C.N. Ramachandran Nair, J.

The appellant is challenging Annexure C order of clarification issued under Section 59-A of the Kerala General Sales Tax Act by the Commissioner of Commercial Taxes. Even though the Commissioner has clarified three questions raised by the appellant, the challenge is only against decision on question No.1(b) which pertains to the appellants liability for tax under Section 5A of theon the purchase of goods manufactured by an exempted unit in appellants brand name.

2. The appellant, a registered dealer under the K.G.S.T. Act and C.S.T. Act, is marketing products manufactured by them and also products manufactured by other industries in the brand name of the appellant. One industrial unit which is engaged in the manufacture and sale of goods to the appellant in appellants brand name was entitled to sales tax exemption under the notification issued by the Government as an industrial unit in the Cochin Export Processing Zone. So far as Branded goods purchased and sold by the petitioner in Kerala are concerned, such goods are taxable at the hands of the appellant as the appellant is the deemed first seller of Branded products by virtue of Section 5(2) of the KGST Act. however, the issue involved in this case is whether the appellant is liable to pay sales tax under Section 5-A of the KGST Act on the Branded goods purchased by the appellant from the industry in Kerala which enjoys sales tax exemption. The relevant provision which the Commissioner has clarified fixing appellants liability, namely, Section 5A(1) is extracted hereunder:

5A. Levy of purchase tax:- (1) Every dealer who, in the course of his business purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under sub-sections (1), (3), (4) of (5) of section 5 and either,-

(a) Consumes such goods in the manufacture of other goods for sale or otherwise; or

(b) Uses or disposes of such goods in any manner other than by way of sale in the State; or

(c) Dispatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce; shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for the year at the rates mention in Section.

All what the Commissioner in the impugned clarification order has said is that since the manufacturer, an industrial unit enjoys sales tax exemption, is not liable to pay sales tax on the sale of goods manufactured in appellants Brand name and sold to them. Appellant will be liable to pay tax under Section 5A(1)(c) of thewhen such goods are dispatched by the appellant to any place outside the State except as the direction result of sale or purchase in the course of inter-State trade or commerce. It is against this order of clarification; this appeal under Section 40 of the KGST Act has been preferred.

2. We have learned counsel appearing for the appellant and learned Govt. Pleader for the respondent.

3. Learned counsel for the appellant has relied on the decision of the Supreme Court in Peekay Re rolling Mills (P) Ltd, vs. Asst. Commissioner (2007 (2) KLT 704 SC) and contended that the facts of the appellants case is similar to the facts decided by the Supreme Court and therefore the impugned order is liable to be quashed with a declaration that the appellant is not liable to pay tax on the branded goods purchased from the exempted unit and dispatched on stock transfer for sale outside Kerala.

4. Learned Govt. Pleader has relied on the decisions of this Court reported in Deputy Commissioner of Sales Tax (Law) Vs. Supreme Boards, Pappinissery, Cannanore {(1998) 6 KTR 374 (Ker)} and Deputy Commissioner of Sales Tax (Law) vs. C.T. Kochouseph {(2005)} 13 KTR 58 (Ker.)} and an unreported decision of a Division Bench of this court in O.P. No.34485/2000 and connected cases dated 10.7.2007 and contended that the issue raised is squarely covered by the above decisions of this court and several other unreported decisions. It is further contended by the learned Govt. Pleader that the appellants case is very similar to the case decided by the three Judges Bench of the Supreme Court in State of Tamil Nadu Vs. M.K. Kandaswamy and others (36 STC 191) [LQ/SC/1975/219] . We find that the appellant has not challenged the validity of Section 5A (1)(c) of thewhich provides for levy of purchase tax on purchase made by a dealer of taxable goods, if the supplier has not paid any tax on the sale of such goods. In this case, admittedly the commodity name branded sanitary products are liable to tax under the. However, by virtue of exemption granted to the industrial unit in Cochin Export Processing Zone, which manufactured the products in appellants brand name, the manufacturer is not liable to pay and sales tax on the sales made by such unit to the appellant. Since the commodity is taxable goods as explained by the Supreme Court in Kandaswamys case above referred it attracts tax at the hands of the purchaser under Section 5A of thewhich is the same as Section 7A of the T.N.G.S.T. Act. Even though the issue is similar to the one raised by the assessee in the case decided by the Supreme Court relied on by the learned counsel for the appellant, we find the Supreme Court has heavily relied on Section 15 of the C.S.T. Act, because the question involved in that case pertains to liability for tax at purchase point on declared goods, namely, steel ingots which enjoyed sales tax exemption at the hands of seller. However, we find that the facts of this case are quire similar to the case decided by the three Member Bench of the Supreme Court in Kandaswamys case.

5. We, therefore, uphold the order of the Commissioner and dismiss the appeal on the above issue.

6. The next aspect in this case is whether irrespective of Section 5A of the Act, the appellant is liable to pay tax under Section 5(2B) which provides for payment of sales tax by the brand name holder when the product purchased is dispatched to outside Kerala otherwise than by way of sale in the course of inter-state trade or commerce. The scheme of levy of tax on branded products contained in Sections 5(2), 5(2A) and 5(2B) are extracted hereunder:

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 purposes of this Act.

5(2A) Where a dealer liable to tax under sub-section (1), sells any goods to a trade mark or brand name holder for sale under a trade mark or brand name, no such dealer shall be liable to pay tax under the said sub-section, if the produces before the assessing authority a declaration in the prescribed form from that trade mark or band name holder.

5(2B) Where a trade mark or brand name holder consumes the goods purchased by him under sub-section (2A), in the manufacture of other goods or uses or disposes of such goods in any manner otherwise than by way of sale within the State or dispatches such goods to any place outside the State, otherwise than by way of inter-state sale, such, trade mark or brand name bolder shall be liable to pay tax on the turnover relating to such purchase for the year irrespective of the quantum of his total turnover.

When sub-section (2) of Section 5 declares that the brand name holder shall be deemed to be the first seller of branded goods, sub-section (2A) provides for exemption to dealers who sell the goods to the brand name holder based on a declaration furnished by the purchasing dealer, namely, the Brand name holder. However, liability under sub section (2B) is attracted when the brand name holder purchasing the goods that have not suffered tax by virtue of sub-section (2A) and dispatches the same outside Kerala as stock transfer. In the normal course, since the brand name holder is the deemed first seller liable to pay tax, he should issue a declaration to the first seller for such seller to claim exemption under sub-section (2A). Since the appellant has not issued any declaration to the manufacturer under sub-section (2A), the Commissioner thought that sub-section (2B) has no application. However, in this case since the supplier is entitled to exemption on their sales by virtue of another notification issued under Section 10 of the Act, there was no necessity for the appellant to issue any declaration in terms of sub-section (2A) of Section 5 for the seller to claim exemption. However, all the conditions of Section 5(2B) are satisfied in as much as the appellant has purchased and despatched the Branded goods to outside the State otherwise by way of inter-state sale and since the supplier has not paid sales tax on their sales by virtue of exemption granted to them, the appellant is liable to pay tax under Section 5(2B) of the. Therefore, even if the first point raised is answered in favour of the appellant, the appellant has no escape from liability by virtue of operation of Section 5 (2B) of the.

In view of the above findings, we dismiss this appeal.