1997 (6) TMI 349 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether empty bottles are considered "packing materials" under section 5(7) of the Kerala General Sales Tax Act, 1963.
2. Applicability of concessional tax rates to the sale of empty bottles.
3. Interpretation of statutory provisions and relevant case law.

Issue-wise Detailed Analysis:

1. Whether empty bottles are considered "packing materials" under section 5(7) of the Kerala General Sales Tax Act, 1963:

The core issue is whether empty bottles qualify as "packing materials" to avail the concessional rate of tax under section 5(7) of the Kerala General Sales Tax Act, 1963. The petitioners, dealers in empty bottles, argued that these bottles were sold to industrial units for packing their finished products, thus qualifying as packing materials. The assessing authority, however, contended that empty bottles are merely containers and not packing materials, taxable at 10 percent as per the First Schedule to the Act. The court examined various definitions and interpretations of "packing materials" and "containers," including dictionary meanings and legal precedents. The Supreme Court, in Lt. Governor v. Ganesh Flour Mills Co. Ltd. [1973] 31 STC 354, and other cases, had interpreted containers such as bottles as packing materials. The court concluded that empty bottles used for packing liquid articles are indeed packing materials under section 5(7).

2. Applicability of concessional tax rates to the sale of empty bottles:

The petitioners had obtained form 18 declarations from purchasing dealers, as required under section 5(7), and collected tax at the concessional rate of 4 percent. The court noted that the statutory provisions regarding concessional tax rates for the relevant assessment years (1983-84 to 1989-90) were similar. The court found that the sale turnover of empty bottles would qualify for the concessional rate of tax if they are treated as packing materials, provided other conditions of section 5(7) are met. Since there was no dispute regarding compliance with these conditions, the court held that the petitioners were entitled to the concessional rate of tax.

3. Interpretation of statutory provisions and relevant case law:

The court analyzed the statutory provisions of section 5(7) and section 5(3) of the Act, as well as relevant case law, including decisions of the Supreme Court and the Kerala High Court. The court referred to the decision in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Thomas Varghese [1996] 103 STC 177, where empty bottles were treated as packing materials. The court also considered the legislative intent and subsequent amendments to the Act, including the inclusion of packing materials as a specific item in the First Schedule from April 1, 1992. The notification S.R.O. No. 375/92, which classified bottles as packing materials, further supported the petitioners' contention. Based on these interpretations and precedents, the court concluded that empty bottles are packing materials and eligible for the concessional tax rate.

Conclusion:

The court set aside the orders of the Sales Tax Appellate Tribunal and the lower authorities, directing the assessing authority to pass fresh orders allowing the concessional rate under section 5(7) of the Act. The tax revision cases were disposed of with no order as to costs.