Empire Distributors & Anr. v. Assistant Commissioner (Assessment), Commercial Taxes, Special Circle I, Ernakulam; State of Kerala & Others (W.P.C. Nos. 5563/2019(U); 20333/2019(N); 9134/2019(N))

## _**C.R.**_ ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **TUESDAY, THE 03RD DAY OF SEPTEMBER 2019/12TH BHADRA, 1941** ## **WP(C).No.5563 OF 2019(U)** ## **PETITIONERS:** **1 EMPIRE DISTRIBUTORS, PONNURUNNI, COCHIN-682019, REPRESENTED BY ITS MANAGING PARTNER MR.RONY A PALLAN AND ANOTHER. 2 RONY A PALLAN MANAGING PARTNER, EMPIRE DISTRIBUTORS, NARAYANAN ASAN ROAD, PONNURUNNI, COCHIN - 682 019. BY ADVS. SRI.JOSEPH KODIANTHARA (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA** ## **RESPONDENTS:** **THE ASSISTANT COMMISSIONER (ASSESSMENT), COMMERCIAL TAXES, SPECIAL CIRCLE I, ERNAKULAM, COCHIN-682018.** ## **R1 BY GOVERNMENT PLEADER** ## **OTHER PRESENT:** ## **GP. DR. THUSHARA JAMES** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03.09.2019, ALONG WITH WP(C).20333/2019(N), WP(C).9134/2019(N), THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Wpc No.5563 OF 2019 & CONN. CASES 2 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **TUESDAY, THE 03RD DAY OF SEPTEMBER 2019 / 12TH BHADRA, 1941** **WP(C).No.20333 OF 2019(N)** ## **PETITIONERS:** **1 EMPIRE DISTRIBUTORS NARAYANAN ASAN ROAD, PONNURUNNI, COCHIN - 682 019, REPRESENTED BY ITS MANAGING PARTNER MR. RONY A PALLAN. 2 RONY A PALLAN, MANAGING PARTNER, EMPIRE DISTRIBUTORS, NARAYANAN ASAN ROAD, PONNURUNNI, COCHIN - 682 019. BY ADVS. SRI.JOSEPH KODIANTHARA (SR.) SRI.V.ABRAHAM MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM VIPIN ANTO H.M SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA** ## **RESPONDENTS:** **THE ASSISTANT COMMISSIONER (ASSESSMENT) COMMERCIAL TAXES, SPECIAL CIRCLE I, ERNAKULAM, COCHIN - 682 018.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03.09.2019, ALONG WITH WP(C).5563/2019(U), WP(C).9134/2019(N), THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Wpc No.5563 OF 2019 & CONN. CASES 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **TUESDAY, THE 03RD DAY OF SEPTEMBER 2019 / 12TH BHADRA, 1941** ## **WP(C).No.9134 OF 2019(N)** ## **PETITIONER:** **ARUN.S.REDDY, AGED 42 YEARS PARTNER, M/S.BRINDHAVAN, DOOR NO.C.C.32/2332, PJRA-3, PRASANTHI LANE, PALARIVATTOM, KOCHI- 682025.** **BY ADVS. SRI.S.M.PREM SRI.P.RAMACHANDRAN (PALAKKAD) SRI.H.NARAYANAN** ## **RESPONDENTS:** **1 STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, STATE GOODS AND SERVICES TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM- 695001.** - **2 THE COMMISSIONER, STATE GOODS AND SERVICES TAXES DEPARTMENT, 9TH FLOOR, TAX TOWER, KILLPPALAM, KARAMANA P.O., THIRUVANANTHAPURAM- 695001.** - **3 THE DEPUTY COMMISSIONER OF STATE TAX (APPEALS) ERNAKULAM,4TH FLOOR, SGST DEPARTMENT COMPLEX, THEVARA, COCHIN- 682015.** - **4 THE STATE TAX OFFICER, STATE GOODS AND SERVICES TAXES DEPARTMENT, SECOND CIRCLE, KALAMASSERY, CIVIL STATION, KAKKANAD, ERNAKULAM- 682030.** **R4 BY GOVERNMENT PLEADER THUSHARA JAMES** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03.09.2019, ALONG WITH WP(C).20333/2019(N), WP(C).5563/2019(U), THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Wpc No.5563 OF 2019 & CONN. CASES 4 ## **JUDGMENT** - **[ WP(C).5563/2019, WP(C).20333/2019, WP(C).9134/2019 ] Dated this the 3rd day of September 2019** Heard Sri Joseph Kodiyanthara, learned Senior Counsel, Sri S.M.Prem for the petitioners and Dr.Thushara James, learned Government Pleader for respondents. 2. A common point for consideration arises in these three writ petitions under Section 23 of Trade Marks Act, 1999 (For short 'Act 1999') read with Section 25 of KVAT Act, 2003 (for short 'Act 2003'). WPC No.5563 of 2019 3. Empire Distributors Ponnurunni, Kochi and its Managing Director are the petitioners. Petitioners pray for a writ of certiorari to call for the records leading upto and inclusive of Ext.P9 Order No.320702 55974/12-13 dated 22.1.2019 of the respondent and quash the order as illegal, unsustainable and without jurisdiction. The petitioners pray for the relief of declaration that the registration of Dukes Biscuits in Exts.P3 and P4 dated 3.8.2017 and 26.8.2017 with retrospective effect from 1.6.2000 and 22.1.2002 under Act Wpc No.5563 OF 2019 & CONN. CASES 5 1999, has no application to the returns filed and assessment completed for the assessment year 2012-13 under Act 2003. 4. The first petitioner is a partnership firm and the second petitioner is the Managing Partner of first petitioner. The first petitioner is a dealer registered under the provisions of Act 2003. The petitioners state that they are not doing business with effect from 30[th] of March 2015 and that the registration obtained by the firm under Act 2003 was cancelled. The writ prayer relates to or deals with assessment made under Act 2003 for the assessment year 2012-13. 5. The petitioners were doing business in bakery products, sweets, confectionery and other food products other than those sold under the registered brand name under Act 1999. The petitioners alleged to have paid VAT in accordance with Entry 7 to the 3[rd] Schedule to Act 1999 on the products the petitioners handled. The petitioners purchased and sold biscuits, confectioneries/food items with trade mark 'Dukes'. The petitioners, by and large, were dealing with the products which were not registered under Act 1999. The petitioners, to the extent of sale of products with trade mark Wpc No.5563 OF 2019 & CONN. CASES 6 registeration, calculated and paid VAT at 13.5%. In other words, the case of petitioners is that to the extent of sale of unregistered products, petitioners paid tax at the rate of 5% and the products sold with a registered trade mark, tax was paid at 13.5%. The self assessment return filed under Section 21 of Act 1999 was accepted and the assessment for the year 2012-13 was completed. 