1990 (11) TMI 370 - HC - VAT and Sales Tax

Summary

Issues:
1. Taxability of bardana used for packing cloth sold by the assessee.
2. Interpretation of the legal position regarding the sale of packing material.
3. Application of the fifth proviso to sub-section (1) of section 5.
4. Existence of an agreement to sell packing material.
5. Implications of implied sale of packing material.

Analysis:

Issue 1: The revision petition was directed against the order of the Board of Revenue regarding the taxability of bardana used for packing cloth sold by the assessee. The Division Bench set aside the order of the single Bench and remanded the case to the assessing authority for re-examination. The assessing authority had imposed tax on the sale of bardana, which was challenged by the assessee in appeal. The appellate authority set aside the tax levy, stating that no sale price was charged for the bardana passed along with the cloth. The Board of Revenue found that no tax was liable on the bardana passed along with the cloth without any sale price, and the same conclusion applied to the sale of jeera contained in bardana. The Division Bench remanded the matter for re-examination, emphasizing that tax would not be leviable on the implied sale of bardana used for tax-free or tax-paid goods sold by the assessee.

Issue 2: The legal position on the sale of packing material was examined based on Supreme Court decisions, which highlighted that the agreement to sell packing materials is a factual determination dependent on the circumstances of each case. The Division Bench clarified that tax would only be leviable if there was an express or implied agreement to sell the packing material, and in the absence of such an agreement, no tax would be applicable.

Issue 3: Reference was made to the fifth proviso to sub-section (1) of section 5 during the consideration of the case. However, it was noted that the proviso was not in force during the relevant assessment period, rendering its consideration incorrect. The assessment period in question predated the insertion of the proviso, making its application erroneous.

Issue 4: The crux of the matter revolved around the existence of an agreement to sell the packing material. The assessing authority had estimated the price of bardana separately based on the assessee's accounts. The single Bench found that no sale price was charged for the bardana, and the Division Bench concurred that in the absence of a sale of packing material, no tax would be leviable.

Issue 5: The concept of implied sale of packing material was examined, with the Division Bench cautioning against loosely interpreting the term "implied sale." It was emphasized that the absence of an agreement to sell the packing material precluded the imposition of sales tax. The findings of the single Bench regarding the non-leviability of tax on bardana used for packing cloth were upheld, and the revision petitions were dismissed accordingly.