2007 (4) TMI 357 - SC - VAT and Sales Tax

Whether sale of bottles was admitted or the charges levied were bottling charges? Held that - The matter requires reconsideration by the High Court. The High Court must on the basis of the materials available on records arrive at a finding as to whether there existed any implied contract for sale and/or whether in effect and substance keeping in view the fixation of price of different materials by the excise authorities in terms of the U.P. Excise Act and/or Rules framed thereunder any separate charges have been levied for prices of the bottles separately or not.

Issues Involved:
1. Taxability of bottling charges under the U.P. Trade Tax Act, 1948.
2. Definition and interpretation of "turnover" under section 2(i) of the Act.
3. Whether bottling charges constitute a part of the turnover.
4. Application of precedents and legal principles regarding packing charges.

Detailed Analysis:

1. Taxability of Bottling Charges:
The primary issue was whether the bottling charges collected by the dealer for filling Indian-made foreign liquor (IMFL) into bottles were subject to tax under the U.P. Trade Tax Act, 1948. The dealer initially admitted liability for these charges but later denied it during the assessment proceedings. The assessing authority included these charges in the turnover and levied tax, but the first appellate authority and the Tribunal ruled in favor of the dealer, stating that the bottling charges were not a result of sale and thus not taxable.

2. Definition and Interpretation of "Turnover":
Section 2(i) of the U.P. Trade Tax Act defines "turnover" to include "any sum charged in respect of the goods before the delivery of the goods." The court emphasized that this definition encompasses any sums charged for anything done by the dealer in respect of the goods sold at the time of or before delivery, excluding costs of freight, delivery, installation, or sales tax when separately charged.

3. Whether Bottling Charges Constitute a Part of the Turnover:
The court held that bottling charges are indeed part of the turnover. The rationale was that bottling is integral to making liquor marketable, and thus, the charges for bottling are sums charged for something done in respect of the goods before delivery. The court rejected the dealer's argument that bottling charges were merely delivery charges, affirming that they are part of the turnover and subject to tax.

4. Application of Precedents and Legal Principles:
The judgment referenced several precedents, including:
- Commissioner of Sales Tax v. Rai Bharat Das & Bros.: Held that packing charges for silica sand sold in gunny bags were part of the turnover.
- Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu: Affirmed that packing charges are part of the sale price and thus part of the turnover.
- Dyer Meakin Breweries Ltd. v. State of Kerala: Held that freight and handling charges incurred before the sale were not deductible from the taxable turnover.

The court also discussed the principle that the burden of proving an implied agreement to sell packing material lies with the department. The court found that in the present case, the bottling charges were integral to the sale of liquor and thus taxable.

Conclusion:
The court concluded that bottling charges are part of the turnover and liable to tax under the U.P. Trade Tax Act, 1948. The judgment of the Tribunal was set aside, and the appeal filed by the Commissioner of Trade Tax was allowed. The matter was remitted to the High Court for fresh consideration, focusing on whether there was an implied contract for the sale of bottles and whether separate charges were levied for the bottles.

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