1995 (2) TMI 377 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 15A of the Bombay Sales Tax Act, 1959 regarding the levy of sales tax on packing materials used in the sale of goods.

Detailed Analysis:

Issue 1: Interpretation of Section 15A of the Bombay Sales Tax Act, 1959
The case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, regarding the interpretation of section 15A. The controversy centered around whether sales tax was payable on tins purchased from unregistered dealers, used for packing oil purchased from registered dealers. The Tribunal held that sales of containers would be taxable at the rate applicable to the sales of the contents, irrespective of whether tax was leviable on the sales of the contents. The Court analyzed the purpose of section 15A, which aimed to simplify tax assessment on packing materials. The Court interpreted that the rate of tax applicable to packing materials should be the same as that of the goods themselves, based on the actual rate applicable to the sales of goods by the dealer. The Court highlighted that the legislative intent was clear, and any other interpretation would contradict the express language of the section.

Issue 2: Impact of Amendment to Section 15A
The Court discussed the subsequent amendment to section 15A, which specified that packing materials would be taxed at the rate set out in the relevant Schedule against the goods packed. This change detached the tax rate on packing materials from the rate applicable to the sale of goods by the dealer. The Court emphasized that after the amendment, the rate of tax on packing materials was no longer linked to the tax rate on the goods themselves. Therefore, the tax on packing materials should be determined based on the rate specified in the Schedule against the goods packed, irrespective of the taxability of the goods themselves.

Conclusion:
The Court concluded that the Tribunal erred in holding that sales tax was payable on the tins used for packing oil at the rate specified in Schedule C for sales of oil, especially when no tax was payable on the sales of oil by the assessee in the case. The Court answered the reference in the negative and in favor of the assessee, emphasizing that the tax on packing materials should be determined based on the rate specified in the relevant Schedule against the goods packed.