RamachandranNair, J. –

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 (hereinafter referred to as the Act for short).

2. We have heard learned counsel appearing for the assessee and learned Government Pleader for the State.

3. 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 . 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.

4. 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.

5. For deciding the case, the scope and application of Section 5(2) of the Act have to be considered and therefore, we extract hereunder the said Section for easy reference:-

"5(2) Notwithstanding anything contained in this Act in respect of manufactured goods other than tea, which are sold under a trade mark or brand name, the sale by the brand name holder or the trade mark holder within the State shall be the first sale for the purpose of this Act."

Even though constitutional validity of the above Section was challenged in this Court, this Court in the decision in Bechu & Co. and Others v. Asst. Commissioner Sales Tax, reported in 132 STC 68 not only rejected the same but also held that even registration of trade mark, logo or brand name under the Trade and Merchandise Marks Act is not compulsory for application of Section 5(2) of the Act.

6. When the assessment was taken up for the year 2003-04, the Assessing Officer rejected the second sale exemption claimed by the assessee and made assessment treating assessee's sales in brand name as the first sales under Section 5(2) of the Act. Even though the first appeal was dismissed, the Tribunal on second appeal held that since the amendment by Kerala Finance Act, 2004 adding the term "brand name" under clause (vi aa) to Section 2 of the Act came into force only in the next year (i.e. 2004-05), assessment for the year 2003-04 is not tenable. It is against this order of the Tribunal, the State has filed this revision case contending that assessment for 2003-04 is sustainable under sub Section (2) of Section 5 of the Act as originally introduced in 1998 and the amendment made by Finance Act, 2004 is only clarificatory. Their further contention is that "trade mark" is an independent word covered by the original Section and therefore, sale under trade name justifies assessment for the year 2003-04. Even though the assessee did not file a revision against the Tribunal's order, wherein the Tribunal held that the asessee's sales will be covered by Section 5(2) of the Act for the year 2004-05 onwards, the assessee has challenged dir