1995 (3) TMI 438 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of the sale turnover of gunny bags used for packing wheat bran under the Central Sales Tax Act.
2. Burden of proof regarding the inclusion of packing material value in the sale price of the goods.
3. Applicability of judicial precedents to the facts of the case.

Issue-wise Detailed Analysis:

1. Taxability of the Sale Turnover of Gunny Bags:
The primary issue revolves around whether the sale turnover of gunny bags used for packing wheat bran is taxable under the Central Sales Tax Act. The department argued that the sale value of the bran and the gunny bags should be deemed separately sold and hence taxable. The Tribunal had previously relied on the decision in Natarajan and Sons v. State of Tamil Nadu [1977] 39 STC 443, which held that when the content is not taxable, the container is also not taxable. However, the High Court disagreed, noting that there was no agreement or evidence to show that the sale value of the bran included the value of the gunny bags. The Court concluded that in the absence of such evidence, the sale turnover of the gunny bags is taxable.

2. Burden of Proof:
The Court emphasized that the burden of proof lies on the department to show that the value for the gunny bags was charged separately. However, it also noted that the assessee failed to provide any bills or agreements to substantiate that the value of the bran included the value of the gunny bags. The Court stated, "In the absence of any materials on record, the department presumed that the sale turnover of bran would include the sale turnover of gunny bags also." The Court concluded that without evidence to the contrary, the presumption stands that the sale turnover of the gunny bags is taxable.

3. Applicability of Judicial Precedents:
The judgment referenced several judicial precedents to support its conclusion. In A.R. Manickam Chettiar & Sons v. State of Tamil Nadu [1992] 87 STC 134, the Court held that the question of whether there is an agreement to sell packing material is a pure question of fact. Similarly, in A. Prakasam Pillai and Sons v. State of Tamil Nadu [1993] 91 STC 95, the Court found that the value of packing materials was not taxable when there was no evidence of an implied sale. The Court also cited the Supreme Court's decision in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624, which stated that the intention to sell packing materials must be evident from the circumstances of the case. The Court concluded that in the present case, the absence of evidence meant that the sale turnover of the gunny bags is taxable.

Conclusion:
The High Court allowed the revisions filed by the department, setting aside the Tribunal's order. The Court restored the assessing officer's decision to levy tax on the sale turnover of the packing materials, namely, the gunny bags, for both assessment years under consideration. The Court emphasized the importance of evidence in determining whether the value of packing materials is included in the sale price of the goods. The judgment underscores the need for clear agreements or bills to substantiate claims regarding the inclusion of packing material value in the sale price. The petitions were allowed with no order as to costs.