1982 (9) TMI 218 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of chillies under the Punjab General Sales Tax Act and the Central Sales Tax Act.
2. Taxability of bardana (gunny bags) under the Punjab General Sales Tax Act.

Detailed Analysis:

1. Taxability of Chillies:
The primary issue is whether the sales of chillies are subject to tax under the Punjab General Sales Tax Act and the Central Sales Tax Act. Both parties agreed that this matter is covered by the Supreme Court's decision in *Mangulu Sahu Ramahari Sahu v. Sales Tax Officer, Ganjam* [1973] 32 STC 494 (SC) and a Division Bench decision of this Court in *Tarsem Lal Sham Lal v. Assessing Authority, Jallundur* [1977] 39 STC 47. These precedents establish that only dry chillies can be taxed. The assessment order dated 25th March 1974, by the Assessing Authority, Patiala, did not specify whether the chillies were dry or green, necessitating a reassessment.

2. Taxability of Bardana (Gunny Bags):
The second issue concerns whether the sale of bardana (gunny bags) is taxable. Both parties concurred that this issue is covered by the judgment in *Saddana Sugar Co., Ludhiana v. Assessing Authority, Ludhiana* [1976 RLR 109]. This case established that if the petitioner-company supplied controlled sugar under statutory orders to various retail dealers, the transaction could not be regarded as a "sale" within the meaning of the Punjab General Sales Tax Act, 1948. The principle derived from this case indicates that the sale of bardana along with controlled sugar does not constitute a taxable sale under the Act.

Order and Directions:
Both counsel requested that the impugned order dated 25th March 1974, be quashed and the case remanded to the Assessing Authority for a fresh assessment in light of the aforementioned legal principles. The court ordered accordingly, directing the Assessing Authority to reassess the sales, keeping in view the principles of law laid down in the cited authorities. No costs were awarded.

Appendix - Judgment in Saddana Sugar Co. v. Assessing Authority, Ludhiana:

Facts and Background:
The petitioner, a partnership firm named Saddana Sugar Company, was a registered dealer under the Punjab General Sales Tax Act, 1948, dealing in vegetable ghee and sugar. For the assessment period from 8th May 1971 to 31st March 1972, the firm filed returns showing total sales of Rs. 43,89,682.57. The Assessing Authority allowed certain deductions for vegetable ghee and imposed a 6% sales tax on Rs. 34,233, the price of bardana in which sugar was sold. The petitioner challenged this order.

Legal Analysis:
The court examined whether the petitioner-firm sold the packing material (bardana) for consideration, either expressly or by implication. The petitioner argued that sugar was a tax-free commodity and no separate price was charged for the bardana. The respondent contended that the cost of packing material was included in the price of sugar, implying a sale of bardana.

The court referred to several precedents, including *Government of Andhra Pradesh v. Guntur Tobaccos Ltd.* [1965] 16 STC 240 (SC) and *Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd.* [1967] 19 STC 84 (SC), to determine whether there was an express or implied agreement for the sale of containers. The court emphasized that the cost of packing material alone does not establish an implied contract for its sale.

Conclusion:
The court concluded that the authorities had not adequately considered whether there was an express or implied contract for the sale of bardana. Additionally, the court noted that if the petitioner supplied controlled sugar under statutory orders, the transaction could not be regarded as a "sale" under the Act. The case was remanded to the Assessing Authority for a fresh decision, considering these observations. The petitions were allowed with no order as to costs.