PONDS INDIA LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THESE revision petitions are filed against the orders passed by the Karnataka Appellate tribunal on October 10, 1995 in S. T. A. Nos. 279 and 280 of 1995. The Tribunal has confirmed the orders passed by the first appellate authority and the assessing authority, who by their orders had concluded that, the petitioner before this Court is the first dealer in the State and that therefore its sales turnover is exigible to tax in view of the proviso to Section 5 (3) (a) of the karnataka Sales Tax Act, 1957 ("the K. S. T. Act", for short ).

(2.) M/s. Ponds (India) limited, petitioner in these revision petitions, is a limited company and a dealer trading in cosmetics, soaps, shampoos and other toiletries. It has got its manufacturing unit in places like Madras and other places outside the State. It also gets certain items of cosmetics manufactured in Karnataka and effects sales thereof within the State and also effects inter-State sales. In the annual returns filed before the assessing authority for the assessment year 1991-1992, it reported total and taxable turnover at Rs. 8,53,47,143. 24 and Rs. 7,45,76,918. 96, respectively. For the year 1990-1991, it had declared total and taxable turnover at Rs. 6,84,13,340. 23 and Rs. 5,82,79,384. 99, respectively. In its books of accounts, the petitioner-company has shown that it received cosmetics, shampoos worth Rs. 6,38,98,221. 11 during 1991-1992 and the said articles worth Rs. 6,43,07,478. 70 during 1990-91 from its madras, Pondicherry and Tambaram manufacturing units and offices as stock transfers. Apart from stock receipts, the petitioner also reported purchases of cosmetics worth Rs. 6,91,092. 50 during 1990-1991 and Rs. 1,26,23,790. 87 during 1991-1992 from M/s. J. B. Advani and Co. (Mysore) Ltd. , Bangalore. As against the stock receipts from its head office/branches outside the state and goods got manufactured through M/s. J. B. Advani and Company, it has reported during 1990-1991 sales of cosmetics (excluding tax) at Rs. 4,75,11,362. 13, white petroleum jelly at Rs. 20,07,119. 72, soaps at Rs. 40,12,321. 80, shampoos at Rs. 17,30,006. 63 and second sales of dream flower talc and sandal talc at Rs. 1,93,16,108. The petitioner-company from out of their gross turnover of Rs. 8,53,47,143. 24 had claimed during 1990-1991 exemption of sales tax on a turnover of Rs. 3,00,86,332. 90 comprising of sales tax collected at Rs. 80,73,923. 19, second sales of dream flower talc and sandal talc at Rs. 1,95,54,953, stock transfer to other branches at rs. 6,81. 937. 50 return of the goods sold at Rs. 17,75,518. 54. During assessment year 1991-1992, the petitioner- company claimed exemption on the sales of branded goods manufactured by M/s. Advani and Co. , to the extent of Rs. 5,57,807. 04 on the ground that they were second sales.

(3.) THE assessing authority while computing the tax liability of the petitioner-company under the act, has allowed all the exemptions claimed except the claim of second sales of dream flower talc and sandal talc to the extent of Rs. 1,93,16,107. 50 in view of proviso to Section 5 (3) (a) of the Act and this was done by the assessing authority after issuing proposition notice in form 31-A of the Act, to the petitioner-company. The assessing authority while rejecting the claim for exemption made by the assessee and for passing the best judgment assessment Under Section 12 (3) of the Act read with Rule 18 (3) of the Rules, in his order, notices the following factual aspects and his conclusion based thereon: the sum and substance of the dealer-company's contentions are that M/s. Chesebrough Ponds inc. , is a foreign company which has got trade mark 'ponds' registered in their name in India and that they are not manufacturing and trading in India and that by an arrangement they have given the right to use the trade mark to M/s. Ponds (India) Ltd. , free of cost and that since they are not the brand name holders and since the company who have got the trade mark Ponds registered in their name are not dealers under the provisions of the KST Act, 1957 as they are not manufacturing or trading in any of the goods in India, the provisions of Section 5 (3) (a) do not apply to the facts of their case. The dealer-company have admitted the fact in no uncertain terms that they are licensed to use the trade mark Ponds by Chesebrough Ponds Inc. , U. S. A. In otherwords, Chesebrough Ponds Inc. , U. S. A. , who have got the marks Ponds registered in India, have 'assigned' the said trade marks Ponds on Ponds (India) Ltd. , so as to enable the latter to make use of it for the manufacture and sales of talcum powder and other toilet articles. If one studies provisions of third proviso to Section 5 (3) (a) of the Act, it is clear that the provisions are applicable not only to the person who holds the trade mark but also to person who is licensed to use the trade mark admitted. M/s. Ponds (India) Ltd. , are admittedly licensed to use the trade mark Ponds and therefore, the said provisions of the K. S. T. Act, 1957 apply on all fours to the case of M/s. Ponds (India) Ltd. Moreover, the fact the J. B. Advani and Co. (Mysore) Ltd. , bangalore, have manufactured dream flower talc and sandle talc to the specifications of the dealer-company is not denied. Further, the fact that M/s. J. B. Advani and Co. (Mysore) Ltd. , bangalore, have supplied the said goods only to Ponds (India) Ltd. , as per the agreements also not denied. In the circumstances, the dealer-company's contention that they are only second seller of talcum powder cannot be accepted. However, there is a mistake committed while proposing the taxable turnover in the proposition notice. The tax that is paid under protest at Rs. 2,38,845. 40 is included in the claim of second sales at Rs. 1,93,54,953. 60 which in turn is included in the gross turnover at Rs. 8,53,47,143. 24. Therefore, Rs. 2,38,645 should be deducted from the gross turnover and the actual claim of second sales is only Rs. 1,93,16,308. 62. In the circumstances and for the foregoing reasons, the assessment in the case of M/s. Ponds (India)Ltd. , is finalised to the best of my judgment Under Section 12 (3) of the Karnataka Sales Tax Act, 1957 read with Rule 18 (3) of the Karnataka Sales Tax Rules, 1957.