TaxTMI 
TaxTMI 
2015 (2) TMI 563
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....e case, the Tribunal was legally justified in holding that the amount of Rs. 8,34,781/as per hire purchase agreement dated 7.2.1996 hire financed in favour of Shri. Ajit Singh Bhimrao was liable to tax under Section 8 of the B.S.T. Act, 1959? (ii) Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that an amount of Rs. 3,27,601/out of Rs. 8,34,781/which were option money, insurance charges for 3 years and hire premium recovered from Shri. Ajit Singh Bhimrao formed part of the Sale Price as defined in Section 2(29) of the B. S. T. Act, 1959? (iii) Whether in absence of a definition of VAT in the B. S. T. Act, 1959, and on a correct interpretation of Section 12A(3) the Tribunal was legally justified in holding that Applicant was liable to pay Sales Tax on the total value of Rs. 8,34,781/which comprised of a sum of Rs. 5,08,180/of Truck purchased from a registered dealer and entitled to deduction under section 8(ii) and sum of Rs. 1/option money, insurance charges of Rs. 45,000/and Rs. 2,81,600/being hire pr....
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....f the vehicle and that it is the only price of the vehicle at the time of delivery thereof to the hirer that will represent the sale price of the vehicle. That means, the sale price of Rs. 5,08,180/and not the amount of Rs. 8,34,781/should be taken as the sale price. The Commissioner decided this application on 21st March, 1998 and he did not accept the Applicant's contention. The Commissioner concluded that the sale price of the vehicle sold on the hire purchase basis would be the entire amount including the hire premium and insurance premium received from the hirer. In other words, the entire sum was taken to be the sale price by him. This order of the Commissioner was challenged by filing an appeal being Appeal No. 47 of 1998. That Appeal was decided on 5th May, 2001. The Tribunal dismissed the appeal after noting several contentions, which have been raised by the applicant. The statement of case proceeds to state that this Judgment of the Tribunal was disputed by the Applicant and it sought rectification thereof under section 62 of the BST Act. This rectification application was registered as Rectification Application No. 42 of 2001. It was decided on 16th January, 2002. It was....
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....t of its business relates to hire purchase, wherein, vehicles sold to Dealers are repurchased from the Dealers in order to dispose of the same on hire purchase basis to a customer. Thus, this is a exceptional transaction and in the light of the huge turnover of the Applicant, they offered Rs. 148 crores approximately to tax. In comparison to this only on a sum of Rs. 16 crores resale exemption was sought. Therefore, it is clear that hire purchase transactions constitute only a minor percentage of the Applicant's turnover. Mr. Sridharan clarifies that the Applicant discharges full tax burden in terms of the BST Act on the first sale of vehicles by them to the Dealers. The tax so paid is on the full price charged on the Dealer. He has invited our attention to the details of the sale transactions including the sample invoices and submits that after the first sale to the Dealer, repurchase of the vehicles from the Dealers by the Applicant and the final and the last sale to the customer by the Applicant on hire purchase are the stages in brief. It is the last leg of the sale by the Applicant to the customer on hire purchase basis, which results in the above questions of law. 11) The ....
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....rther submits that as per the Explanation and the speech of the Finance Minister, reproduced hereinabove, certain deemed resales as per section 2(26) were not deemed as resale where the seller held a trade mark in respect of the goods sold. The object and purpose of this Explanation was to ensure that the full value of the trademarked goods were captured by the firstpoint Sales Tax levy, in order to provide for those situations wherein a trade mark holder subcontracted the manufacture of the goods to a third party and bought the same paying sales tax on such first sale, but subsequently affixed his trade mark to the value of such goods and then resold them claiming resale exemption. Consequently, prior to 1988 amendment, in such a chain of transactions, the value added by use of the trade mark is not captured by the sales tax levy in the first sale from the subcontracted manufacturer to the trade mark holding reseller. 16) Mr. Sridharan further submits that such object and purpose is also clear from the wording of the Explanation to section 2(26) itself, which excludes only those transactions of resale where the reseller holds a trade mark and specifically holds the same in resp....
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....ential function and subject matter of a trade mark, further reference must be made to existing jurisprudence in common law. As explained in the treatise Kerly's law of trademarks and tradenames, 14th Edn., (page 5 to 12 of compilation VolumeII), the definition of the specific subject matter of a trade mark was determined by the European Court of Justice in Centrafarm v. Winthorp (1974) ECR 1183 where is held as follows: "In relation to trade marks, the specific subjectmatter of the industrial property is the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purpose of putting products protected by the trade mark into circulation for the first time, and is therefore intended to protect him against competitor wishing to take advantage of the status and reputation of the trade mark by selling products illegally bearing that trade mark" 20) Mr. Sridharan further submits that similarly the said treatise refers to the decision in CnlSucal NV SA v. HAG GF AG (1990) I ECR 3711, wherein it was similarly stated that the subject matter of a trade mark was: &nb....
