1991 (6) TMI 221 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales promotion expenses at 6% on the price form part of the sale price and fall within the scope of section 62(1)(e) of the Gujarat Sales Tax Act, 1969.
2. Whether the separate agreement for packing materials forms part of the agreement to sell goods in packed condition and is taxable at the rates applicable to the sale of goods.

Issue-wise Detailed Analysis:

Issue 1: Sales Promotion Expenses
The first question addressed by the High Court was whether the Tribunal was correct in holding that the issue of sales promotion expenses at 6% on the price being part of the sale price was beyond the scope of section 62(1)(e) of the Gujarat Sales Tax Act, 1969. The Tribunal concluded that section 62(1)(e) pertains to whether any tax is payable on a particular sale, not whether sales promotion expenses form part of the sale price. The Court affirmed this interpretation, noting that section 62(1)(e) does not cover the determination of whether sales promotion expenses are included in the sale price. Consequently, the Tribunal was justified in confirming the Deputy Commissioner's view that the question was outside the scope of section 62(1)(e). Thus, the first question was answered in the affirmative, in favor of the Revenue and against the assessee.

Issue 2: Taxability of Packing Materials
The second issue concerned whether the separate agreement for packing materials should be considered part of the sale of goods and taxed at the same rate. The assessee argued that there were two separate sales: one for the goods and another for the packing materials. The Tribunal, however, found that the sales of packing materials were integrated with the sale of goods, based on the nature of the transactions and the fact that all sales were made in packed condition. The Tribunal referenced the Supreme Court decision in Raj Sheel v. State of Andhra Pradesh, which emphasized examining the nature and ingredients of the sale to determine whether it is a single integrated sale or separate transactions.

The Tribunal observed that the sales were always in packed condition, and the customers had no option but to purchase the goods in such condition. This integrated nature of the sale was supported by the Tribunal's reference to previous decisions in Deepak Industries v. State of Gujarat and State of Gujarat v. Ashok Oil Mills, where it was held that even if there are technically two transactions, they should be treated as a single integrated sale for tax purposes under similar statutory provisions.

The Tribunal's conclusion that the packing materials were taxable at the rate applicable to the sale of goods was upheld. The High Court noted that even if the decisions in Deepak Industries and Ashok Oil Mills were considered in light of the Supreme Court's decision in Raj Sheel, the finding of fact that there were no separate sales of packing materials remained decisive. Thus, the second question was also answered in the affirmative, in favor of the Revenue and against the assessee.

Conclusion:
Both questions referred to the High Court were answered in the affirmative, supporting the Tribunal's findings and favoring the Revenue. The sales promotion expenses did not fall within the scope of section 62(1)(e) for tax determination, and the sale of packing materials was considered part of an integrated sale of goods, taxable at the same rate.