2008 (2) TMI 804 - HC - Indian Laws

Packing material/packing case - Polythene sheets - sales tax assessment - Held that - Commissioner rightly interpreted entry 102 vide Ext.P1 declaring the polythene film sold by the petitioner as packing material. The statement by the Government in their order that polythene film is not packing case is correct but mistake happened in their order because they have not considered whether polythene film is packing material which it is and is therefore covered by the entry 102. Packing cases and Packing bags are made to pack items of specified volume shape or size. However, packing materials are purchased by the producers of goods, to cut or shape it and use it as packing materials depending on the nature of the packing required. In this case, it is conceded that the purchasers of polythene films from the petitioner are purchasing and using the item to make polythene covers to pack goods like milk, oil, etc. So long as the item sold is used for packing goods, it is packing material, irrespective of the fact whether the petitioner has sold it in rolls or sheets and the purchaser in the course of packing in the automatic packing machine only made it into covers and packed the goods. Following the above findings, quash Ext. P5 to the extent of assessment of polythene sheets at the rate in excess of 4% and restore the original assessment. The writ petition is allowed as above.

Summary

Issues:
Challenge to revised sales tax assessment under Section 19 of the K.G.S.T Act, 1963 for polythene sheets at a higher rate of 12% instead of 4% as packing material under entry 102 of the First Schedule.

Analysis:

Issue 1: Interpretation of Entry 102 of the First Schedule to the K.G.S.T Act
The petitioner contested the revised assessment based on Ext. P3 issued by the Assessing Officer, challenging the higher tax rate of 12% on polythene sheets instead of the original 4% as packing material under entry 102. The Government argued that only they have the power to declare new materials as packing materials under this entry. The Commissioner's clarification in Ext. P1 deemed polythene film as packing material under entry 102, leading to the original assessment at 4%. The Government's communication stated that polythene film was not covered by their notification, hence the higher tax rate. The petitioner argued that polythene film indeed falls under entry 102, regardless of the Government's stance.

Issue 2: Authority to Declare Packing Materials
The Court analyzed the scope of entry 102, emphasizing that items fitting the ordinary meaning of "packing case" or "packing material" are assessable at 4% without the need for Government notification. The Government's authority is to notify materials beyond those listed in the entry. The Court cited precedents to clarify that notifications are necessary only for items not inherently classified as packing materials, as seen with rubber bands and cellophane tapes. The Government's notification of items like bottles and gunny bags as packing materials was deemed redundant, as these items naturally fall under the entry.

Issue 3: Interpretation of Packing Materials
The Court determined that polythene film sold by the petitioner qualifies as packing material under entry 102, despite the Government's contention. It differentiated between packing cases and packing materials, highlighting that materials used by producers to pack goods are considered packing materials. The Court noted that polythene film purchased by users to make covers for packing goods like milk and oil constitutes packing material under the entry.

Conclusion:
The Court quashed the revised assessment imposing a tax rate higher than 4% on polythene sheets, reinstating the original assessment. The judgment favored the petitioner's argument that polythene film is a packing material falling under entry 102 of the First Schedule to the K.G.S.T Act.