1981 (1) TMI 240 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of entry No. 1 of the Second Schedule of the Bengal Finance (Sales Tax) Act, 1941 regarding exemption for cereals and pulses sold in sealed containers.

Analysis:
The judgment pertains to a reference under section 21(1) of the Bengal Finance (Sales Tax) Act, 1941, read with section 45(1) of the Delhi Sales Tax Act, 1975. The issue at hand revolves around whether stapled polythene bags, in which pop corn was sold by a dealer, qualify as sealed containers as per entry No. 1 of the Second Schedule appended to the Bengal Finance (Sales Tax) Act, 1941. The respondent claimed exemption from tax under this entry, contending that the stapled polythene bags were not sealed containers. The dispute arose during the assessment year 1968-69, involving the respondent, a registered dealer selling pop corn in such bags. The Additional Commissioner did not accept the respondent's contention, leading to a revision petition before the Financial Commissioner.

The Financial Commissioner opined that sealing is typically done to make food-stuff airtight for prolonging product life and facilitating transportation. However, in this case, the stapling of polythene bags was loose, rendering them non-airtight and unfit for long-term preservation. The Financial Commissioner held that the stapled bags did not qualify as sealed containers, thereby denying the exemption claimed by the respondent. The Commissioner of Sales Tax challenged this decision, citing relevant case law to support the argument that access to the contents should be impossible without breaking the fastening for a container to be considered sealed.

The court referenced two key cases to support its decision. In Commissioner of Sales Tax v. G.G. Industries, the Supreme Court held that a container is sealed if access to the contents is impossible without breaking the fastening. Similarly, in Commissioner of Sales Tax v. National Chikki Mart, the Bombay High Court deemed heat-sealed polythene bags containing chikki as sealed containers since accessing the contents required breaking the bag. In the present case, the court observed a sample of loosely stapled polythene bags and acknowledged that while a person could break the staples to access the pop corn easily, it was still possible to extract the contents without breaking the fastening.

Ultimately, the court held that the stapled polythene bags in question did not meet the criteria of sealed containers, as access to the pop corn could be achieved without breaking the staples. Citing the precedent set by the Supreme Court, the judgment favored the respondent-dealer, granting them the entitlement to exemption and costs. The reference was answered in the affirmative in favor of the respondent.