1990 (8) TMI 381 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether bottle and crate deposits collected by the respondent-dealer formed part of the sale turnover exigible to tax under the Karnataka Sales Tax Act, 1957.
2. Whether charges for packing materials, charged separately, form part of the sale price in view of the provisions of rule 6(4)(ff) of the Karnataka Sales Tax Rules, 1957.
3. The validity of the issuance of show cause notices suo motu by the Deputy Commissioner of Commercial Taxes.

Issue-wise Analysis:

1. Bottle and Crate Deposits:
The primary issue was whether bottle and crate deposits collected by the respondent-dealer formed part of the sale turnover and were exigible to tax under the Karnataka Sales Tax Act, 1957. The learned single Judge, relying on the judgment in Dyer Meakin Breweries v. Commissioner of Sales Tax, U.P. [1972] 29 STC 69 (All.), held that deposits made by the purchaser as bottle deposits or crate deposits can hardly be treated as forming part of the sale price. The court observed that the deposits were intended to ensure the return of the bottles and crates and did not constitute a sale of such items. The appellate authority and the Karnataka Appellate Tribunal supported this view, noting that there was no sale of the bottles and crates when deposits were collected, and thus the deposits did not form part of the taxable turnover. The High Court agreed with this interpretation, emphasizing that the deposits were not part of the sale price and were not exigible to tax.

2. Charges for Packing Materials:
The second issue was whether charges for packing materials, charged separately, formed part of the sale price under rule 6(4)(ff) of the Karnataka Sales Tax Rules, 1957. The learned single Judge held that the law permitted deduction on packing material if it did not form part of the sale price and was charged separately. The Deputy Commissioner's proposal to disallow the deduction on packing materials was deemed vague and illegal. The High Court upheld this view, stating that the respondent charged separately for packing materials, which did not form part of the sale price. Therefore, the deduction allowed by the Assistant Commissioner was justified and the Deputy Commissioner's action to disallow it was unwarranted.

3. Validity of Show Cause Notices:
The validity of the issuance of show cause notices suo motu by the Deputy Commissioner was also challenged. The learned single Judge found that the Deputy Commissioner issued the notices without proper justification and without addressing the relevant rules or reasoning adopted by the Assistant Commissioner. The High Court agreed, noting that the Deputy Commissioner could not have proposed to disallow the deductions when rule 6(4)(ff) was clear, and the Assistant Commissioner had already allowed the deductions based on the facts. The court concluded that the show cause notices were issued without proper grounds and quashed them.

Conclusion:
The High Court dismissed the appeals and the revision petition, affirming the learned single Judge's decision that the bottle and crate deposits did not form part of the sale price and were not exigible to tax. It also upheld the deduction for packing materials charged separately, as allowed by the Assistant Commissioner. The show cause notices issued by the Deputy Commissioner were deemed unwarranted and were quashed. The court concluded that there was no justification for the Deputy Commissioner's actions and upheld the deductions allowed by the Assistant Commissioner.