M/S. ELITE FOODS (P) LTD. v. The Assistant Commissioner, Commercial Taxes Special Circle-II, Ernakulam and Deputy Commissioner (Appeals)-II, Department of Commercial Taxes, Ernakulam

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **MONDAY, THE 5TH DAY OF SEPTEMBER 2016/14TH BHADRA, 1938** ## **WP(C).No. 23499 of 2016 (J)** **----------------------------** **PETITIONER : ----------------------** **M/S. ELITE FOODS (P) LTD., 60, MAJOR INDUSTRIAL ESTATE, KALAMASSERY DEVELOPMENT PLOT, ERNAKULAM-683 109, REPRESENTED BY C.G.PRATHIBASMIDAN, CHIEF EXECUTIVE OFFICER.** **BY ADVS.SRI.HARISANKAR V. MENON SMT.MEERA V.MENON** **RESPONDENT(S):** **-----------------------------** **1. THE ASST. COMMISSIONER, COMMERCIAL TAXES SPECIAL CIRCLE- II, ERNAKULAM - 682 015.** **2. DEPUTY COMMISSIONER (APPEALS)-II, DEPARTMENT OF COMMERCIAL TAXES, ERNAKULAM-682 015.** **R1 & R2 BY GOVERNMENT PLEADER SMT. LILLY.K.T.** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 29-08-2016, ALONG WITH WPC.NO. 23512 OF 2016 AND CONNECTED CASES, THE COURT ON 05-09-2016 DELIVERED THE FOLLOWING:** **sts** ## **WP(C).No. 23499 of 2016 (J)** **----------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **-----------------------------------------** **EXHIBIT-P1: COPY OF ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2009-10 (VAT) 28.01.2016.** **EXHIBIT-P1(A): COPY OF ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT FOR THE YEAR 2009-10 (CST) 28.01.2016.** **EXHIBIT-P2: COPY OF APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT 22.04.2016.** **EXHIBIT-P2(A): COPY OF APPEAL FILED BY THE PETITIONER BEFORE THE 2ND RESPONDENT 22.04.2016.** **EXHIBIT-P3: COPY OF ORDER PASSED BY THE 2ND RESPONDENT 31.05.2016.** **EXHIBIT-P3(A): COPY OF ORDER PASSED BY THE 2ND RESPONDENT 31.05.2016.** **RESPONDENT(S)' EXHIBITS:** **NIL** **-------------------------------------------** **/TRUE COPY/** ## **P.S.TO JUDGE** **sts** ## **A.M. SHAFFIQUE, J.** =============== W.P. (C) Nos. 23499, 23512, 23513, 23514 & 23527 of 2016 ====================== Dated this, the 5[th] day of September, 2016 ## **J U D G M E N T** These writ petitions concern a common issue relating to stay granted by the appellate authority on condition of the petitioner remitting 30% of the tax due and furnishing security for the balance amount. 2. The petitioner is common in all the cases. According to the petitioner, the appeals are filed with reference to different assessment years. The main contention urged by the petitioner is with regard to the levy of higher rate of 12.5% on all its products as against the liability to pay tax at 4%. The question is whether the products are being sold by the petitioner under a registered trade mark or under a registered label. According to the petitioner, it is a company manufacturing toasted breads and cakes. Breads of all kinds come under Entry 6 of 1[st] Schedule which is exempted from tax and bakery products (cakes) are taxable at 4% under the 3[rd] Schedule unless those are sold under brand name registered under ## W.P(C) No.23499/16 & conn.cases **==> picture [21 x 9] intentionally omitted <==** the Trade Marks Act, 1999. Petitioner has obtained Trade Mark Registration for its products Elite Premium Tea Cakes and Elite Chocolate Cakes. In so far as other bread products or bakery products are concerned, there is no registration. However, assessment has been made levying a higher rate at 12.5% on all its products. Petitioner preferred an appeal _inter alia_ contending that petitioner does not have a registered trade mark in respect of breads and cakes other than premium tea cakes and chocolate cakes. According to the petitioner, in KVATA No.352/2008, the Deputy Commissioner (Appeals) has already found as per order dated 4/1/2010 that only two items referred as premium tea cakes and chocolate cakes under the brand Elite is liable for levy at higher rate. It is further contended that in respect of the petitioner's sister concern M/s Elite Natural (P) Ltd., the assessment and imposition of penalty had been cancelled. However, without taking into consideration the aforesaid factual situation, petitioner is called upon to remit 30% of the dues, which, according to the petitioner, imposes on the petitioner a higher obligation than what is actually payable. 3. A statement has been filed by the 1[st] respondent _inter_ ## W.P(C) No.23499/16 & conn.cases ## -:3:- _alia_ observing that the assessee could be brought under the trade mark registered by M/s.Yamuna Roller Flour Mills (P) Ltd. It is contended that label registration means trade mark (Brand Name) registration and there is no registration for label alone. M/s.Yamuna Roller Flour Mills is a sister concern of the assessee having brand name registration under the Trade Marks Act for bakery products including toasted breads and cakes coming under Class 30 of the Trade Marks Act and the said registered brand name was being used for sale of bakery products of the assessee. Therefore, there is a liability to pay tax at 12.5%. It is contended that being an order passed after due application of mind, there is no reason why this Court should interfere with the impugned orders. 