IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.8078-8080 OF 2010

NILKAMAL LIMITED (FORMERLY KNOWN AS

NILKAMAL PLASTICS LIMITED)

.....Appellant(s)

Vs.

STATE OF KERALA ETC.

.....Respondent(s)

WITH

CIVIL APPEAL NOS.10696-10697 OF 2011

O R D E R

The Kerala High Court by the impugned judgment

reversed an order of the Kerala Sales Tax Appellate Tribunal

(hereinafter referred to as “the Tribunal”). The Tribunal

had reversed the revisional order made against the assessee

and held that the transaction whereby M/s Kaveri Pet and

Polyforms Pvt. Ltd. (hereinafter referred to as “Kaveri”)

sold plastic moulded furniture to it (“the assessee”)

constituted point of first sale and, therefore, the further

sale by the appellant-assessee, did not fall within the

mischief of Section 5(2) of the Kerala General Sales Tax Act

(hereinafter referred to as “the KGST Act”).

The essential facts are that Nilkamal Crates and

1

Digitally signed by

NEETA SAPRA

Date: 2023.03.21

18:17:31 IST

Reason:

Signature Not Verified

Containers which owns the trade mark and brand “Nilkamal” by

two different licensing arrangements (in this case an

agreement entered into with - Kaveri on 6^th December, 2001)

had authorized the right to use the brand for the purpose of

manufacture and sale of its products. Kaveri on 02.04.2001

entered into a Memorandum of Understanding with the present

assessee (hereinafter referred to as “N.L.”). Kaveri was

selling the entire production of furniture to it (i.e. the

assessee). The assessee is registered as a trading dealer

under the KGST Act. Its return was accepted and its

contention that since the entire production were sold by

Kaveri to it constituted the first sale and since both

Kaveri and the assessee were holders of the brand, the first

sale for the purpose of Section 5(2) of the KGST Act was the

one by which Kaveri sold the goods, was accepted. The

revisional authority differed; and, exercising powers under

Section 35 of the KGST Act set aside the assessment order.

Similarly for the next 3 assessment years the completed

assessments were sought to be reopened. The assessee

approached the Tribunal which accepted its contentions.

The Kerala High Court by its impugned judgment,

considered the Memorandum of Understanding dated 2.4.2001

entered into between Kaveri and the assessee. It also took

note of the fact that sale of products by Kaveri were

exempted for the relevant year. After noticing that in terms

of the arrangement between Kaveri and the assessee, the

former was obliged to sell all the furniture produced by it

2

to the assessee, the High Court concluded that both Kaveri

and the assessee being holders, the sale by Kaveri to the

assessee did not constitute first sale. The High Court was

also impressed by the fact that Kaveri’s sales were exempted

for the relevant period.

Section 5 of the of the KGST Act as it stood during

the relevant period is extracted below:

“5. Levy of tax on sale or purchase of goods

(1) Every dealer (other than a casual trader or

agent of a non-resident dealer) whose total

turnover for a year is not less than two lakh

rupees and every casual trader or agent of a non-

resident dealer, whatever be his total turnover for

the year, shall pay tax on his taxable turnover of

that year,-

(i) in the case of goods specified in the

First

or Second Schedule, at the rates

and only at

the points specified against

such goods in the

said Schedules;

(ii) [Omitted]

(iii) In the case of transfer of the right to

use any goods for any purpose (whether or not

for a specified period) at the rate of eight

per cent at all points of such transfer;

(iv) (a) In the case of transfer of goods

involved in the execution of works contract

where transfer is in the form of goods at the

rates and at the points specified

against

such goods in th