1976 (11) TMI 181 - HC - VAT and Sales Tax

Summary

Issues:
- Assessability of disputed turnover
- Rate of tax applicable to the disputed turnover

Assessability of disputed turnover:
The case involved an appeal under section 37 of the Tamil Nadu General Sales Tax Act against the order of the Board of Revenue dated 22nd July, 1972. The appellants purchased kerosene packed in sealed tins from a vendor and sold it in Tamil Nadu. The dispute arose regarding whether the turnover from the sale of tins should be included in the assessable turnover. The appellants claimed that the amount for the tins should not be included, citing rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. However, the assessing officer and the appellate authority assessed the turnover differently, with the appellate authority considering the tins taxable at a separate rate from the kerosene. The Board of Revenue revised the appellate authority's decision, holding that the turnover was assessable at 5½ per cent, similar to kerosene. The appellants challenged this decision, leading to the present appeal.

The court analyzed rule 6(cc)(i) and concluded that the provision did not apply in this case. The court emphasized that the contract between the appellants and their customers was to sell the kerosene in sealed tins, indicating an agreement to sell the packing materials (tins) as well. The court referred to previous decisions to support this interpretation, highlighting that the existence of an intention to sell the packing materials is crucial for determining assessability. Additionally, the court noted that rule 6(cc)(i) applies to packing materials used after the sale of goods, not in cases where the contract involves the sale of goods in a packed condition, including the packing materials. Therefore, the court held that the turnover in question was liable to tax, as determined by the authorities.

Rate of tax applicable to the disputed turnover:
Regarding the rate of tax applicable to the disputed turnover, the court disagreed with the Board of Revenue's decision to tax the turnover at the same rate as kerosene. The court highlighted that kerosene was subject to a single point levy at 5½ per cent, while the tins were charged separately. The court emphasized that since there was no composite price for both kerosene and tins, the turnover for tins should not be taxed at the same rate as kerosene. The court cited a previous case to support this position, stating that different items transferred under a composite contract must be charged at different rates. Therefore, the court allowed the appeal, set aside the Board of Revenue's order, and reinstated the decision of the appellate authority. No costs were awarded in this matter.

In conclusion, the court ruled that the disputed turnover was assessable, considering the contract to sell kerosene in sealed tins as an agreement to sell the tins as well. The court also determined that the turnover for tins should not be taxed at the same rate as kerosene due to separate pricing, ultimately setting aside the Board of Revenue's decision and restoring the appellate authority's ruling.