1995 (2) TMI 371 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of purchase tax under section 13 of the Bombay Sales Tax Act, 1959.
2. Interpretation of contracts regarding the sale of empty bottles and gunny bags.
3. Implied contract of sale of packing materials (gunny bags).

Issue-wise Detailed Analysis:

1. Levy of Purchase Tax under Section 13 of the Bombay Sales Tax Act, 1959:
The main issue revolves around whether purchase tax under section 13 of the Bombay Sales Tax Act, 1959, is applicable on the purchase of gunny bags used for packing empty bottles sold by the assessee. The Sales Tax Officer initially did not levy purchase tax on these transactions but later reassessed and levied the tax, which was upheld by the Tribunal.

2. Interpretation of Contracts Regarding the Sale of Empty Bottles and Gunny Bags:
The contracts between the assessee and the breweries explicitly pertained to the sale of empty bottles. There was no express contract for the sale of gunny bags used for packing the bottles. The Tribunal found that the gunny bags were used merely as a convenient and cheap vehicle of transport and not as part of the sale contract. The Tribunal's conclusion was that the cost of gunny bags was insignificant compared to the value of the bottles and did not constitute a sale.

3. Implied Contract of Sale of Packing Materials (Gunny Bags):
The assessee argued for an implied sale of gunny bags, claiming they were resold along with the bottles. However, the Tribunal, relying on various decisions, including the Supreme Court's judgment in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh, concluded that there was no implied sale of gunny bags. The Supreme Court's criteria for an implied sale include the necessity of an agreement to transfer title to goods, supported by monetary consideration, and the actual passing of property in goods. The Tribunal found that these criteria were not met in the present case.

Analysis Based on Supreme Court Precedent:
The Supreme Court in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh highlighted that an implied sale of packing materials could only be inferred when the packing materials were of significant value and formed part of the bargain. The Court emphasized that the intention to sell or buy packing materials must be evident from the circumstances. In the present case, the Tribunal found no such intention, as the gunny bags were merely a means of transport and not part of the sale agreement.

Specific Findings:
- The contracts between the assessee and the breweries were solely for the sale of empty bottles.
- No separate price was charged for the gunny bags, and they were used only for transportation.
- Certificates from breweries confirmed that the contracts were for bottles, not gunny bags.
- The Tribunal concluded that the purchasers did not intend to buy the gunny bags, and thus no implied sale could be inferred.

Conclusion:
The Tribunal was justified in upholding the levy of purchase tax under section 13 of the Bombay Sales Tax Act, 1959, as there was no express or implied sale of gunny bags. The question referred to the High Court was answered in the affirmative, in favor of the Revenue, confirming the Tribunal's decision.

Judgment:
The High Court affirmed the Tribunal's decision, stating that no implied sale of gunny bags could be inferred, and thus, the levy of purchase tax under section 13 was justified. The reference was answered in the affirmative, with no order as to costs.