2006 (9) TMI 276 - SC - VAT and Sales Tax

SALES TAX EXEMPTION EGGS AND MEAT INCLUDING FLESH OF POULTRY EXCEPT WHEN SOLD IN SEALED CONTAINERS DRESSED CHICKEN STAPLING AND CRIMPING DONE ONLY TO FACILITATE EASY CARRYING AND TO ENSURE DRESSED CHICKEN DOES NOT SLIP OUT OF BAG

Summary

Issues:
Interpretation of the term "sealed container" under the Karnataka Sales Tax Act, 1957 for the sale of dressed chicken in polythene bags closed by stapling or crimping.

Comprehensive Analysis:

Issue 1: Interpretation of "sealed container" under the Act

The appellant, engaged in poultry farming, sold dressed chicken in polythene bags closed by stapling or crimping. The key contention was whether such closure constituted a sale in a sealed container, affecting the tax liability under the Act. The Authority for Clarification and Advance Ruling initially held that the sale of dressed chicken in such polythene bags fell under the taxable category. The Karnataka High Court upheld this decision, prompting the appeal to the Supreme Court.

Issue 2: Precedents and Legal Interpretation

The Supreme Court referred to past judgments to interpret the term "sealed container." The court cited the case of Commissioner of Sales Tax v. G.G. Industries, emphasizing that a container is considered sealed if access to its contents is impossible without breaking the fastening. This definition was further clarified in subsequent cases like Martand Dairy and Farm v. Union of India and Commissioner of Sales Tax v. National Chikki Mart, reinforcing the requirement of breaking the fastening for a container to be considered sealed.

Issue 3: Analysis of Contrasting Views

The appellant relied on the Delhi High Court's decision in Commissioner of Sales Tax, Delhi v. Pop Corn, which distinguished the need for breaking the fastening to access the contents. The court in this case considered pop corn sold in loosely stapled polythene bags as not in sealed containers, as access to the contents was possible without breaking the staples. This contrasted with the Karnataka High Court's interpretation, leading to a divergence in views on what constitutes a sealed container.

Issue 4: Supreme Court's Decision

The Supreme Court disagreed with the Karnataka High Court's interpretation, stating that undoing the fastening did not equate to breaking it. The court emphasized that in cases of stapling or crimping, the fastening could be removed without breaking anything. Therefore, following the precedent set in G.G. Industries, the court held that the dressed chicken in polythene bags closed by stapling or crimping were not sold in sealed containers. Consequently, the appellant was exempted from sales tax liability.

Conclusion:

The Supreme Court's detailed analysis and reliance on legal precedents clarified the interpretation of "sealed container" under the Karnataka Sales Tax Act, 1957. By emphasizing the necessity of breaking the fastening for a container to be considered sealed, the court ruled in favor of the appellant, exempting them from sales tax liability for selling dressed chicken in polythene bags closed by stapling or crimping.