6. The respondent, through Ext.P6 notice dated 7.11.2018 issued under Section 25(1) of Act 2003, proposed re-assessment of return for the assessment year 2012-13. The ground stated for reassessment of return for assessment year 2012-13 stated in the words of first respondent reads as follows: "Out of the taxable turnover, Rs.79973321/- was assessed to tax @ 5% as bakery products (under entry 7 of 3[rd] schedule). Similarly Rs.1557577/- was assessed @ 2.5% as sale of bakery products to canteen (half rate). On a scrutiny of assessment records, it was revealed from the schedule forming part of P&L account that the assessee is dealing with the following goods. |Sales-Cadico<br>:<br>Sales-Dukes Biscuits :<br>Sales-Dukes Wafer<br>:<br>Sales-Mahak<br>:<br>Sales-Orkay<br>:<br>Total<br>:|Rs.721260.20-78,21,268.29<br>Rs.5,68,155,39.83<br>Rs.4288087.57<br>Rs.2007283.57<br>Rs.23409.74<br>Rs.70955580.26<br>6,38,53,51| |---|---| On verification of the above products with the official web site of Controller General of Patents Designs and Trademark, it is seen that the above items are registered under the Trade Mark Act, 1999. Therefore, the Wpc No.5563 OF 2019 & CONN. CASES 7 above items are taxable @ 13.5%. The application of incorrect rate of tax resulted in short levy of Rs.6568000/- as shown below:- Short levy at the differential rate of 8.5% on Rs.6,93,58,003.26 : Rs.5693507.00 Short levy at the differential rate of 4.25% on Rs.1597577.00 : Rs.67,897.00 Total Rs.5761404.00 Sale branded bakery products as pointed out in defect No.1 will be assessed @ differential rate of tax as hereunder: Short levy at the differential rate of 8.5% on Rs.6,93,58,003.26 : Rs.5693507.00 Short levy at the differential rate of 4.25% on Rs.1597577.00 : Rs.67,897.00 Total Rs.5761404.00 ## 7. The petitioners, through Ext.P7 objected re-assessment of the return filed for the assessment year 2012-2013. The respondent, overruling the objections raised by the petitioners through Ext.P9 order held as follows: The audit team of comptroller & Auditor General of India while auditing you assessment file the year 2012-13 made following objection that: "Out of the taxable turnover, Rs.79973321/- was assessed to tax @ 5% as bakery products (under entry 7 of 3[rd] schedule). Similarly Rs.1557577/- was assessed @ 2.5% as sale of bakery products to canteen (half rate). On a scrutiny of assessment records, it was revealed from the schedule forming part of P&L account that the assessee is dealing with the following goods. Sales-Cadico : 721260.29 Sales-Dukes Biscuits : Rs.5,68,155,39.83 Sales-Dukes Wafer : Rs.4288087.57 Wpc No.5563 OF 2019 & CONN. CASES 8 Sales-Mahak : Rs.2007283.57 Sales-Orkay : Rs.23409.74 Total : Rs.70955580.26 On verification of the above products with the official web site of Controller General of Patents Designs and Trademark, it is seen that the above items are registered under the Trade Mark Act, 1999. Therefore, the above items are taxable @ 13.5%. The application of incorrect rate of tax resulted in short levy of Rs.6568000/- as shown below:- Short levy at the differential rate of 8.5% on Rs.6,93,58,003.26 : Rs.5693507.00 Short levy at the differential rate of 4.25% on Rs.1597577.00 Rs.67,897.00 Total Rs.5761404.00 Hence the writ petition. 8. The petitioners assert that they are not evaded tax payable to exchequer in any manner for any assessment year including assessment year 2012-13. The re-opening of assessment, by referring to registration of trade mark granted in Exts.P3 and P4, is illegal and contrary to the scheme of Act 2003. Exts.P3 and P4 are dated 3.8.2017 and 26.8.2017 respectively. Ravi Foods Pvt. Ltd. is the manufacturer and supplier of bakery and confectionery items under the brand name 'Dukes'. On 22.1.2002 and 1.6.2000, Ravi Foods Pvt. Ltd., applied for registration of product and the trade mark with 'Dukes'. The application was pending for over 15 years. The Wpc No.5563 OF 2019 & CONN. CASES 9 application has been finally accepted and the product 'Dukes' has been registered as per Exts.P3 and P4 on 3.8.2017 and 26.8.2017. The petitioners did business in Dukes biscuits etc. about five years prior to the date on which the order in Exts.P3 and P4 under Section 23 of Act 1999 was made. The petitioners purchased and sold products with brand name 'Dukes' as unregistered trade mark category. The retrospective effect under Section 23 of Act 1999 is exclusively meant for the scope, purpose, various rights and privileges conferred on the registered trade mark holder by Act 1999 but the retrospective effect of registration can't be extended to other situations or obligations under any other enactment, including Act 2003. The retrospective effect of registration has no bearing on the tax liability when the incidence of tax has arisen during the assessment year 2012-13. Therefore, there is no need to revise the return for the assessment year 2012-13 and propose rate of tax at 13.5%. It is stated that the petitioners being