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1997 (12) TMI 569 - SC - VAT and Sales TaxWhether the price of the containers or the packing is charged separately or not? Whether the cardboard cartons cannot be taxed once again when sold along with the beer? Held that - Appeal dismissed. In view of the clear provisions of section 5(3-D) of the Karnataka Act and the corresponding provisions of section 5(5) of the Kerala Act there is no basis for the argument that if the price of the goods and the price of the containers or packing materials are separately charged, the provisions of the aforesaid two sections will not be applied at all. The law is quite clear that when the goods contained in containers or packed in packing materials are sold the containers and the packing materials will have to be taxed at the same rate at which the goods are liable to be taxed. It will not make any difference if the price payable for the containers or packing materials are shown separately in the bills raised by the seller. Sub-section (5) of section 5 specifically provides that the rate of tax and point of levy applicable to the containers shall be the same as those applicable to the goods sold. Therefore, even if the cartons have already been subjected to tax by virtue of specific provisions of section 5(5) they will be liable to tax at the same point and at the same rate as the goods contained therein.In calculating the turnover of the goods, packing materials will have to be taken into account. The packing materials will be taxed at the same rate and at the same point as the goods contained in the packing material.
Issues Involved:
1. Taxation rate on cardboard cartons used for packing liquor. 2. Inclusion of the value of cartons in the turnover of liquor for tax purposes. 3. Application of Section 5(5) of the Kerala General Sales Tax Act, 1963. 4. Previous taxation of cardboard cartons and its impact on current tax liability. 5. Interpretation of similar provisions in other state laws and relevant case law. Detailed Analysis: 1. Taxation Rate on Cardboard Cartons Used for Packing Liquor: The appellant, Premier Breweries Limited, contended that cardboard cartons should be taxed at 8% under entry 97 of the First Schedule of the Kerala General Sales Tax Act, 1963, and not at the 50% rate applicable to liquor. The appellant argued that the cartons were charged separately from the liquor and should not be included in the liquor's value for tax purposes. This was initially accepted by the Assistant Commissioner of Sales Tax. 2. Inclusion of the Value of Cartons in the Turnover of Liquor for Tax Purposes: The Deputy Commissioner revised the assessment, including the value of the cartons in the liquor's turnover and taxing them at the same rate as the liquor. This decision was upheld by the Tribunal and the High Court. The appellant argued that the cartons were secondary containers for protecting the bottles and should not be included in the turnover of the beer. 3. Application of Section 5(5) of the Kerala General Sales Tax Act, 1963: Section 5(5) specifies that the tax rate and point of levy for containers or packing materials should be the same as for the goods contained or packed, regardless of whether the price is charged separately. The court emphasized that the language of Section 5(5) is clear and unambiguous, mandating that the turnover of goods must include the turnover of containers or packing materials. 4. Previous Taxation of Cardboard Cartons and Its Impact on Current Tax Liability: The appellant contended that since the cardboard cartons had already been taxed under a different entry, they should not be taxed again when sold with beer. The court clarified that Section 5(5) requires packing materials to be taxed at the same rate and point as the goods, regardless of previous taxation. 5. Interpretation of Similar Provisions in Other State Laws and Relevant Case Law: The court examined similar provisions in the Andhra Pradesh and Karnataka Sales Tax Acts. In the case of Raj Sheel v. State of Andhra Pradesh, the court had ruled that packing materials could be taxed separately if not sold with the goods. However, the court distinguished this case, noting that Section 5(5) of the Kerala Act explicitly includes the turnover of packing materials in the turnover of the goods, even if charged separately. The court also referenced Vasavadatta Cements v. State of Karnataka, where similar provisions were interpreted in line with the Kerala Act. Conclusion: The court concluded that the provisions of Section 5(5) of the Kerala General Sales Tax Act, 1963, are clear and mandate that the turnover of goods includes the turnover of containers or packing materials, taxed at the same rate and point as the goods. The appeals were dismissed, and it was held that the Deputy Commissioner's decision to tax the cartons at the same rate as the liquor was in accordance with the law. The court also dismissed the contention regarding the previous taxation of cartons, emphasizing that the rule is a method of computing the turnover of goods, not a separate tax on packing materials. Outcome: The appeals and special leave petitions were dismissed, with no order as to costs.
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