2008 (4) TMI 699 - HC - VAT and Sales Tax

Liability to pay any tax on the bottling charges - Held that - This court is unable to determine the price of the bottle separately. As already noted that further enquiry has not been permitted by the apex court and the finding is to be recorded only on the basis of material on record. Therefore until and unless the price of the bottle could be determined separately no tax liability could be fastened on the dealer by taking the bottling charges fixed by the Excise Department to be the price of the bottle. Thus, the finding recorded by the appellate authority and the Tribunal cannot be disturbed in this revision. Appeal dismissed.

Summary

Issues Involved:
1. Whether the Tribunal was legally justified in excluding bottling charges from taxable turnover.
2. Whether the Tribunal was legally justified in accepting the accounts of the assessee without considering incriminating evidence.

Issue-Wise Detailed Analysis:

1. Exclusion of Bottling Charges from Taxable Turnover:
The primary issue in this case revolves around whether the bottling charges should be included in the taxable turnover. The dealer, involved in the manufacturing and sale of country liquor (an exempted commodity), was assessed for tax on the price of the bottles used for packaging liquor. The assessing authority treated the bottling charges as the price of the bottles and levied tax accordingly. The appellate authority and the Tribunal, however, held that the demand for tax on the price of the bottle did not amount to a separate sale and was merely due to business compulsions. They concluded that there was no separate contract for the sale of packing material, thus no tax could be charged on the price of the bottles.

The High Court initially allowed the revision, stating that tax was eligible on the bottle charges. However, the apex court remitted the matter back to the High Court for reconsideration, emphasizing the need to determine if there was an implied contract for the sale of bottles and whether separate charges were levied for the bottles. The apex court highlighted that the distinction between 'bottling charges' and 'price of bottles' was essential and that the tax could only be levied if there was an element of consensus ad idem (meeting of minds) between the buyer and seller regarding the sale of bottles.

Upon reconsideration, the High Court acknowledged that the bottling charges included not only the price of the bottles but also other expenses like labels, seals, and labor. Since the exact price of the bottles could not be determined separately from the bottling charges, the court concluded that tax could not be levied on an assumed or approximate basis. Furthermore, the court noted that the tax on packaging material was introduced only after the relevant assessment year, and thus, the packaging material was not liable to tax for the period in question.

2. Acceptance of Assessee's Accounts Without Considering Incriminating Evidence:
The second issue was whether the Tribunal was justified in accepting the accounts of the assessee without considering the incriminating evidence. The High Court reiterated the apex court's directive to base its findings solely on the existing record. The court found that the appellate authority and the Tribunal had correctly interpreted the available evidence, concluding that the bottling charges could not be isolated as the price of the bottles. The court emphasized that tax is levied on the turnover of goods sold, and since the sale of liquor was exempt, the turnover of its sale, including packaging, was also exempt.

Conclusion:
The High Court, after thorough reconsideration, dismissed the revision, upholding the Tribunal's decision to exclude bottling charges from taxable turnover. The court determined that without a clear, separate price for the bottles, no tax liability could be imposed on the dealer based on the bottling charges. The judgment emphasized the need for precise determination of the price of the bottles and highlighted the legislative changes post the relevant assessment year regarding the taxability of packaging materials. The court also dismissed the revision on the grounds that the Tribunal had rightly accepted the dealer's accounts in the absence of definitive incriminating evidence.