registered dealers are under obligation to pay VAT, when the incidence of tax is attracted or the sale transaction had taken place. The petitioners could not be called upon to bear the burden of indirect taxes particularly when Wpc No.5563 OF 2019 & CONN. CASES 10 the taxes were not collected from the end customer at 13.5% and the indirect tax liability is made over to the end customer. For the subject assessment year the end customer is justified in paying VAT for purchase of these unregistered trademark products with the brand name 'Dukes' only at 5%. The petitioners in anticipation of Ravi Foods Pvt. Ltd. getting registration of trademark under Act 1999 could not be expected to collect tax at 13.5% from customers and pay at that rate to the Government. The retrospective effect under Section 23 of Act 1999 could not have anything to do with the petitioner or the end buyer of products sold as unregistered trade mark products. The crux of the controversy is that the deeming effect of registration of a trade mark under Sec.23 of Act 1999 whether can be given retrospectivity for completed sale transactions for the purpose of Act 2003 as well. Therefore, the notice in Ext.P6 and the order in Ext.P8 are ex facie illegal, without jurisdiction, arbitrary and unconstitutional. ## WPC No.20333 of 2019 9. Empire Distributors and its Managing Director/the petitioners herein challenges Ext.P11 notice under section 25(1) read Wpc No.5563 OF 2019 & CONN. CASES 11 with Section 42(3) of Act 2003 dated 15.3.2019 for the assessment year 2011-12 and Ext.P12 notice under Section 25(1) of Act 2003 dated 5.3.2019 for the assessment year 2012-13. The impugned notice refers to the very same details which are adverted to in WPC No.5563 of 2019 filed by the petitioners. For brevity, the details and the proposed revised tax are not adverted to. The sum and substance noted in Ext.P12 notice is that the petitioners sold biscuits etc. with the brand name 'Dukes' and it attracts tax rate of 13.51, but paid VAT at 5%. ## WPC No.9134 of 2019 10. Arun S.Reddy is the petitioner. The petitioner prays for writ of certiorari and quash Exts.P2, P3, P6, P6(a), P7, and P7(a) as illegal and arbitrary. 11. Exts.P2 and P3 are notices issued under section 25(1) of Act 2003. Exts.P4 and P5 are the replies given by the petitioner. Notices in Exts.P2, P3, P6 and P7 are issued for revising the return filed for the assessment year 2016-2017 proposing to levy additional tax on admitted turn over shown by the petitioner. Exts.P4 and P5 are replies submitted by the petitioner. Petitioner herein is one of Wpc No.5563 OF 2019 & CONN. CASES 12 the partners of M/s Brindavan, a partnership firm established with the object of running hotel/restaurant service etc. M/s Brindavan is a registered dealer under Act 2003 with TIN 32071387555. The assessee/dealer opted for payment of tax under the compounding scheme in accordance with Section 8(c) (i) of Act 2003. On 29.6.2016 the dealer applied for registration of 'Brindavan Vegetarian' trade name under Act, 1999. On 12.04.2017, Ext.P1 certificate of registration has been granted and the petitioner received Ext.P1 in May 2017. The 4[th] respondent issued Exts.P2 and P3 to revise the returns for the assessment years 2016-17, 2017-18. The notice in Ext.P2 alleges that the petitioner is a registered trade mark dealer and that the details of registration of trade mark are not informed to the department. The dealer since is registered under Act 1999, the petitioner/dealer is not eligible for compounding tax rate under Section 8(c)(i) of Act 2003. The cooked food sold by the petitioner for the assessment year 2016-17, attracts 5% under Entry 30A of 3[rd] Schedule of Act 2003. Therefore, the proposed revision of return/rate of tax is initiated. Briefly stated the reply of petitioner is that by referring to registration granted in Wpc No.5563 OF 2019 & CONN. CASES 13 Ext.P1 revising the returns is completely illegal, arbitrary and without jurisdiction. Hence the writ petition. 12. The case of the respondent is that the petitioners/Empire distributors and its Managing Director filed tax returns calculating tax payable at 5% on branded products, but these products are registered trade mark brands and liable to tax at 13.5%. While auditing the return for the assessment for 2012-13, the authorities detected the above anomaly and in turn they raised an audit objection for the relevant year. 13. Counter affidavit of respondent avers that the dispute is with regard to the date of effect of trade mark registration granted by the Registrar Trade marks. Exts.P3 and P4 record that trade mark numbers 1075059 and 928956 have been granted to M/s Ravi Foods (P) Ltd. Hyderabad w.e.f 22.1.2002 and 1.6.2000. The dates of issue of Exts.P3 and P4 have been recorded as 26.8.2017. The Registrar of Trade Marks, Mumbai and M/s Ravi Foods (P) Ltd. Hyderabad have not been arrayed as party to the writ petition. The petitioner company is only a dealer and not a trade mark holder. Sections 23 and 25 of the Trade Mark Act, 1999 are directly applicable to the Wpc No.5563 OF 2019 & CONN. CASES 14 case on hand. It is also vehemently contended that the respondents are within their jurisdiction and in effect are giving effect to what is explicitly provided by sec.23 of Act 1999. 