1998 (5) TMI 394 - AT - VAT and Sales Tax

Issues Involved:
1. Taxability of implied sale of packing material.
2. Validity of the ex parte assessment order dated June 19, 1996.
3. Entitlement to exemption under the Sales Tax Incentive Scheme for Industries, 1987.
4. Jurisdiction of the Assessing Authority (AA) in issuing the notice for escaped assessment.
5. Levy of interest under section 30 of the Rajasthan Sales Tax Act, 1994.

Detailed Analysis:

1. Taxability of Implied Sale of Packing Material:
The primary issue was whether the implied sale of packing material could be taxed when the dealer was exempted from tax under the Sales Tax Incentive Scheme for Industries, 1987. The Tribunal referred to various Supreme Court rulings, including Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh, Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd., and Jamana Flour & Oil Mill (P.) Ltd. v. State of Bihar, which established that the turnover in packing materials is assessable to tax under the CST Act provided an agreement, express or implied, to sell it exists. The Tribunal concluded that the turnover in the packing materials used by the dealer was assessable to tax as there was an implied agreement to sell the goods packed in bags, and this was at the time of or before delivery.

2. Validity of the Ex Parte Assessment Order Dated June 19, 1996:
The dealer contended that the ex parte order violated the principles of natural justice as adequate opportunity for hearing had been denied. The Tribunal noted that the notice had been served, and in the event of non-appearance, the AA was within his rights to frame an ex parte order. However, the Tribunal found that the AA should have considered the dealer's application for reopening the ex parte assessment, which was still pending.

3. Entitlement to Exemption Under the Sales Tax Incentive Scheme for Industries, 1987:
The Tribunal examined whether the exemption granted under the Incentive Scheme to the sale of goods packed could also be availed for the sale of packing material. The Tribunal concluded that the Incentive Scheme did not cover packing material at the relevant time. The amendment made on March 27, 1995, extending benefits to packing material, was not applicable to the period in question. Therefore, the dealer was not entitled to exemption on the turnover of packing material.

4. Jurisdiction of the Assessing Authority (AA) in Issuing the Notice for Escaped Assessment:
The Tribunal held that the AA had jurisdiction to issue the notice for escaped assessment under section 30 of the 1994 Act. The AA's action was justified as it sought to ensure that the benefits availed of were to the extent admissible under the Incentive Scheme. The AA's jurisdiction was not found to be encroaching on the Screening Committee's domain.

5. Levy of Interest Under Section 30 of the Rajasthan Sales Tax Act, 1994:
The Tribunal referred to the Supreme Court's ruling in India Carbon Ltd. v. State of Assam, which clarified that in the absence of a substantive provision in the CST Act for the levy of interest, no interest could be levied. Consequently, the Tribunal set aside the interest amount of Rs. 30,645 levied by the AA.

Conclusion:
The Tribunal modified the impugned assessment order and notice of demand dated June 19, 1996, to set aside the interest amount of Rs. 30,645. The application was partly allowed to this extent and dismissed for the rest. The Tribunal upheld the taxability of the implied sale of packing material and validated the AA's jurisdiction in issuing the notice for escaped assessment. The dealer was not entitled to exemption on the turnover of packing material under the Incentive Scheme for the period in question.

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