4. Learned counsel for the petitioner however placed reliance on the judgment of this Court in _**Kilban Foods India (P) Ltd. v. The Commissioner, Commercial Taxes and**_ _**another**_ [(2014) 22 KTR 307 (Ker)]. That was a case in which this Court considered the difference between registered trademark and registered dealer. It was held at para 28 as under:- _“28. We are of the view that the assessee must be_ W.P(C) No.23499/16 & conn.cases ## -:4:- _a person who has obtained registration of its brand in respect of pickles to suffer tax at 12.5%. It is not sufficient that there is general registration obtained. Going by the reply given by the Trade Mark Registry which we cannot hold to be illegal or wrong (in fact it has been issued by the Deputy Registrar of Trade Marks), though the appellant may be using the brand name “happy” (label), there is no registration for the trade mark for the product “pickles”. It may be true that the appellant may be advertising its products under the label “happy”. It may also be true that the appellant has obtained registration in respect of many of its food products under the Trade Mark Act, 1999 with the trade mark “happy” (label). But, to deprive the appellant of the benefit of the concessional rate of taxation (4%) provided in Entry 49, we are of the view that the appellant must have obtained registration for the trade mark in respect of pickles. We must remind ourselves that we are dealing with a provision relating to assessment to tax and while it may be true that the principle of purposive interpretation is not alien to the law of taxation, to carry it to the extent the Assessing Officer has done is, in our view, impermissible. Appellant has admittedly registered for the class of goods contained in Classes 29, 30 and 31. Registration of the trade mark confers certain statutory rights, namely the right to obtain relief in respect of infringement of trade mark.”_ 5. Learned Government Pleader however would submit W.P(C) No.23499/16 & conn.cases **==> picture [21 x 9] intentionally omitted <==** that the above judgment has no application to the facts of the case. It is pointed out that petitioner is using a trade mark of his sister concern which is already registered and, therefore, there is obligation to pay tax at a higher rate. 6. I do not think I will be justified in considering the contentions urged by either parties on merits as I am concerned only with the conditional order of stay granted by the appellate authority. There is of course substantial difference in the rate of tax when an assessee sells a product under a brand name registered under the Trade Marks Act, 1999 and without such registration of a brand name. These writ petitions concern the demand for CST and VAT for the assessment year 2009-10, CST for assessment year 2008-09, CST and VAT for the year 2007-08, CST and VAT for assessment year 2010-11 and VAT for the assessment year 2006-07 respectively. As per a statement shown by the learned counsel for petitioner, if the demand for tax on a differential rate of sale of goods under a registered brand name is excluded, the tax liability will only come to `26,63,806/and interest thereon would come to `39,47,442/-. It is stated that 95% of the demand and 91% of the interest is related to the ## W.P(C) No.23499/16 & conn.cases ## -:6:- differential rate alleging use of a registered brand name. 7. Necessarily, it is for the appellate authority to arrive at a final decision taking into account all the contentions of the parties. During the said period, question is whether the petitioner should be called upon to remit such a huge liability which would come to more than `3 crores. 8. In respect of sustainability of the argument regarding sale of bakery products under a registered brand name, the appellate authority observed that the sustainability has to be considered in detail only at the time of final hearing. Therefore, it is evident that the liability for payment of tax in respect of a substantial portion, that is about 95% of the demand, was deferred to be considered at the time of hearing the appeal. But when the issue relates to a substantial portion of the demand, there was no rationale to defer the consideration of the matter. Atleast the appellate authority ought to have _prima facie_ come to a conclusion as to whether such an obligation rests on the petitioner, and that too when reliance is placed on an earlier judgment in KVATA No.352/2008 and the judgment of this Court in _**Kilban Foods**_ (supra). ## W.P(C) No.23499/16 & conn.cases ## -:7:- 9. Taking into consideration the aforesaid facts, I am of the view that the petitioner has made out a _prima facie_ case for a stay and it would be sufficient if the petitioner remits the amount demanded other than the demand made with reference to the differential tax levied in respect of sale of goods under registered brand name. The said amount shall be remitted by the petitioner within a period of four weeks from the date of receipt of a copy of this judgment. 10. Exts.P3 and P3(a) in W.P. (C) No. 23499/16, Ext.P3 in WP(C) No. 23512/16, Exts.P3 and P3(a) in WP(C) No. 23513/16, Exts.P3 and P3(a) in WP(C) No. 23514/16 and Ext.P5 in WP(C) No. 23527/2016 shall stand modified to the above extent. The appellate authority shall endeavour to dispose of the appeals as early as possible. Writ petitions are disposed of as above. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Rp //True Copy// P.S to Judge