14. Ext.P9 shows that the petitioner was given opportunity for producing the documents and it was heard personally in the matter. In the circumstances and also on the basis of the fact that the petitioner has not availed the statutory remedy available to it, the petitioner is not entitled to invoke the writ jurisdiction under Article 226 of the Constitution of India as held by the Apex Court . in Commissioner of Income Tax v Chhabil Dass Agarwal[1] 15. In WPC No.9134 of 2019, 4[th] respondent filed counter affidavit and stated that M/s Brindavan Vegetarian Restaurant paid tax at the compounded rate of 0.5% on entire turnover of cooked food. It is pertinent to note that as per Section 8(c)(i) of KVAT Act 2003, hotels or restaurants using brand name or a trade mark cannot file returns by paying compounding rate of tax. It is seen that the firm is having trade mark registration and the date is effective from the date of application. Hence during the assessment years 2016-17 1 2014 (1) SCC 613 Wpc No.5563 OF 2019 & CONN. CASES 15 (from July 2016 to March 2017) and 2017-18 (from April 2017 to June 2017) the assessee is having registered trade mark and can be treated as trade mark holder thereby coming under obligation to pay applicable rate of tax but not compounding rate of tax. 16. The statutory remedy is available against orders under Sec.25 of Act 2003 and without exhausting the available statutory remedies by the assessee, the writ petition is filed and not maintainable. Moreover filing the writ petition without exhausting the remedies available under the statute is not proper and for this reason as well the writ petition deserves to be dismissed. 17. Senior Adv.Abraham Markose and Adv.S.M.Prem argue that the orders/notices impugned in the writ petition are completely illegal, without jurisdiction and unconstitutional. It is contended that the petitioners are doing business in sale of bakery/confectionery items or as the case may be serving cooked food to the patrons visiting the hotel run by the petitioners. The petitioners have collected applicable tax from end cutomer on the day on which the incidence to tax has arisen and remitted the collected tax to respondents. The object, purpose and scope of Act Wpc No.5563 OF 2019 & CONN. CASES 16 1999 is kept in mind, while appreciating or applying retrospective of registration of a mark or brand from the date of application. The grant of registration of trade mark or emblem etc. though is retrospective in nature, this retrospective application of registration of a trade mark with effect from the date on which the application is made has nothing to do with payment of tax under Act 2003. The collection of tax is a contemporaneous obligation to the date and time when the incidence of tax arises. In other words the legal obligation to collect and remit tax to govt. is examined with reference to the circumstances prevailing as on the date of transaction so far as end customer is concerned and whether the dealer is returning the tax as mandated or not. The petitioners in anticipation of registration of a brand/mark or business are not expected to collect higher rate of tax and pay the higher rate to Govt, such mechanism is beyond the scheme under Act 2003 and completely illegal. 18. Section 23[2] comes under Chapter III of Act 1999 which is 2 Registration -(1) Subject to the provisions of Section 19, when an application for registration of a trade mark has been accepted and either- - (a) The application has not been opposed and the time for notice of Wpc No.5563 OF 2019 & CONN. CASES 17 captioned as 'procedure for and duration of registration'. Section 23 deals with filing an application for registration of a trade mark, the application so filed has been accepted either that the application for registration is not opposed or that the application has been opposed and opposition has been decided in favour of the applicant. The Registrar as Sec.23 stands today, shall register the said trade mark within 18 months of filing of the application and that the trade mark when registered shall be registered as of the date of marking the said application and that date of application shall be deemed to opposition has expired; or (b) The application has been opposed and the opposition has been decided in favour of the applicant, The Registrar shall, unless the Central Government otherwise directs, register the said trade mark within eighteen months of the filing of the application and the trade mark when registered shall be registered as of the date of the marking of the said application and that date shall, subject to the provisions of section 154, be deemed to be the date of registration. (2) On the registration of a trade mark, the Registrar shall issue to the applicant a certificate in the prescribed form of the registration thereof, sealed with the seal of the Trade Mark Registry. (3) Where registration of a trade mark is not completed within twelve months from the date of the application by reason of default on the part of the applicant, the Registrar may, after giving notice to the applicant in the prescribed manner, treat the application as abandoned unless it is completed within the time specified in that behalf in the notice. (4) The Registrar may amend the register or a certificate of registration for the purpose of correcting a clerical error or an obvious mistake. Wpc No.5563 OF 2019 & CONN. CASES 18 be the date of registration. 