1978 (8) TMI 197 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the value of packing materials and gunny bags is substantial and if there is an implied agreement for their sale.
2. Validity and justification of the Appellate Tribunal's conclusion that packing materials and gunny bags were sold inter-State.
3. Validity and justification of the exclusion of turnover of Rs. 2,07,780.53 from the taxable turnover of the assessee.

Detailed Analysis:

Issue 1: Substantial Value and Implied Agreement for Sale
The Tribunal concluded that the value of the containers involved in the transactions was substantial, leading to an implied agreement for the sale of these gunny bags. This conclusion was based on the decisions in Srinivasa Pai v. State of Kerala and Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Balakrishna Pillai, which support the view that substantial value of containers implies an agreement for their sale. However, the High Court noted that the Tribunal's assertion of the substantial value was not consistent with the reliance placed by the State Representative on Tushar Trading Co. v. State of Kerala, which argued that mere separate invoicing does not imply a contract of sale for packing materials. The Tribunal's reliance on an alleged admission by the revenue about the substantial value of containers was questioned and deemed inconceivable.

Issue 2: Sale of Packing Materials and Gunny Bags Inter-State
The Tribunal's finding that the packing materials and gunny bags purchased by the assessee were sold inter-State was challenged. The High Court examined various precedents, including Hyderabad Deccan Cigarette Factory v. State of A.P., which emphasized that whether packing materials are sold depends on the intention of the parties and the nature of the transaction. The Supreme Court in this case highlighted that the assessment of whether there was an agreement to sell packing materials should be based on relevant facts and circumstances, not on assumptions or surmises. The High Court found that the Tribunal did not fully consider all relevant facets and circumstances, such as the commercial identity and value proportion of the containers, in its decision.

Issue 3: Exclusion of Turnover from Taxable Turnover
The Tribunal directed the exclusion of Rs. 2,07,780.53 from the taxable turnover of the assessee, based on the view that the packing materials and gunny bags were sold inter-State and thus eligible for exemption under clause (c) of section 5A of the Kerala General Sales Tax Act. The High Court, however, found that the Tribunal's reasoning was flawed and not fully justified by law. The Tribunal's decision was based on an alleged admission about the substantial value of containers, which was later disowned by the Government Pleader. The High Court emphasized that the Tribunal must reassess the case considering all relevant legal principles and facts.

Conclusion:
The High Court set aside the orders of the Sales Tax Appellate Tribunal in all the cases and remanded them back to the Tribunal for a decision in accordance with the law and the detailed observations made by the Court. The High Court stressed the importance of considering whether there was an express or implied agreement for the sale of packing materials, the commercial identity of the containers, and the intention of the parties involved in the transactions. The Tribunal was instructed to re-evaluate the cases with a comprehensive analysis of these factors.