1966 (3) TMI 72 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Inclusion of packing charges in taxable turnover.
2. Interpretation of Rule 6(5)(f)(ii) of the Mysore Sales Tax Rules, 1957.
3. Application of the Cement Control Order, 1958, and its amendments.

Issue-wise Detailed Analysis:

1. Inclusion of Packing Charges in Taxable Turnover:
The petitioner, Cement Marketing Company of India, Limited (referred to as "the dealer"), challenged the inclusion of Rs. 1,22,989.90 in the taxable turnover for the period between 20th February, 1961, and 31st March, 1961. The contention was that these charges should be excluded under Rule 6(5)(f)(ii) of the Mysore Sales Tax Rules, 1957, as they represented packing charges.

2. Interpretation of Rule 6(5)(f)(ii) of the Mysore Sales Tax Rules, 1957:
Rule 6(5)(f)(ii) allows the exclusion of charges for packing and delivery from the taxable turnover if they are specified and charged separately. The dealer argued that the packing charges incurred for packing the cement in suitable containers before despatch should be excluded from the taxable turnover. The Commercial Tax Officer, Deputy Commissioner, and Sales Tax Appellate Tribunal rejected this claim, stating that since the producer did the packing and not the dealer, the charges did not fall within the rule.

3. Application of the Cement Control Order, 1958, and its Amendments:
The Cement Control Order, 1958, mandated that the producer sell cement only to the State Trading Corporation of India, Limited (referred to as "the Corporation"). The price payable by the Corporation to the producer was fixed by the Order. An amendment in 1961 clarified the prices for packed and loose cement. The dealer contended that the packing was done by the producer at the request of the Corporation for the consumer, and hence the packing charges should be excluded from the taxable turnover.

Judgment Analysis:

The court examined the provisions of the Cement Control Order, 1958, and its amendments. The Order required the producer to sell cement to the Corporation, which in turn sold it to consumers. The price for packed cement included packing charges, which were to be specified separately.

The court found that the Corporation could purchase either packed or loose cement from the producer. The producer packed the cement at the request of the Corporation for the consumer. The court concluded that the packing charges constituted services rendered for the consumer, and therefore, should be excluded from the taxable turnover under Rule 6(5)(f)(ii).

The court criticized the lower tribunals for misinterpreting the requirement of an agency relationship between the producer and the Corporation. The crucial question was whether the packing was done for the consumer, not whether the producer was an agent of the Corporation.

The court allowed the revision petition, holding that the dealer was entitled to the deduction of Rs. 1,24,156.95 as packing charges under Rule 6(5)(f)(ii). The Commercial Tax Officer was directed to modify the assessment accordingly and refund any tax paid on this amount. The petitioner was awarded costs of Rs. 100.

Conclusion:
The court clarified that packing charges incurred by the producer at the request of the Corporation for the consumer should be excluded from the taxable turnover under Rule 6(5)(f)(ii). The judgment emphasized the correct interpretation of the Cement Control Order and the Mysore Sales Tax Rules, ensuring that the value of services, such as packing, is not included in the taxable turnover.