19. From the definition of word registration under the Act is limited for the purposes of Act 1999. The deemed registration of trade mark retrospectively i.e., from the date of application filed is limited for the purposes of registration of trade mark. The retrospective registration of an application from the date on which the application is made does not correspondingly change the rate payable by the dealer than what is payable when the tax incidence has actually arisen. The deeming provision cannot annul or reverse the steps taken by the dealer when the application for registration of the trade mark was pending with the competent authority. The short and the long of the legal objection canvassed by respondents is that the retrospective operation of registration of a trade mark is not a circumstance available for reopening assessments already completed with contemporaneous rates of tax. 20. The retrospective effect under Section 23 of Act 1999 is not one of the grounds available for re-assessment under Section 25(1) of the Act 2003. The petitioners refer to and rely on unreported judgment in WPC No.8888 of 2015 and Meghraj Biscuits Industries Wpc No.5563 OF 2019 & CONN. CASES 19 ## Ltd. v Commissioner of Central Excise, U.P.[3] ## 20.1 The portion relied on by petitioners from Meghraj Biscuits (supra) reads as under: “On reading the above quoted paragraphs from the above judgment, with which we agree, it is clear that the effect of making the registration certificate applicable from retrospective date is based on the principle of deemed equivalence to public user of such mark. This deeming fiction cannot be extended to the Excise Law. It is confined to the provisions of the Trade Marks Act. In a given case like the present case where there is evidence with the Department of the trade mark being owned by M/s. Kay Aar Biscuits (P) Ltd. and where there is evidence of the appellants trading on the reputation of M/s. Kay Aar Biscuits (P) Ltd. which is not rebutted by the appellants (assessee), issuance of registration certificate with retrospective effect cannot confer the benefit of exemption Notification to the assessee. In the present case, issuance of registration certificate with retrospective effect from 30.9.91 will not tantamount to conferment of exemption benefit under the Excise Law once it is found that the appellants had wrongly used the trade mark of M/s. Kay Aar Biscuits (P) Ltd.” ## 21. The petitioners also rely on the decision in Union of India v Margadarshi Chit Funds (P) Ltd.[4] of the Apex Court. 22. The registration or refusal of a trade mark has different connotations and considerations under Act 1999. The respondents are not authorised by Act 2003 to extend the retrospective presumption of registration of trade mark for any of the obligations arising under Act 2003. ## 23. Dr.Thushara James contends that the writ petitions are 3 Unreported judgment dated 14.3.2017 in Appeal (civil)Nos.8739-8741 of 2001 of the Apex Court 4 2017 KHC 4453 Wpc No.5563 OF 2019 & CONN. CASES 20 devoid of merit and liable to be dismissed. According to her, Exts.P3 and P4 in WPC No.5563 of 2019 declare the effective date of registration by operation of Section 23 of Act 1999. Likewise Ext.P1 in W.PC No.9134 of 2019 refers to the date on which the application was made and the effective date of registration. Section 23 in clear terms declares that the Registrar shall register the trade mark within 18 months of the filing of the application. The trade mark registered is registered and the effect of registration dates back to the making of application and the date of registration shall be deemed to be the date of application. The respondents either while issuing the notice impugned in the writ petition or the orders passed thereon are accepting the retrospective effect of registration and demanding tax from the petitioners' applicable tax under Act 1999. She contends that there cannot be two dates of applicability, one for Act 1999 and another for Act 2003. In other words, the respondents are merely following what is apparent from Sec.23 of Act 1999 and no exception can be taken out by the petitioners. She prays for dismissing the writ petitions. 24. I have noted the submissions of the learned Advocates Wpc No.5563 OF 2019 & CONN. CASES 21 appearing for the parties, perused the record and the following point is framed for consideration of this Court. 25. Whether the registration of a trade mark under Section 23 of Act 1999 which is statutorily deemed to be effective from the date of application for registration is restricted for the purpose, scope and object of registration under Act, 1999 or extended to the obligations under Act 2003 or not. 26. The petitioners in WPC No.5563 of 2019 and 20333 of 2019 were traders selling food and confectionery items both registered and unregistered. The petitioners were selling a few of the products manufactured by Ravi Foods Pvt. Ltd. The petitioners have nothing to do with the effort of Ravi Foods Pvt. Ltd.. Ravi Foods Pvt.Ltd., as noted above, applied for registration on Ist of June 2000 vide Ext.P4 and 22.1.2002 vide Ext.P3 for registration of trade mark. On 22.8.2014 Ext.P4 and 3.8.2017 Ext.P3 registration of trade mark has been granted under Section 23 of Act 1999 to Ravi Foods Ltd. The legal fiction[5] of registration in Section 23 of Act 1999 dates back > 5 Legal Fiction - Fiction is defined as a legal assumption that a thing is true which is either not true, or which is as probably false or true, an assumption