2005 (11) TMI 450 - HC - VAT and Sales Tax

Issues Involved:
1. Applicability of the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 regarding tax-free goods used as packing material.
2. Justification of the Tribunal's decision on the sale of containers and bardana, etc.

Detailed Analysis:

Issue 1: Applicability of the Second Proviso to Section 5(2)(a)(ii)
The core issue was whether the second proviso to section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941, applied to goods purchased tax-free under a certificate of registration and used as packing material for snuff, which is a tax-free item.

Facts and Arguments:
- The assessee, engaged in the manufacture and sale of snuff (a tax-free item), purchased packing materials tax-free under the registration certificate.
- The Sales Tax Officer added the value of these packing materials to the taxable turnover, asserting they were shown for resale but used for packing, invoking the second proviso to section 5(2)(a)(ii).
- The Tribunal ruled that the second proviso did not apply, as these materials were not resold but used for packing snuff.

Legal Provisions:
- Section 5(2)(a)(ii): Defines "taxable turnover" and includes sales to registered dealers of containers or packing materials for goods specified for sale.
- Second Proviso: If goods intended for resale or use as raw materials are used for another purpose, their price is included in the taxable turnover of the purchasing dealer.

Court's Analysis:
- The court noted that containers and packing materials for goods specified for sale are deductible from gross turnover.
- The court agreed with the Tribunal that the second proviso did not apply because the packing materials were not resold but used for packing snuff.
- The court found that the registration certificate under the local Act did not have a specific column for packing materials, leading to their incorrect listing under "for resale."
- The court concluded that the absence of a specific column for packing materials in the registration certificate should not penalize the assessee.

Conclusion:
The court held that the second proviso to section 5(2)(a)(ii) did not come into play, affirming the Tribunal's decision. The Tribunal was right in holding that the second proviso did not apply to the case.

Issue 2: Justification of the Tribunal's Decision on the Sale of Containers and Bardana
The secondary issue was whether the Tribunal was justified in holding that there was a sale of the goods in question, namely containers and bardana.

Facts and Arguments:
- The Tribunal had an alternative finding that even if the goods were for resale, the price charged for snuff included the price of the containers, implying their sale.
- The Tribunal referenced the Allahabad High Court decision in Commissioner of Sales Tax, U.P. v. Vanaspati Trading Company, which supported the view that packing materials could be considered sold with the main product.

Court's Analysis:
- The court noted that this issue was based on an alternative finding by the Tribunal.
- Since the primary finding was that the second proviso did not apply, the court deemed it unnecessary to address this alternative issue.

Conclusion:
The court did not find it necessary to answer the second question, as the primary issue was resolved in favor of the assessee. The Tribunal's alternative finding was rendered moot.

Final Judgment:
The reference was answered accordingly, affirming the Tribunal's decision that the second proviso to section 5(2)(a)(ii) did not apply and the issue of resale of packing materials did not need further consideration.

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