrangements do not override the actual first sale for levy purposes. On that basis, the sale by Kaveri to the assessee was treated as the first sale, and the levy could not be denied.

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Issues: Whether the sale of furniture by Kaveri to the assessee constituted the first sale for the purposes of Section 5(2) of the Kerala General Sales Tax Act, and whether the seller's exemption or the common brand arrangement displaced that levy.

Analysis: Section 5(2) creates a special rule for goods sold under a trade mark or brand name, deeming the sale by the brand name holder or trade mark holder within the State to be the first sale. The earlier decisions on the same provision establish that the statutory focus is on the branded sale by the brand holder, and that inter se arrangements between entities having use of the same brand do not automatically permit disregard of the actual first sale. The fact that Kaveri was exempt for the relevant period did not extinguish the character of the sale or justify ignoring it for the purposes of the levy. The High Court therefore erred in treating the sale to the assessee as not constituting the first sale.

Conclusion: The sale by Kaveri to the assessee was the first sale within the meaning of Section 5(2), and the levy could not be denied on the ground of Kaveri's exemption.

Final Conclusion: The impugned judgment was set aside and the appeals were allowed, restoring the assessee's position.

Ratio Decidendi: Under Section 5(2) of the Kerala General Sales Tax Act, the sale of branded goods by the brand name holder or trade mark holder within the State is deemed to be the first sale, and such sale cannot be ignored merely because the seller was exempt from tax or because both entities were authorized to use the same brand.

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