or supposition of law that something which is or may be false is true, or that a state of facts exists which has never really taken place; an allegation in legal proceedings that does not accord with the actual facts of the case, and which may be contradicted for the very purpose except to defeat the beneficial end for which the fiction is invented and allowed. Thus fiction in the realm of law has a defined role to play but it cannot be stretched to a point where it loses the every Wpc No.5563 OF 2019 & CONN. CASES 22 actually to the date on which the application for registration of trade mark was made. There is no quarrel on appreciating and applying the retrospective registration of trade mark by legal fiction to the date on which the application is made. The fiction of registration of application from the date on which the application is made is nothing but a legal assumption that a thing which is either not true or which is probably false as true. Through statutory declaration or assumption it is recognised that the trade mark is actually registered from the date on which the application was made. 27. In Bengal Immunity Co. v State of Bihar, the Apex Court while dealing with the extent to which fiction can be applied,in paragraph-107 held as follows: purpose for which it is used and in no case should it be allowed to perpetrate injustice; fiction of law shall not be permitted to work any wrong, but shall be used 'ut res magis valeat quam pereat'. Brijnandan Singh v Jamuna Prashad Sahu MLJ : QD (1956-1960) Vol.IV C 2979 : 1958 BLJR 122 : AIR 1958 Pat 589 : ILR 37 Pat 339. "I... employ the expression "legal Fiction' to signify any assumption which conceals, or affects to conceal, the fact that a rule of law has undergone alteration, its letter remaining unchanged, its operation being modified.... It is not difficult to understand why fictions in all their forms are particularly congenial to the infancy of society. They satisfy the desire for improvement, which is not quite wanting, at the same time that they do not offend the superstitious disrelish for change which is always present. ENTRY S.MAINE, Ancient law, 21-22 (7[th] ed.1901)" LEGAL FICTION is the mask that progress must wear to pass the faithful but blear-eyed watchers of our ancient legal treasures. But though legal fictions are useful in thus mitigating or absorbing the shock of innovation, they work havoc in the form of intellectual confuction" MORRIS R.COHEN, Law and the Social Order 126(1933) Wpc No.5563 OF 2019 & CONN. CASES 23 A legal fiction presupposes the correctness of the state of facts on which it is based and all the consequences which flow from that state of facts have got to be worked out to their logical extent. If the purpose of legal fiction is for a specified purpose, one cannot travel beyond the scope of that purpose. 27.1 Legal fiction assumes existence of a fact which may not really exist. However, a presumption of a fact depends on satisfaction of certain circumstances. Those circumstances logically would lead to the fact sought to be presumed. (Nandlal Wasideo Badwaik v Lata nandlal Badwaik, (2014) 2 SCC 576, Para 18). 27.2 A legal fiction has to be strictly confined to the area in which it operates. The legal fiction must be limited to the purposes indicted by the context and cannot be given a larger effect. The context is vital. It should be carried to its local conclusion (Rahas Bihari v State AIR 1995 Ori 23 at 30). 28. In indirect taxes, taxes are paid primarily by persons who can shift the burden upon some one else i.e. end customer or all taxes are paid by persons who are otherwise under no legal compulsion to pay the taxes. Under VAT, tax is levied on commodities and taxes are finally paid by the consumer. The system operative in indirect taxation is: firstly tax is paid to one person/organization often to a retailer by the customer, the Wpc No.5563 OF 2019 & CONN. CASES 24 person/organization passes the taxes received from customer to Government. In Union of India v NITDIP textile Processors Pvt.Ltd., the Apex Court explaining the working of indirect tax held as follows: "Taxation is a mode of raising revenue for public purposes. In exercise of the power to tax, the purpose always is that a common burden shall be sustained by common contributions, regulated by some fixed general rules, and apportioned by the law according to some uniform ratio of equality. The word `duty' means an indirect tax imposed on the importation or consumption of goods. `Customs' are duties charged upon commodities on their being imported into or exported from a country. The expression `Direct Taxes' include those assessed upon the property, person, business, income, etc., of those who are to pay them, while indirect taxes are levied upon commodities before they reach the consumer, and are paid by those upon whom they ultimately fall, not as taxes, but as part of the market price of the commodity. For the purpose of the Scheme, indirect tax enactments are defined as Customs Act, 1962, Central Excise Act, 1944 or the Customs Tariff Act, 1985 and the Rules and Regulations framed thereunder." (emphasis applied) Therefore, the liability of petitioners is what petitioners have received from the customer on the sale of "Dukes" Biscuits etc. as unregistered trade mark products. It is not the case of respondents that the petitioners did not remit the amounts received by petitioners as VAT, but the basis of reopening the re-assessment is that with the grant of registration under Act 1999, the rate applicable to the sales already completed by petitioners are changed. This Court is of the view, upon consideration of totality Wpc No.5563 OF 2019 & CONN. CASES 25 of circumstances and also the principle underlying in indirect taxes, that the assessments if are allowed to be reopened and taxes determined as noted in the notices/orders, then the petitioners are made to pay as taxes, more than the petitioners have collected. Such recourse is unavailable to respondents both under Act 1999 and Act 2013. 