2000 (12) TMI 796 - SC - VAT and Sales Tax

Whether the craft paper manufactured by the petitioner is a packing material or it is paper ? Held that - Set aside the order made by the High Court in the case of appellants and remit the matter to it for a fresh decision in accordance with law after allowing the parties to place the necessary material before the court to take the view one way or the other. The burden lay upon the person claiming the exemption or concessional rate to establish that fact and in the absence of any pleading and material to show the manufacturing process involved and its usage not being clear took the view that the craft paper does not cease to be paper merely because it is also used for packing purposes. If it is shown that craft paper can be used only for packing purposes or mainly for packing purposes and in commercial parlance understood to be packing material and if the facts can be established the concessions arising under the law can be claimed.

Summary

Issues:
Whether "craft paper" manufactured by the petitioner qualifies as "packing material" for tax exemption under the U.P. Trade Tax Act, 1948.

Analysis:
The appellants sought recognition certificate under section 4-B of the U.P. Trade Tax Act to avail exemption for purchasing raw material and packing material. However, a Full Bench of the Allahabad High Court held that "craft paper" is not considered "packing material" but rather "paper," leading to a notice to delete it from the recognition certificate. The High Court emphasized determining the common parlance meaning or commercial sense of "paper" or "packing material." It was noted that "craft paper" can be used for writing, printing, packing, and wrapping, and its usage as packing material does not negate its classification as paper. The burden of proof lies on the party claiming exemption to establish the manufacturing process and usage, with the absence of such details leading to the classification of "craft paper" as paper rather than packing material.

The judgment highlighted the importance of establishing that "craft paper" is primarily or exclusively used for packing purposes to claim tax concessions. The decision of the Full Bench in a related case was based on the lack of evidence regarding the manufacturing process and exclusive use for packing. The Court emphasized the need for parties to provide necessary material to determine whether "craft paper" qualifies as packing material. Consequently, the High Court's order was set aside, and the matter was remitted for a fresh decision based on the evidence presented by the parties. The judgment underscores the significance of demonstrating the specific usage and adaptation of the product to ascertain its classification as either "paper" or "packing material" for tax purposes.

In conclusion, the Supreme Court directed a fresh decision by the High Court after allowing the parties to present relevant evidence regarding the manufacturing process and predominant usage of "craft paper." The judgment emphasizes the need for clear proof establishing whether the product meets the criteria to be considered as "packing material" for tax exemption purposes, highlighting the importance of factual evidence in determining the classification of goods under the U.P. Trade Tax Act.