WHIRLPOOL OF INDIA LTD., BANGALORE (KARNATAKA) versus THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES (INTELLIGENCE 3) SOUTH ZONE, BANGALORE (KARNATAKA)

Citation: [2006] SUPP. 9 S.C.R. 305 · Decided: 22-11-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

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Judgment (excerpt)

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WHIRLPOOL OF INDIA LTD., BANGALORE (KARNAT AKA)
A
v.
THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES
(INTELLIGENCE 3) SOUTH ZONE, BANGALORE (KARNATAKA)
NOVEMBER 22, 2006
[S.B. SINHA AND MARKANDEY KA TJU, JJ.]
Sales Tax:
B
Appellant-dealer, a registered user of trade mark "Whirlpool", was C
getting certain goods manufactured by another dealer under the said trade
mark-Sale by other dealer to Appellant was exempted from tax in view of
Government Notification-Sale transaction between appellant and the other
dealer-Held, fails under the Third proviso to s.5(3)(a) and not under Sixth
~~
Proviso read with Explanation Ill to s.5(3)(a) -Appellant not entitled to D
any credit' in respect of sales tax that would have been paid by the other
dealer for goods sold by it to Appellant-Sale by the other dealer does not
give any benefit of reduction in tax to Appellant-Karnataka Sales Tax Act,
1957-Section 5(3)(a)- 'Third and Sixth proviso; Explanation Ill' & Section
19C.
E
Appellant, a registered dealer under the Karnataka Sales Tax Act, 1957,
is a licensee and registered user of the trade mark "Whirlpool" in terms of
an agreement executed between it and M/s. Whirlpool Corporation, USA, the
proprietor and owner of the said trade mark. Appellant was getting certain
goods manufactured by another dealer, namely, Mis. Applicomp, on Original F
Equipment Manufacture basis under the said trade mark.
·In view of a notification issued by the State Government under Section
19C of the Act, no tax was payable under the said Act by M/s Applicomp on
sale of furnished goods manufactured by it and consequently sales by M/s
Applicomp to appellant were exempted from payment of any tax under the Act G
In appeal to this Court it is contended by the appellant, that the
transaction between M/s. Applicomp and the Appellant falls under the Sixth
Proviso read with Explanation Ill to Section 5(3)(a) of the Act, by virtue of
which credit has to be given to the Appellant in respect of sales tax that would
305
II
306
SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.
A have been paid by M/s 'Applicomp' for the branded goods sold by it to the
Appellant.
Rejecting the contention of the Appellant and thereafter dismissing the
appeal, the Court
B
HELD: 1.1. It is the Third Proviso and not the Sixth Proviso which
applies in this case because the goods are manufactured by the dealer
(Applicomp) using the branded name of another dealer (appellant). These goods
are not used as raw materials, components or packing materials. Hence the
sale by Applicomp to the appellant cannot be deemed to be the sale by the first
C dealer liable to tax under this Section, but it is the subsequent sale of such
goods by the dealer having the right either as proprietor or otherwise
(appellant) which has to be deemed to be the first sale liable to tax under this .
Section. The incidence of tax on the first sale would ther~fore be on the
appellant and not on Applicomp. (310-D, E, G)
D
1.2. Moreover, a reading of the agreement between the appellant and
Applicomp makes it clear that Applicomp is neither a registered user nor a
licensee of the trade mark. Thus it is not selling the goods as either a trade
mark holder or as one having any rights as the proprietor of the trade mark
or otherwise. The sales made by Mis. Applicomp to the appellant, are not sales
to the exclusive marketing agent or distributor or wholeseller or any other
E dealer but are only sales of manufactured branded goods to the brand owner.
F
G
Hence the Sixth Proviso and Explanation III to Section 5(3)(a) is clearly not
applicable. Any sale by Applicomp to the appellant does not give the benefit of
any reduction in tax to the appellant. [310-H; 311-A)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5150 of2006.
From the Judgment and Order dated 20-1-2004 of the High Court of
Karnataka at Bangalore in S.T.A. No. 70/2003.
Harish N. Salve, Y. Raja Gopala Rao, Y. Ramesh and Vismai Rao for the
appellant.
Sanjay R. Hedge, Anil Kumar Mishra, Vikrant Yadav and Sashidhar for
the Respondent.
The Judgment of the Court was delivered by
H
MARKANDEY KAT JU, J. Leave granted.
WHIRLPOOL OF INDIA LTD .. BANGALORE (KARNATAKA) ••.DEPUTY. COM~ffi. OF COMM. TAXES IMARKANOEY KATJU. l.I 307
This appeal has been file against the judgment of a Division Bench of A
the Karnataka High Court dated 20.1.2004 in STA No. 70 of 2003, by which
the appeal was .dismissed.
Heard learned

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