29. The legal fiction through date of application for trade mark registration is treated as date of registration. This presumption has to be strictly construed and the effect is not allowed to permeate into other statutory fields unless specifically stated so by those statutes. A legal fiction has to be strictly confined to the area in which it operates. The legal fiction must be limited to the purposes indicted by the context and cannot be given a larger effect. The context is vital. It should be carried to its local conclusion (Rahas Bihari v State AIR 1995 Ori 23 at 30). 30. The respondents through orders/notices impugned in the writ petitions have extended the legal fiction of effective date under Act 1999 to Act 2003 and are demanding higher rate of tax. Act 2003 deals with,demands, determines, and collects value added tax i.e. an indirect tax on sale of goods etc. 31. The revision of the return by referring to retrospective effect of registration of trade mark virtually amounts to expanding the Wpc No.5563 OF 2019 & CONN. CASES 26 area in which the retrospective effect under Section 23 operates. This Court is required to bear in mind that the presumption or definition available under one enactment unless and until specifically adopted by other enactment cannot give cause to reopen assessments by the respondents. The re-opening of assessment on the ground that registration of trade mark is effective from the date on which the application is made is unavailable under Section 25(1) of Act 2003. The Court hastens to add that instances where lesser tax is paid than what is actually payable on the date of incidence, are not examined in this judgment. For example at the applicable or relevant point, the product or business has a registered trade mark, but the assssee by sells a as an suppression or otherwise, registered product unregistered trade mark, then such cases stand on different footing. In these writ petitions the Court is examining reopening of assessment only on the ground that the registration is deemed to be effective from the date on which application is made. The petitioners in WP's 5563 of 2019 and 9134 of 2019 being dealers cannot also be expected to collect higher rate of tax than is Wpc No.5563 OF 2019 & CONN. CASES 27 applicable at the time the tax incidence had taken place. The dealers can't collect higher rate of tax or pay higher rate of tax by referring to an application pending with the registrar under Act 1999. The petitioners/dealers if collect higher rate of tax but pay tax as if tax is collected for unregistered trade mark, then the petitioners/dealers could be retaining and misappropriating the indirect taxes collected from the end customer. Such procedure could also be penal under Act 2003. On the other hand, as noted in Empire Distributor's case the application filed by M/s Ravi Food Products for registration of trade mark was pending for 15 long years. The assessments cannot be re-opened for the period permitted by Act 2003 and determine the tax liability of petitioners on the ground that registration of trade mark is decimal from the date of application. The petitioners then would be paying VAT without even collecting VAT from the end customer. These inconsistent and impermissible situations are not appreciated by the respondents which issuing notice under Section 25 of Act 2003 or when the orders are passed. The retrospective effect given by Section 23 has to be confined to the area in which the legal fiction Wpc No.5563 OF 2019 & CONN. CASES 28 of retrospectivity operates i.e. Registration of trade mark. The legal fiction of retrospective application must be limited to the purposes indicated by the context, i.e. Registration of trade mark under Act 1999 and cannot be given a wider effect. The context of retrospectivity be carried to its logical conclusion, i.e. by confining the effect for the purposes of Act 1999. 32. For the above reasons this Court is satisfied that the notices/orders impugned in the writ petition are illegal, arbitrary and unsustainable in law and liable to be set aside. The petitioners are also entitled for a declaration that the sale of unregistered products which are subsequently registered does not furnish cause of action for re-opening the assessments. The writ petitions are ordered as indicated above. ## **Sd/-** ## **S.V.BHATTI** **JUDGE** CSS/ Wpc No.5563 OF 2019 & CONN. CASES 29 ## **APPENDIX OF WP(C) 5563/2019** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF INFORMATION DATED 04/04/2014 OBTAINED FROM TRADE MARK REGISTRY AT CHENNAI IN APPLICATION NO.928956.** **EXHIBIT P2 TRUE COPY OF INFORMATION DATED 04/04/2014 OBTAINED FROM TRADE MARK REGISTRY AT CHENNAI IN APPLICATION NO.1075059.** **EXHIBIT P3 TRUE COPY OF CERTIFICATE OF REGISTRATION OF TRADER MARK NO.1075059 DATED 03/08/2017.