1981 (6) TMI 112 - HC - VAT and Sales Tax

Summary

Issues:
1. Tax imposition on purchase turnover of packing materials under Kerala General Sales Tax Act.
2. Interpretation of section 5A(1)(c) in relation to despatch of goods in inter-State trade or commerce.

Analysis:
1. The revision petitioner, a dealer in eggs involved in inter-State commerce, challenged the imposition of tax on the purchase turnover of packing materials by the assessing authority under the Kerala General Sales Tax Act. The petitioner argued that the turnover of packing materials should not be taxed under section 5A of the Act. The petitioner contended that under section 5(6) of the Act, if the commodity sold is exempt from tax, the container sold must also be exempt. Additionally, the petitioner argued that section 5A(1)(c) exempts purchases from tax if the goods are despatched to places outside the State as a result of inter-State trade or commerce. However, these arguments were rejected by the Sales Tax Officer, Appellate Assistant Commissioner, and the Appellate Tribunal, leading the petitioner to file a revision petition.

2. Section 5A of the Kerala General Sales Tax Act requires a dealer to pay tax on the taxable turnover of goods purchased if certain conditions are met, one of which is mentioned in section 5A(1)(c) where goods are despatched outside the State as a direct result of a sale in inter-State trade or commerce. The Court analyzed the petitioner's case, where packing materials were purchased to despatch eggs in inter-State trade. The Court emphasized that when parties enter into a sale agreement requiring despatch, the property in the packing materials passes along with the goods sold. Therefore, there is a sale of the packing materials, making section 5A(1)(c) applicable, and no tax liability arises on the packing materials used for despatch in inter-State trade or commerce.

3. The Court clarified that the liability to pay tax on certain purchases, such as coir, was not affected by the judgment as the liability arose from being a purchaser at the last point of purchase in the State, not under section 5A. The judgment allowed the petition, ordering the recomputation of tax liability in accordance with the decision and directing any refund due to the petitioner.

In conclusion, the Court ruled in favor of the revision petitioner, holding that section 5A(1)(c) applied to exempt the petitioner from tax liability on the packing materials used for despatching eggs in inter-State trade or commerce.