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....d. In the present case in the first leg the vehicles are sold to the Dealers, the trade mark is used. Thereafter, these vehicles are repurchased and then disposed of in favour of the customers. In these circumstances, there is no basis for the finding that the Applicants are holders of the mark. The interpretation placed by the Revenue will result in absurdity. Because of their interpretation, the first sale between the Applicant and Dealer is liable to Sales Tax. The resale from the Dealer to the Applicant does not attract the Sales Tax to be eligible to resale exemption. The third transaction between the Applicant and the customer is denied resale exemption and again subjected to Sales Tax as if it is a first point levy. The fact that the second transaction, namely, resale by the Dealer to the Applicant attracts the resale exemption is apparent from the invoices. It is in these circumstances that he terms the transaction involved in the present case as resale transaction not hit by the Explanation below section 2(26) of the BST Act. 24) He finally concluded his submissions by submitting that the hire purchase premiums are not taxable under the applicable provisions of the BST ....
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.... avoid the consequences under the BST Act. The Explanation which has been introduced in section 2(26) in 1988 would therefore govern the case. He submits that the References be answered in favour of the Revenue and against the Assessee. 27) Mr. Sonpal has relied upon the following decisions and material in support of his contentions: 1. Circular No. 21 of 1988 dated 27th May, 1988, Bombay Sales Tax (Amendment) Rules, 1988. 2. Jay Bharat Credit and Investment Co. v. CST (2000) 120 STC 1 3. Sundaram Finance Ltd. vs. Asstt. Commissioner of I. T., Chennai (2012) 10 SCC 430 4. Commissioner of VAT, Delhi vs. Carzonrent (India) Pvt. Ltd. 198 (2013 Delhi Law Times 783 (DB) 5. Goodwill India Ltd. vs. The State (1980) 45 STC 368 6. Commissioner, Trade Tax, U. P. vs. Varanasi Auto Sales (P) Ltd. (1996) 101 STC 55....
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....old; or (ii) if the seller is entitled to use a trade mark or a patent in respect of the goods sold, or if the seller is entitled to use a patent in respect of the method or process of manufacturing the goods sold; 1-5-1992 to 8-9-1992 Explanation I - For the purposes of clauses (i) , (ii) and (iii) of section 8, a sale of purchased goods other than Declared goods shall not be deemed to be a re-sale if the seller - (a) holds or is entitled to use, or uses, a patent in respect of the goods sold or in respect of the method or process of manufacturing the goods sold; or (b) holds or is entitled to use, or uses, a trade mark registered under the Trade and Merchandise marks Act, 1958 [43 of 1958] in respect of the goods sold; or (c) uses in respect of the goods sold, a trade mark registered, whether by him or by any other person, under the Trade and Merchandise Marks Act, 1958 [43 of 1958] in respect of any other goods. 1-5-1992 to 8-9-1992 Explanation II - Where a dealer has applied for grant of patent, or for the registration, or for the renewal of the registration of his trade mark, he shall be deemed to be holding a patent or, as th....
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.... in respect of his sale of such goods. The amendments now being made are retrospective with effect from 22nd April 1988 as the definition of "resale" was first amended with effect from that date." 29) A perusal of the above would reveal that the term resale has been defined for the purpose of sections 7, 8, 8A, 9, 12, 13 and 13B. That is for the purpose of levy of Sales Tax on goods specified in Schedule 'C', power to satisfy points of sale at which goods may be taxed, levy of turnover tax on goods specified in Schedule 'C' in case of certain Dealers. By section 12, there is a deduction permissible from turnover on conditions stipulated therein being satisfied. By section 13 and 13B, purchase tax payable on certain purchases of goods from unregistered Dealers and purchase tax payable on specified goods has been dealt with. In these circumstances, the definition of the term "resale" was necessitated. A resale means a sale of purchased goods in the same form in which they were purchased or without doing anything to them which amounts to or results in a manufacture. By Explanation which has been substituted w.e.f. 22nd April, 1988 by Maharashtra Act 22 of 1988, it h....
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....fter provided to the customers on hire purchase basis. Mr.Sridharan submits that there is no evasion of tax, inasmuch as in the first sale of the vehicles to the Dealer, full tax as applicable under the BST Act is paid. Once that tax is paid, on the sale transaction back to the Applicant, no tax has been charged. That qualifies as a resale. The third transaction of hire purchase is the one on which the tax is demanded. But, in terms of the Explanation, the Revenue will have to satisfy this Court that the Applicant holds the trade mark in the goods even after the first sale. In other words, the trade mark no longer subsists but is exhausted after the first sale. 31) We are unable to agree with Mr. Sridharan, because the Tribunal, in this case, has held that the Applicant is a holder of the trade mark. The Tribunal relied upon a decision of this Court rendered in the case of Federation of Association of Maharashtra and Anr. reported in 11 Sales Tax Cases 391. It may be that the said decision is rendered in the backdrop of a challenge to the constitutional validity of section 2(26) of the BST Act and particularly the Explanation referred by us hereinabove, yet, while upholding t....
