STATE OF KERALA Vs. S D PHARMACY

JUDGEMENT

(1.) The question raised in the sales tax revision case filed by the State and in the writ petition filed by the assessee is one and the same, i.e., whether the assessee is liable to pay tax as brand name holder on the sale of products made under brand name/trade mark/logo under section 5(2) of the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act", for short). We have heard learned counsel appearing for the assessee and learned Government Pleader for the State.

(2.) The assessee with 70 years of track record is a big name in ayurvedic medicines and products which are marketed within the State and in other parts of the country under the name and style S.D. Pharmacy. The assessee is a partnership concern engaged only in wholesale marketing of the products, which are manufactured by two sister concerns, namely, M/s. SD Pharmacy Pvt. Ltd. and M/s. Oriental Extractions Pvt. Ltd. There is no dispute that these private limited companies are under the control of same persons, who constitute the assessee, which is a partnership firm. The ayurvedic products marketed by the assessee-firm are manufactured by these two private limited companies with the name and logo of the assessee conspicuously printed on every product in the following style S.D. Pharmacy.

(3.) The entire products manufactured by the sister concerns above stated are first sold to the assessee-firm, which in turn sells the products to their franchisees at wholesale price. The assessee's case is that since they have purchased the items from the sister concerns, sales made by them are second sales which are exempt from tax as the products are taxable at the point of first sale in the State. However, the case of the Department is that real sale is the sale made by the assessee-firm under the brand name to the franchisees, which is the deemed first sale by virtue of section 5(2) of the Act.