State of Kerala v. M/s Procter and Gamble Home Products, Kakkanad

**TUESDAY, THE 7TH DAY OF AUGUST 2018 / 16TH SRAVANA, 1940** **AGAINST THE ORDER/JUDGMENT IN TA 765/2003 of KERALA S.T.A.T.ADDL.BENCH-I, ERNAKULAM DATED 24-04-2004** **REVISION PETITIONER/APPELLANT/REVENUE:** **STATE OF KERALA REP. BY JOINT COMMISSIONER (LAW) COMMERCIAL TAXES, ERNAKULAM.** **BY ADV.MOHAMMED RAFIQ, SR.GOVERNMENT PLEADER** **RESPONDENT(S):/RESPONDENT/ASSESSEE** **M/S.PROCTER AND GAMBLE HOME PRODUCTS, KAKKANAD.** **R1 BY ADV. SRI.ANIL D. NAIR R1 BY ADV. SRI.R.SREEJITH R1 BY ADV. SMT.O.A.NURIYA R1 BY ADV. KUM.SOUMYA PRAKASH R1 BY ADV. KUM.MEKHALA M.BENNY** **THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 07-08-2018, ALONG WITH S.T.REV.NOS.5 & 7/2007, 345/08 AND WPC 22751/2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **S.T.REV.309/2005** ## **APPENDIX** ## **PETITIONER'S EXHIBITS** |**ANNEXURE-A :**|**COPY OF AGREEMENT PRODUCED BY THE ASSESSEE BEFORE THE**| |---|---| |**ASSESSING AUTHORITY.**|| |**ANNEXURE-B :**|**COPY OF ASSESSMENT ORDER DATED 15.3.2003.**| |**ANNEXURE-C :**|**COPY OF APPELLATE ORDER IN STA NO.1081/03 DATED 15.5.2003**| |**ANNEXURE-D :**|**COPY OF ORDER OF THE SALES TAX APPELLATE TRIBUNAL, ADDL.BENCH-**| |**I, ERNAKULAM IN TA NO.765/2003 AND CONNECTED CASES DATED 24.4.2004.**|| ## **//TRUE COPY//** **PS TO JUDGE.** jg-29/8 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------- S.T.Rev.Nos.309 of 2005, 5 & 7 of 2007 & 345 of 2008 and WP(C) No.22751 of 2018 ------------------------------------------Dated this the 7[th] day of August, 2018 ## O R D E R/J U D G M E N T ## Vinod Chandran, J. The revisions are by the State against the orders of the Kerala Sales Tax Appellate Tribunal. S.T.Rev.Nos.309/2005 and 345/2008 are from the assessment orders for the year 1998-99; one from the original assessment and the other from the order in a rectification application filed by the State before the Tribunal. S.T.Rev.Nos.5/2007 and 7/2007 are from the assessments for the years 2000-01 and 2001-02. The question of law raised in these revisions is as to whether the respondent-Procter and Gamble Home Products Limited (PGHPL) is liable to tax under Section 5(2) of the Kerala General Sales Tax Act, 1963 ('KGST Act' for short) for the sale of products under the brand name ‘Procter and Gamble’. The Tribunal held that the PGHPL and manufacturer, Procter and Gamble Hygiene and Health Care Limited (PGHHCL), who sold to PGHPL, are both S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** permitted to use the brand name by the principal Company based in the United States of America. The manufacturer also being permitted to use the brand name, the sale from the manufacturer to PGHPL was found to be the sale under Section 5(2), thus exempting from tax the sale made by PGHPL to the ultimate consumer. 2. A number of revisions were pending before this Court from the monthly and yearly assessments made against the assessee-PGHPL. Yet another Division Bench in a batch of revision petitions, concerned with monthly assessments of 2002-03 and 2003-04, remanded the matter to the Tribunal for fresh consideration, especially noticing the subsequent judgments of this Court and the Honourable Supreme Court. While the matters were pending there, the assessee herein applied under an amnesty scheme and to facilitate extension of such amnesty, the assessee withdrew the appeals before the Tribunal. An order was passed in the amnesty scheme, which is challenged by the assessee in the writ petition claiming some adjustments to the tax due as found by the Assessing Officer, even under the amnesty scheme. The assessee had applied for amnesty even for S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** the years, which are subject matter of these revisions, despite the Tribunal ruling in their favour. Obviously the assessee realises the futility of defending these revisions for reason of the subsequent decision of the Hon'ble Supreme Court. 3. The assessee was aggrieved with the cold response of the Department to consider the applications under the amnesty scheme and hence approached this Court and obtained a direction to so consider. Aggrieved with set-off not being permitted of the amounts paid in compliance with the interim orders at the various stages of the statutory scheme as also that of the tax paid by the manufacturer, the assessee filed a writ petition which is also posted along with the revisions. It is also alleged that the years 2002-03 and 2003-04 were not considered for amnesty now, though included in the earlier order passed. The writ petition is filed seeking an appropriate revision of the order passed under the amnesty scheme produced as Ext.P7. 