1991 (3) TMI 362 - HC - VAT and Sales Tax

Issues Involved:
1. Whether fumigation covers, tarpaulins, nylon ropes, and patramats are covered by the scope of section 8(3) of the Central Sales Tax Act, 1956.
2. Whether these items can be specified in the certificate of registration for being purchased against declarations in form 'C' at concessional rates under section 8(1) of the Central Sales Tax Act, 1956.

Issue-wise Detailed Analysis:

1. Applicability of Section 8(3) of the Central Sales Tax Act, 1956:

The primary issue revolves around whether fumigation covers, tarpaulins, nylon ropes, and patramats fall under the scope of section 8(3) of the Central Sales Tax Act, 1956. The applicant, a statutory corporation under the Food Corporation Act, 1964, argued that these items are essential for the storage and protection of foodgrains, which they purchase and resell. The Sales Tax Officer initially rejected the inclusion of these items in the registration certificate, stating that they were not used "in the manufacture or processing of goods for sale" nor "for packing of goods for sale." This decision was upheld by the Assistant Commissioner of Sales Tax and later by the Gujarat Sales Tax Tribunal.

The Tribunal concluded that the items in question were used merely for the preservation and storage of foodgrains, not for packing them for sale. The Tribunal differentiated between materials used for preservation and those used for packing goods intended for sale. The Tribunal's interpretation was that the items did not meet the criteria outlined in section 8(3)(c) of the Central Sales Tax Act, which specifies that goods must be intended for resale or for use in the manufacture or processing of goods for sale, or as packing materials for goods for sale.

2. Specification in the Certificate of Registration:

The applicant sought to amend its certificate of registration to include the disputed items, arguing that they should be considered as packing materials under section 8(3)(c). The Tribunal, however, held that fumigation covers, tarpaulins, nylon ropes, and patramats were not used for packing goods for sale but for preserving and protecting foodgrains during storage. The Tribunal's decision was based on the specific uses of these items, which were admitted by the applicant. Fumigation covers were used to control infestation, tarpaulins and nylon ropes to protect foodgrains from weather conditions, and patramats to keep foodgrains off the ground to avoid moisture.

The Tribunal's interpretation was that the term "packing material" should not be broadly construed to include items used solely for preservation and protection. The Tribunal referenced the Supreme Court's decision in Ganesh Flour Mills Co. Ltd., where the Court held that materials intended for packing goods for sale, even after undergoing a process to make them suitable for such use, could be included in the registration certificate. However, the Tribunal distinguished this case by emphasizing that the items in question were not used for packing goods for sale but for storage and preservation.

The High Court upheld the Tribunal's decision, agreeing that the items were not intended for packing goods for sale as required by section 8(3)(c). The Court noted that the legislative intent was to restrict the meaning of packing materials to those used directly for packing goods for sale, not for preservation or storage. The Court referenced the Supreme Court's decision in Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, which distinguished between items intended for use in manufacturing or processing and those that merely facilitate business operations.

Conclusion:

The High Court affirmed the Tribunal's decision, holding that fumigation covers, tarpaulins, nylon ropes, and patramats were not covered by section 8(3) of the Central Sales Tax Act, 1956, and could not be specified in the certificate of registration for concessional tax rates. The Court emphasized that these items were used for preservation and protection, not for packing goods for sale. The reference was answered in the affirmative, against the applicant and in favor of the State, with no order as to costs.

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