1998 (9) TMI 617 - HC - VAT and Sales Tax

Issues Involved:
1. Tax exemption on goods sold in containers.
2. Interpretation of Explanation 2 of Section 2(34) of the Assam General Sales Tax Act, 1993.
3. Applicability of legal fiction to tax containers.
4. Legislative intent and ambiguity in the Act.
5. Comparison with other legal precedents and statutes.
6. Imposition of tax on containers when goods are exempt.

Detailed Analysis:

1. Tax Exemption on Goods Sold in Containers:
The appellant, a wholesale dealer of food articles, claimed that goods sold in containers were exempt from tax under Section 9 of the Assam General Sales Tax Act, 1993. The assessing officer, however, included the price of containers in the sale price and imposed an 8% tax on them, as per Section 8 of the Act. The revisional authority upheld this levy, leading to the writ petition and subsequent appeal.

2. Interpretation of Explanation 2 of Section 2(34) of the Act:
Explanation 2 of Section 2(34) states that if goods are sold in containers or packing materials of small value compared to the goods or if such packing is essential or customary, the value of the containers shall be included in the sale price of the goods, regardless of separate charges. The court emphasized that this legal fiction must be fully realized to achieve the legislative intent.

3. Applicability of Legal Fiction to Tax Containers:
The court reiterated that legal fiction assumes a state of affairs to be real and its consequences must also be considered real. This principle was supported by precedents such as East End Dwellings Co. Ltd. v. Finsburry Borough Council and G. Viswanathan v. Honourable Speaker, Tamil Nadu Legislative Assembly. The court concluded that the legal fiction in Explanation 2 requires the inclusion of container value in the sale price, impacting the taxability of the containers.

4. Legislative Intent and Ambiguity in the Act:
The court examined the legislative intent behind the amendment of the Act, which aimed to tax containers sold with exempted goods. However, the deletion of specific words in the amendment led to ambiguity. The court noted that fiscal liabilities cannot be imposed based on mere legislative intent without clear and unambiguous language in the statute.

5. Comparison with Other Legal Precedents and Statutes:
The court reviewed various precedents, including Premier Breweries v. State of Kerala, which held that when goods are exempt from tax, containers should also be exempt. The court distinguished the Assam Act from the Kerala Act, noting differences in language and legislative clarity. The court also referenced Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd., which was based on a repealed Act with different language, making it inapplicable.

6. Imposition of Tax on Containers When Goods Are Exempt:
The court concluded that if goods are exempt from tax, containers used for selling those goods should also be exempt, provided their value is small compared to the goods or if such packing is essential or customary. The court found that the value of the containers in this case was indeed small compared to the goods sold. Thus, the appeal was allowed, and the impugned judgment was set aside, with no order as to costs.

Conclusion:
The appeal was allowed, and the judgment and order of the learned single judge were set aside. The court held that no tax can be levied on containers if the goods contained within them are exempt from tax, provided the value of the containers is small or if their use is essential or customary.

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