1956 (2) TMI 53 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of sales tax on steam.
2. Levy of sales tax on gunny bags containing sugar.
3. Levy of sales tax on gunny bags containing grain.

Issue-wise Detailed Analysis:

1. Levy of Sales Tax on Steam:
The petitioner contended that steam should not be taxed as it is not tangible corporeal goods and does not fall within the definition of "goods" under the General Sales Tax Act. The definition of "goods" under clause (g) of section 2 of the Hyderabad General Sales Tax Act includes "all kinds of movable property other than actionable claims, stocks and shares and securities and includes all materials, articles and commodities." The court examined various cases, including Rash Behari Shaw v. Emperor and Erie County Natural Gas and Fuel Co. Ltd. v. Carroll, to determine whether steam could be classified as goods. The court concluded that steam is tangible, visible, has weight, and can be felt, thereby qualifying as goods. Consequently, any sale of steam within the meaning of the Hyderabad General Sales Tax Act would be subject to sales tax unless exempted. The argument that steam was sold without profit was dismissed, as the tax is levied on turnover, not profit.

2. Levy of Sales Tax on Gunny Bags Containing Sugar:
The petitioner argued that the gunny bags used for selling sugar should not be taxed separately as they were not sold for profit and were included in the price of sugar. The court referred to the definitions of "dealer," "sale," and "turnover" under the Hyderabad General Sales Tax Act. It was determined that gunny bags are goods and that the cost of these bags was included in the manufacturing cost of sugar. The court noted that the invoices showed the weight per bag and the number of bags sold at a particular price, which included the cost of the gunny bags. The court rejected the contention that the bags were supplied free of cost and held that the turnover on gunny bags is liable to sales tax. The court also referred to similar judgments from other High Courts, such as Mohanlal Jogani Rice & Atta Mills v. State of Assam and Varasuki & Co. v. Province of Madras, which supported the view that the turnover of containers or packing materials is liable to sales tax.

3. Levy of Sales Tax on Gunny Bags Containing Grain:
The petitioner contended that the gunny bags used for refilling grain for the company's workers should not be taxed. The Sales Tax Officer rejected this contention without providing reasons. The court noted that the supply of grains to the grain shops was intended to provide cheap grain to the workers and was not a business or trade activity. The court found no material evidence to support the conclusion that the petitioner was engaged in the business of selling or supplying grain. Therefore, the turnover on gunny bags used for supplying grain to the grain shops was not liable for sales tax. The court ordered the refund of the tax collected on these assessments for the years 1950-51, 1951-52, 1952-53, and 1953-54.

Conclusion:
The petition was partly allowed. The court quashed the assessment order in so far as it pertained to the levy of sales tax on gunny bags containing grain and directed the refund of the tax collected in respect of these assessments. Each party was ordered to bear its own costs.