IN THE HIGH COURT OF KERALA AT ERNAKULAM
ST.Rev..No. 1 of 2010()
1. STATE OF KERALA, REPRESENTED BY
... Petitioner
Vs
1. EUREKA FORBES LTD.,
... Respondent
For Petitioner :GOVERNMENT PLEADER
For Respondent :SRI.ANIL D. NAIR
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice P.S.GOPINATHAN
Dated :10/02/2010
O R D E R
C.N.Ramachandran Nair & P.S.Gopinathan, JJ.
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S.T.REV.Nos.1 and 4/2010
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Dated this the 10th day of February, 2010.
ORDER
Ramachandran Nair, J.
1.The question raised in the connected revision
filed by the State is whether the Tribunal was
justified in cancelling the brand name assessment
made on the respondent assessee under Section 5
(2) of the K.G.S.T.Act for the assessment years
1998-99 and 2003-04.
2.We heard Government Pleader appearing for the
petitioner and Adv.Sri.Anil D.Nair appearing for
the respondent.
3.The contention of the Government Pleader is that
the two items involved, namely, water purifier
and vacuum cleaner were sold under the brand name
STRV 1&4/10 -:2:-
“Acquaguard” and “Euroclean” respectively by the
assessee and so much so, the assessee, which has
control over the brand name, is liable for
assessment under Section 5(2) of the KGST Act.
The Tribunal, however on facts, found that the
brand name for the two products were not owned by
the assessee. However, after hearing both sides,
we are not able to sustain the Tribunal’s order,
because, we are not being appraised of the true
facts. In the first place, acquaguard is a brand
name owned by M/s.Acquamall Water Solutions Ltd.,
its manufacturer, which is a 100% subsidiary of
the assessee. If the brand name owner is a 100%
subsidiary of the assessee, then certainly
assessee has got control over the affairs of the
subsidiary company and it is for the officer to
find out the trade margin received by the
assessee in their sales after purchase of the
items from the manufacturer, which also had
STRV 1&4/10 -:3:-
sales outlet in Kerala. Since policy decision of
the subsidiary company is under the control of
the holding company, the transaction has to be
closely watched and if the local sale by the
subsidiary company to the holding company is at a
low price, then certainly even without recourse
to Section 5(2) of the Act, assessee’s sales can
be assessed as first sales, which is the genuine
sale of the product in the market. The gross
profit obtained by the assessee itself would
prove beyond reasonable doubt as to whether the
transaction between the companies was intended to
evade payment of tax. The brand name used by the
assessee was not considered by any of the
authorities. The position is same in so far as
the sale of the other product, namely, vacuum
cleaner under the brand name “Euroclean” where
the brand name is said to be owned by M/s.FAL
Industries Ltd., which was controlled by Forbes
STRV 1&4/10 -:4:-
Gokak Ltd. of which the assessee is a subsidiary.
In fact, it is seen that M/s.FAL Industries Ltd.,
the manufacturer, has now claimed brand name and
the said company later got amalgamated with
Forbes Gokak Ltd. Since the respondent is only
a subsidiary of Forbes Gokak Ltd., which controls
the brand name owned by its subsidiary, which was
later amalgamated with it, the transaction
between subsidiary companies and related
companies, namely, the two subsidiaries of the
very same company, which are M/s.FAL Industries
Ltd. and the assessee have to be examined. Here
again, we make it clear that the trade margin
obtained by the assessee or the gross profit
received by them will be indicative of the brand
name – right and genuineness of the transaction
between the related companies. We, therefore,
set aside the orders of the Tribunal and that of
the first appellate authority and remand the
STRV 1&4/10 -:5:-
cases to the assessing officer for detailed
consideration after giving an opportunity to the
assessee of being heard. The assessing officer
will also go through the website details produced
by the Government Pleader in court.
C.N.Ramachandran Nair, Judge.
P.S.Gopinathan, Judge.
sl.