** **EXHIBIT P4 TRUE COPY OF CERTIFICATE OF REGISTRATION OF TRADE MARK NO.928956 DATED 26/08/2017. EXHIBIT P5 TRUE COPY OF JUDGMENT DATED 15/06/2016 PASSED BY THIS HONOURABLE COURT IN WP(C)NO.8888/2015. EXHIBIT P6 TRUE COPY OF NOTICE DATED 07/11/2018 ISSUED UNDER SECTION 25(1) READ WITH 25A OF THE KVAT ACT, 2003 BY THE RESPONDENT. EXHIBIT P7 TRUE COPY OF REPLY LETTER DATED 06/12/2018 TO EXHIBIT P6 ISSUED BY THE PETITIONER TO THE RESPONDENT. EXHIBIT P8 TRUE COPY OF LETTER DATED 21/12/2018 ISSUED BY THE 2ND PETITIONER TO THE RESPONDENT. EXHIBIT P9 TRUE COPY OF ORDER NO.320702 55974/12-13 DATED 22/01/2019 ISSUED BY THE RESPONDENT.** Wpc No.5563 OF 2019 & CONN. CASES 30 ## **APPENDIX OF WP(C) 20333/2019** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF INFORMATION DATED 4.4.2014 OBTAINED FROM TRADE MARK REGISTRY AT CHENNAIN IN APPLICATION NO.928956. EXHIBIT P2 TRUE COPY OF INFORMATION DATED 4.4.2014 OBTAINED FROM TRADE MARK REGISTRY AT CHENNAI IN APPLICATION NO.1075059. EXHIBIT P3 TRUE COPY OF CERTIFICATE OF REGISTRATION OF TRADE MARK NO.1075059 DATED 3.8.2017. EXHIBIT P4 TRUE COPY OF CERTIFICATE OF REGISTRATION OF TRADE MARK NO.928956 DATED 26.8.2017. EXHIBIT P5 TRUE COPY OF JUDGMENT DATED 15.6.2016 PASSED BY THIS HONOURABLE COURT IN WPC NO.8888 OF 2015. EXHIBIT P5 A TRUE COPY OF THE CLARIFICATION LETTER DATED 14.11.2012 FROM THE COMMISSIONER OF COMMERCIAL TAXES, TRIVANDRUM TO THE ASSISTANT COMMISSIONER, SPECIAL CIRCLE, KOTTAYAM. EXHIBIT P6 TRUE COPY OF NOTICE DATED 7.11.2018 ISSUED UNDER SECTION 25(1) READ WITH 25A OF THE KVAT ACT, 2003 BY THE RESPONDENT. EXHIBIT P7 TRUE COPY OF REPLY LETTER DATED 6.12.2018 TO EXHIBIT P6 ISSUED BY THE PETITIONERS TO THE RESPONDENT. EXHIBIT P8 TRUE COPY OF LETTER DATED 21.12.2018 ISSUED BY THE 2ND PETITIONER TO THE RESPONDENT. EXHIBIT P9 TRUE COPY OF ORDER NO.320702 55974/12-13** Wpc No.5563 OF 2019 & CONN. CASES 31 ||**DATED 22.1.2019 ISSUED BY THE RESPONDENT.**| |---|---| |**EXHIBIT P10**|**TRUE COPY OF INTERIM ORDER DATED 20.6.2019**| ||**PASSED THE LEARNED SINGLE JUDGE OF THIS**| ||**HONOURABLE COURT IN WPC NO.5563/2019.**| ||**TRUE COPY OF NOTICE UNDER SECTION 25(1)**| |**EXHIBIT P11**|**READ WITH 42(3) OF THE KVAT ACT, 2003 DATED**| ||**15.3.2019 FOR THE YEAR 2011-12 ISSUED BY**| ||**THE RESPONDENT.**| |**EXHIBIT P12**|**TRUE COPY OF NOTICE UNDER SECTION 25(1) OF**| ||**THE KVAT ACT, 2003 DATED 5.3.2019 FOR THE**| ||**YEAR 2012-13 ISSUED BY THE RESPONDENT.**| |**EXHIBIT P13**|**TRUE COPY OF REPLY DATED 29.3.2019 TO**| ||**EXHIBIT P11 FILED BY THE PETITIONERS BEFORE**| ||**THE RESPONDENT.**| |**EXHIBIT P14**|**TRUE COPY OF REPLY DATED 29.3.2019 TO**| ||**EXHIBIT P12 FILED BY THE PETITIONERS BEFORE**| ||**THE RESPONDENT.**| |**EXHIBIT P15**|**TRUE COPY OF NOTICE NO.32071673924/2011-12**| ||**DATED 8.7.2019 FOR PERSONAL HEARING ISSUED**| ||**BY THE RESPONDENT.**| |**EXHIBIT P16**|**TRUE COPY OF NOTICE NO.32070255974/2012-13**| ||**DATED 19.7.2019 FOR PERSONNAL HEARING**| ||**ISSUED BY THE RESPONDENT.**| |**EXHIBIT P17**|**TRUE COPY OF LETTER DATED 19.7.2019 ISSUED**| ||**BY THE PETITIONERS TO THE RESPONDENT.**| Wpc No.5563 OF 2019 & CONN. CASES 32 ## **APPENDIX OF WP(C) 9134/2019** ## **PETITIONER'S EXHIBITS:** |**EXHIBIT P1**||**TRUE COPY OF CERTIFICATE OF REGISTRATION OF**| |---|---|---| |||**TRADE MARK DATED 12.04.2017 ISSUED BY THE**| |||**REGISTRAR OF TRADEMARKS, TRADE MARKS**| |||**REGISTRY, MUMBAI, GRANTING TRADE MARK FOR**| |||**THE RESTAURANT SERVICES RUN BY THE**| |||**PETITIONER'S FIRM AS BRINDHAVAN VEGETARIAN.**| |**EXHIBIT P2**||**TRUE COPY OF NOTICE NO.32071387555/2016-17**| |||**DATED 15.11.2018 ISSUED BY THE 4TH**| |||**RESPONDENT UNDER SECTION 25(1) OF THE KVAT**| |||**ACT, 2003 PROPOSING TO FIX TAX LIABILITY ON**| |||**PETITIONER'S FIRM UNDER SECTION 6(1) FOR**| |||**THE YEAR 2016-17.**| |**EXHIBIT P3**||**TRUE COPY OF NOTICE NO.32071387555/2017-18**| |||**DATED 15.11.2018 ISSUED BY THE 4TH**| |||**RESPONDENT UNDER SECTION 25(1) OF THE KVAT**| |||**ACT, 2003 PROPOSING TO FIX TAX LIABILITY ON**| |||**PETITIONER'S FIRM UNDER SECTION 6(1) FOR**| |||**THE YEAR 2017-18.**| |**EXHIBIT P4**||**TRUE COPY OF THE OBJECTION DATED 11.12.2018**| |||**SUBMITTED BY THE PETITIONER TO EXHIBIT P2**| |||**NOTICE FOR THE YEAR 2016-17.**| |**EXHIBIT P5**||**TRUE COPY OF THE OBJECTION DATED 11.12.2018**| |||**SUBMITTED BY THE PETITIONER TO EXHIBIT P3**| |||**NOTICE FOR THE YEAR 2017-18 UP TO 30TH JUNE**| |||**2017.**| |**EXHIBIT P6**||**TRUE COPY ORDER NO.32071387555/2016-17**| |||**DATED 26.12.2018 ISSUED BY THE 4TH**| |||**RESPONDENT.**| |**EXHIBIT P6**|**A**|**TRUE COPY OF THE DEMAND NOTICE DATED**| |||**26.12.2018 ISSUED IN FORM NO.12 DEMANDING**| |||**RS.19,74,917/- FOR THE ASSESSMENT YEAR**| |||**2016-17.**| |Wpc No.5563 OF 2019 & CONN.|| |---|---| |CASES|33| |**EXHIBIT P7**|**TRUE COPY ORDER NO.32071387555/2017-18**| ||**DATED 26.12.2018 ISSUED BY THE 4TH**| ||**RESPONDENT.**| |**EXHIBIT P7 A**|**TRUE COPY OF THE DEMAND NOTICE DATED**| ||**26.12.2018 ISSUED IN FORM NO.12 DEMANDING**| ||**RS.6,29,114/- FOR THE ASSESSMENT YEAR 2017-**| ||**18, UP TO 30TH JUNE 2017.**| |**EXHIBIT P8**|**TRUE COPY OF THE APPEAL FILED UNDER**| ||**SECTIONS 55, 57 & 59 OF THE KERALA VALUE**| ||**ADDED TAX ACT. 2003 AGAINST EXHIBIT P6**| ||**ORDER.**| |**EXHIBIT P9**|**TRUE COPY OF THE APPEAL FILED UNDER**| ||**SECTIONS 55,57 & 59 OF THE KERALA VALUE**| ||**ADDED TAX ACT, 2003 AGAINST EXHIBIT P7**| ||**ORDER.**|