1984 (1) TMI 299 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Scope of Section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act regarding the consumption of empty bottles.
2. Scope of Section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act regarding the disposal of dealwood boxes.

Issue-wise Detailed Analysis:

1. Scope of Section 7-A(1)(a) regarding the consumption of empty bottles:

The assessee, a pharmaceutical company, challenged the Tribunal's view that the use of empty bottles for packing medicines amounts to consumption under Section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act. The Tribunal had held that the process of manufacture is complete only when drugs are bottled, thus considering the bottles as consumed in the manufacturing process. However, the court disagreed, stating that the bottles do not lose their identity or get destroyed during the process. The court referred to the Supreme Court's interpretation of "consumed" in State of Karnataka v. Raghurama Shetty and State of Tamil Nadu v. Subbaraj and Co., which emphasized that consumption implies the goods are devoured or exhausted, losing their identity in the process. The court concluded that the bottles, which retain their identity even after being filled, cannot be considered consumed in the manufacture of drugs or syrups. Thus, the purchase turnover of empty bottles cannot be taxed under Section 7-A(1)(a).

2. Scope of Section 7-A(1)(b) regarding the disposal of dealwood boxes:

The Tribunal had also upheld the tax on the purchase of dealwood boxes under Section 7-A(1)(b), arguing that these boxes were disposed of in a manner other than by sale. The court, however, found that the dealwood boxes, used for packing and dispatching medicines, should be considered sold along with the drugs and syrups. The court noted that the value of the packing materials is typically included in the price of the goods sold. Citing the Kerala High Court's decision in Moncompu Egg Store v. State of Kerala, the court reasoned that the property in the packing materials passes to the purchaser along with the goods, implying a sale of the packing materials. Therefore, the purchase of dealwood boxes does not fall under Section 7-A(1)(b) as it constitutes a sale rather than disposal in any other manner.

Conclusion:

The court set aside the Tribunal's order, holding that the purchase turnover of Rs. 30,578.99 for empty bottles and dealwood boxes cannot be taxed under Section 7-A(1) of the Tamil Nadu General Sales Tax Act. The petition was allowed, and there was no order as to costs.