The Supreme Court has dismissed an appeal filed by Unilever Sri Lanka Limited in connection with a long-running Value Added Tax (VAT) dispute.
The Court ruled that Unilever could be considered a “manufacturer” for the purposes of the transactions concerned, even though the goods had been physically produced by other companies.
The judgment was delivered yesterday (14) by a three-judge bench comprising Justices Mahinda Samayawardhena, Menaka Wijesundera and Sampath Abayakoon.
The dispute concerned Signal toothbrushes manufactured by Polypak Secco Limited and Vim scourer bars manufactured by R.M. Chemicals Ceylon (Private) Limited.
After the products were supplied to Unilever, the company released and sold them on the market.
Unilever argued that the two companies which physically produced the goods were the manufacturers and that it had merely purchased and sold the finished products.
However, the Supreme Court held that, under the VAT Act, a company did not necessarily need to own a factory or machinery, employ a workforce or be directly involved in the physical production process to be considered a manufacturer.
The Court observed that the products had been manufactured according to specifications and quality requirements determined by Unilever under the relevant agreements.
It also noted that Unilever retained significant rights over the products’ manufacturing standards, packaging and commercial identity.
Accordingly, the Supreme Court ruled that Unilever should be considered a manufacturer under the relevant provisions of the VAT Act and affirmed the judgment delivered by the Court of Appeal in November 2022.
Unilever’s appeal was therefore dismissed. The judgment is also expected to apply to four other appeals between the same parties concerning separate tax periods.