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....of the provisions contained in these two enactments. If in terms of these enactments the seller does not hold a trade mark or a patent or is not entitled to use the said trade mark or patent in the goods, in respect of which such rights are conferred, after they are sold for the first time, then, the subsequent acts in relation to these goods would not be covered by the Explanation. 33) Mr. Sridharan has relied upon the works of eminent authors. He brings to our notice the passage in the book Intellectual property: Patents, Copyright, Trade Marks and Allied Rights, Fourth Edition by W. R. Cornish. He submits that the general concept in every intellectual property law is that it is necessary to decide which steps in the chain of production and distribution of goods require the licence of the right owner, manufacturer, first sale by the manufacturer, subsequent sales and other dealings, export and import, use. He submits that in many cases, both in British and Foreign laws, the rights are exhausted after first sale by the right owner or with his consent. However, this is confined to first sale within the territory covered by the right and therefore, the principle of domestic ex....
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....sion. We cannot assume that the State legislature enacted a law enabling imposition and levy of tax on sales and purchases of goods and in doing so, interfered with the aforenoted legislations. Far from interfering, the State legislature made a reference to the sellers holding a trade mark or a patent in the goods which are sold after they are purchased or the rights to use the trade marks or patent in relation to such goods solely to distinguish the sellers conferred with such rights from those not holding the same. The State never intended to travel beyond these parliamentary statutes and therefore, the wording of the Explanation in the instant case cannot be said to be creating any right or authority unknown or not provided by the parliamentary statutes. Once this conclusion is reached, strictly speaking, the alternate contention of Mr. Sridharan need not detain us. 35) Mr. Sridharan submitted that there is a exhaustion of the rights of a trade mark holder upon first sale and he relied upon the works of well known authors. However, we have to go by the scheme of the Trade Marks Act, 1999 and the Trade and Merchandise Marks Act, 1958. In both statutes, we find that there is no....
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....goods or services in respect of which the trade mark is registered and to obtain relief in respect infringement of the trade mark in the manner provided by the Act. This right is subject to the conditions and limitations to which the registration itself is subjected. A person who claims to be a trade mark holder but does not have it registered either in relation to the goods or services, will only be able to prevent passing off the goods or services as the goods of another person or as services provided by another person or the remedies in respect thereof. 37) We do not find any provision which sets any limit of the nature read by Mr. Sridharan. The trade mark is not exhausted. All that is provided in the law is that the registration of a trade mark shall be for a period of 10 years but may be renewed from time to time. Since the definitions of the 'mark', 'trade mark', 'registered trade mark', 'well known trade mark' are all incorporated so as to distinguish the goods or services of one person from those of the others, then, unless some provision is specifically made so as to exhaust the distinction and right therein, we cannot take assistance of....
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....ause deals with the exclusive rights conferred by registration. This corresponds to the existing section 28 of the Trade and Merchandise Marks Act, 1958. This right has now been extended to include services also." 39) A bare perusal thereof would indicate as to how the exclusive right to use of a trade mark given under subsection (1) of section 28 shall be subjected to any conditions and limitations to which the registration is subject. What is infringement of a registered trade mark is dealt with by section 29 and by subsection (1), it is stated as to how the mark being used not by a registered proprietor or a person permitted to use it in the course of its trade uses, a mark which is identical with or deceptively similar to the trade mark in relation to goods or services, in respect of which it is registered and in such manner as to render the use of mark likely to be taken as being used as a trade mark would constitute infringement. 40) The preceding Chapter III deals with procedure for and duration of registration and the prior provisions enabling registration of trade marks would indicate that so long as the parameters in the legislation are fulfilled, the protection by ....
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....Mr. Sridharan. If the Act is read as a whole and the provisions thereof are construed harmoniously, it would be clear that the protection guaranteed by registration of the Trade Mark may have some limitations. However, they affect the enjoyment of the rights conferred by registration (see sections 28, 29 and 30). The registered Trade Mark is thus not exhausted as the rights therein are protected so long as the registration is in effect and valid. The rights therein are somewhat diluted and their enjoyment curtailed but we cannot infer from the statute the result that Mr. Sridharan reads in it. It is only the limitations or restrictions on the rights, which have been conferred upon registration that are spelt out. Those may include the restrictive provisions when the goods enter the market. The goods entering the market and dealings in such goods entering the market are cases which are specifically dealt with and some savings and restrictions have been enacted in the legislation pertaining to trade marks. However, the theory and principle which is relied upon by Mr. Sridharan by itself and without anything more cannot assist the Applicant. Such principle or theory ought to find plac....