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1991 (3) TMI 358 - HC - VAT and Sales Tax
Issues:
1. Whether the cost of gunny bags used as packing material for exempted goods is liable to sales tax. 2. Whether the exemption granted to specific commodities extends to the packing materials. Analysis: The appellant, a dealer in paddy, rice, and manure, was assessed by the Deputy Commercial Tax Officer for selling gunny bags along with the contents, resulting in a higher taxable turnover. The Appellate Assistant Commissioner initially provided relief to the assessee based on a rule exempting charges for packing materials not separately specified. However, the Board of Revenue, on revision, held that the gunny bags' value was not deductible, as revealed in the assessee's reply stating the sale value included the cost of the bags. The Board emphasized that if an exemption is granted to a commodity, it should not extend to packing materials subject to tax, overturning the appellate authority's decision. The appellant argued that since the cost of gunny bags was not separately shown and paddy and rice were exempted goods, the bags should also be exempt from tax. However, the Court held that when commodities are packed in gunny bags, the bags retain their identity and are not exempt merely because the contents are tax-free. Citing precedent, the Court highlighted a case where the Supreme Court ruled that the value of containers used for tax-exempt goods could be assessed for sales tax if included in the sale price, regardless of separate pricing for the containers. Additionally, a Full Bench decision supported this stance, emphasizing that the nature of the transaction determines tax liability for packing materials. In the present case, the Court noted that the assessee admitted including the gunny bags' price in the sale value of rice or paddy, indicating an agreement to sell both the goods and packing material together. As the transaction involved selling the commodities along with the packing material, the Court upheld the Board of Revenue's decision to include the gunny bags' cost in the taxable turnover. Consequently, the Court found no grounds to interfere with the Board's order, leading to the dismissal of the appeal without costs.
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