1966 (10) TMI 112 - SC - VAT and Sales Tax

DEALER IN CHEWING TOBACCO CLAIM FOR EXCLUSION OF PACKING MATERIAL FROM TAXABLE TURNOVER WHETHER ALLOWABLE

Summary

Issues:
1. Assessment of sales tax on chewing tobacco sales.
2. Exemption of packing material from sales tax.
3. Interpretation of rule 5(1)(g)(ii) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.

Analysis:
1. The appellants, engaged in the business of chewing tobacco, were assessed for sales tax on their turnover from selling chewing tobacco. The contention that the tobacco purchased by them did not undergo a manufacturing process was rejected by the authorities, including the High Court of Madras. The courts upheld the tax assessment on the sale of chewing tobacco.

2. The appellants argued that the packing material used for preparing packets of chewing tobacco should be exempt from sales tax post-December 13, 1957. However, the Deputy Commercial Tax Officer rejected this claim, stating that the packing material, even if rendered unusable after the sale of chewing tobacco, was still taxable. The High Court upheld this decision, emphasizing non-compliance with rule 5(1)(g)(ii) of the Sales Tax Rules.

3. The case referred to a previous judgment where it was discussed whether packing material is taxable when tobacco products are sold. The court highlighted the need for explicit contracts for the sale of packing material between the parties. In this case, since the appellants did not specify separate charges for chewing tobacco and packing material, the claim for exclusion of packing material value from taxation was dismissed. The court upheld the tax assessment on the packing material used for chewing tobacco packets.

In conclusion, the Supreme Court dismissed the appeal, stating that the failure to specify separate prices for chewing tobacco and packing material led to the rejection of the claim for excluding the value of packing material from taxation. The judgment emphasized the importance of complying with tax rules and providing clear documentation for separate charges to claim exemptions effectively.