KAIL LTD. (FORMERLY KITCHEN APPLIANCES- INDIA LTD.) versus STATE OF KERALA REPRESENTED THRGH. JT. COMMR. (LAW)

Citation: [2016] 5 S.C.R. 865 · Decided: 26-10-2016 · Supreme Court of India · Bench: SHIVA KIRTI SINGH · Disposal: Dismissed
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Judgment (excerpt)

[2016] 5 S.C.R. 865 
865 
KAIL LTD. (FORMERLY KITCHEN APPLIANCES- INDIA LTD.) 
A 
v. 
STATE OF KERALA 
REPRESENTED THRGH. JT. COMMR. (LAW) 
(Civil Appeal Nos. 4283-4284 of2013) 
OCTOBER 26, 2016 
[SHIVA KIRTI SINGH AND R. K. AGRAWAL, JJ.] 
Kera/a General Sales Tax Act, 1963 - s.5(2) - Levy of tax on 
sale of goods - Sale of home appliances by appellant company 
under brand name 'S' - Appellant company purchased products 
from company 'V', holding company which brings the goods to the 
State on stock transfer and sell entire goods to its subsidiary, 
appellant company - Claim of second sale exemption by appellant 
- Case of the appellant-Company that it is not the holder of the 
brand name 'S' - Assessing authority held that appellant company 
is the brand name holder of 'S' and thus, turnover of items sold 
under 'S' brand name to be treated as first sale uls. 5 (2) - Ti·ibunal 
held in favour of the appellant company, whereas High Court upheld 
the order passed by the Assessing Authority - On appeal, held: 
Under s. 5 (2) if the conditions are satisfied that sale of the 
manufactured goods is under a trade mark or brand name and is 
within the State, the sale by the brand name holder or the trade 
mark holder shall be the first sale for the purposes of the KGST Act 
- Objective of s. 5(2) is to assess the sale of branded goods by the 
brand name holder to the market and the inter se sale between the 
brand name holders is not intended to be covered bys. 5(2) - When 
the goods are sold under the brand name, necessarily, it has to 
assume that the marketing company is the holder of the brand name 
or has the right to market the products in the brand name because, 
it is the first company introducing the products in the market - On 
facts, marketing is actually done by fully owned subsidiary and/or 
a group company of the holding company, which was allowed to 
use the brand name 'S' - Thus, tax invoking s. 5(2) rightly levied on 
the appella111-Co111pany for the relevant period since it is proved 
beyond reasonable doubt that the appellant-9pmpany is the brand 
name holder of .. S" - Order passed by the High Court upheld. 
865 
B 
c 
D 
E 
F 
G 
H 
866 
A 
8 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[~O 16] 5 S.C.R. 
Dismissing the appeals, the Court 
HELD: 1.1 It is clear from the language of s. 5(2) of the 
Kerala General Sales Tax Act, 1963 that in order to attract sub-
section (2) of Section 5, the following conditions are to be 
satisfied: (i) Sale of manufactured goods other than tea; (ii) Sale 
of the said goods is under a trade mark or brand name; and (iii) 
The sale is by the brand name holder or the trade mark holder 
within the State. If all the said conditions are satisfied, the sale by 
the brand name holder or the trade mark holder shall be the first 
sale for the purposes of the KGST Act. Applying the conditions 
to be satisfied to attract section 5(2), to the facts of the instant 
case, it is an admitted fact that the goods sold by the appellant-
Com pany arc manufactured goods other than tea. The first 
condition is satisfied. The next condition to be satisfied is that 
the sale of goods is under a trade mark or brand name. It is an 
undisputed fact that the manufactured goods sold by the appellant-
Company were home appliances under the brand name "S". Thus, 
the second condition is also satisfied. The last condition to be 
satisfied in order to attract section 5(2) of the KGST Act is that 
the sale is by the brand name holder or trade mark holder within 
the State and whether the appellant-Company is a holder of the 
brand name "S". [Paras 9, 10] [871-F-G; 872-A-C] 
1.2 When a product is marketed under a brand name, the 
Assessing Authority is entitled to assume that the sale is by the 
holder of the brand name or by a person, who is entitled to use 
the brand name in India. Apart from this, in the instant case, the 
marketing is actually done by fully owned subsidiary and/or a 
group company of the holding company, which was allowed to use 
the brand name "S". Brand name has no relevance when the 
products are manufactured and sold in bulk by the holding 
company to its subsidiary company for marketing. However, the 
brand name assumes significance when goods are marketed with 
publicity in the market. Moreover, when the goods are sold under 
the brand name, necessarily, it has to assume that the marketing 
company is the holder of the brand name or has the right to market 
the products in the brand
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