4. The learned Senior Government Pleader points out that as far as the assessment years 2002-03 and 2003-04, the order under amnesty was already passed as S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** per Ext.P4 in the writ petition. The learned counsel for the writ petitioner has a contention that the order is no longer in force for reason of Ext.P6 judgment. On a reading of Ext.P6 judgment, this Court does not find that the order at Ext.P4 (produced therein also as Ext.P4) was not set aside. In such circumstances, the prayer of the petitioner could also be moulded insofar as seeking a rectification of order passed at Ext.P4 also. 5. As far as the revisions are concerned, the issue is covered by the judgment of the Honourable Supreme Court reported in (2017) 1 SCC 60 [KAIL Ltd. v. State of Kerala] . The orders of the Tribunal are hence set aside, following the aforesaid judgment answering the question of law against the assessee and in favour of the revenue. Since the petitioner has already applied for amnesty scheme and has been also granted such relief, necessarily there need be no consideration of the issue whether the margin insofar as the sale between the PGHHCL and PGHPL was sufficient to show an actual brand name sale. The assessee would satisfy the amounts due under the amnesty scheme S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** itself. The revisions are hence allowed setting aside the order of the Tribunal subject only to the permission granted to the respondent-assessee to settle the dues under the amnesty scheme. 6. Looking at the orders challenged in the writ petition, the amnesty scheme has been granted for all the years starting from 1998-99 to 2003-04. For the years 2002-03 and 2003-04, amnesty scheme has been applied and order passed as per Ext.P4. Ext.P7 is the order with respect to the years 1998-99 to 2001-02. The claim of the assessee is to give adjustments insofar as the payments made by the assessee pending litigation as also the tax paid by PGHHCL for the sale to the assessee. 7. To understand the different components claimed adjustment by the assessee, one has to look at Ext.P1 application under the amnesty scheme filed by the petitioner-assessee. In the years 1998-99 to 2002-03, there is a total amount of Rs.3,28,34,036.09 paid by PGHHCL, the manufacturer, as tax with respect to the sale made to the assessee. The same has to be considered for deduction under Rule 32(13B) of the KGST S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** Rules, 1963 on proper proof being produced before the AO. The further adjustments claimed is on the tax paid by way of demand draft of Rs.25,00,000/- for the year 2003-04 to comply with the condition of the stay order in a revision filed against the penalty imposed on the assessee for the said year. The revisional authority is said to have set aside the penalty order from which no appeal was filed by the State. Hence, on verification, if the stated facts of the penalty and deposit made are true, the amounts remaining with the State has to be necessarily given adjustment of, when satisfying the amounts under the amnesty scheme. The further claim is with respect to 20% of the demand paid as per stay orders in the years 2002-03 and 2003-04 which comes to a total of Rs.1,56,08,625/-. If such deposit is made, necessarily the same would also have to be given credit and deducted from the total amounts due in the amnesty scheme. It is made clear that in none of these amounts, there can be a claim now raised of appropriation to interest. The penalty having been set aside and the order of assessment in the years 2002-03 & 2003-04, also having been set aside by the S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** Tribunal, there could have been no appropriation effected. The assessee's dues under the amnesty scheme arose only for reason of their voluntary shouldering of the responsibility under Section 5(2). Exts.P4 and P7 shall be modified accordingly. We make it clear that by making the modification, there shall not be any denial of the amnesty scheme only on the amnesty scheme having now expired on 30.6.2018. The modification made shall be applying the amnesty scheme as it existed prior to its expiry. The said directions are issued only in the context of the facts arising in this case, where the assessee had voluntarily accepted the amnesty scheme within the time and orders were also issued by the AO. The writ petition is ordered accordingly. The assessee on production of the certified copy of the judgment as also proof of deposit pursuant to interim orders and also the details of tax paid by the manufacturer, shall be heard and sufficient modification made in the amnesty orders at Exts.P4 & P7 within a month from the date of hearing. If the assessee has to pay any further amounts, the same shall be paid within one month of the order, with interest S.T.Rvs.309/05,5&7/07&345/08 and WP(C)22751/18 **==> picture [15 x 9] intentionally omitted <==** applicable from the date of expiry of amnesty scheme to the date of payment. The Petitions are ordered accordingly. The parties to suffer their respective costs. Sd/K.VINOD CHANDRAN JUDGE Sd/ASHOK MENON JUDGE jg