2021 (8) TMI 1012 - HC - VAT and Sales Tax

Levy of sales tax - sale of oil exempted under the provisions of the Orissa Sales Tax Act - applicability of fourth proviso to Section 5(1) of the Orissa Sales Tax Act - sale of containers of exempted goods u/s6 of the said Act - rate of Tax in respect of container when sold with exempted goods u/s 6 of the O.S.T. Act - HELD THAT - The Court finds that the AO erroneously observed that the dealer should have shown the sale price of such container separately and should have also paid the tax. However, the fact remains that the tins in which the exempted oil were sold was not shown separately. The AO himself noted that the sale price of said containers was not to be found in the invoices. Consequently, there was no question of presuming the sale of the tin containers and requiring the Petitioner to be taxed thereon. The tin containers are exempt from payment of sales tax in terms of the 4th proviso to Section 5 (1) of the OST Act - the 4th proviso to Section 5 (1) of the OST Act is applicable to the sale of tin in which exempt oil was sold and the containers were not separately sold - nil rate of tax would apply to the sale of tin containers. Revision petition allowed.

Summary

Issues:
1. Interpretation of the provisions of the Orissa Sales Tax Act regarding the taxation of containers sold along with tax-exempted goods.
2. Applicability of the fourth proviso to Section 5(1) of the Orissa Sales Tax Act to the sale of containers of exempted goods.
3. Determination of the tax rate for containers sold with exempted goods under Section 6 of the Orissa Sales Tax Act.

Analysis:
1. The case involved a dispute regarding the taxation of tin containers sold along with tax-exempted oil by the Petitioner. The Assessing Officer (AO) held the Petitioner liable to pay tax on the sale price of tin containers as they were not separately disclosed and taxed. The Assessee's appeal was allowed by the Additional Commissioner of Sales Tax (ACST) citing relevant case laws supporting the non-taxability of containers sold with tax-exempted goods.

2. The Tribunal, however, reversed the ACST's decision, stating that the containers were not an integral part of the sale of oil, and hence, the tax was applicable. The High Court analyzed the provisions of the Orissa Sales Tax Act, specifically the fourth proviso to Section 5(1), which states that containers of taxable goods sold along with such goods but not charged separately shall be taxed at the same rate as the goods contained therein.

3. The Court found that since the oil sold was tax-exempt, the containers should also be exempt from sales tax as per the provisions of the Act. The AO's observation that the containers should have been separately disclosed for taxation was deemed erroneous as the sale price of containers was not evident from the invoices. The Court relied on Supreme Court decisions supporting the Assessee's case and held that the containers were exempt from sales tax, answering all framed questions in favor of the Petitioner.

4. Consequently, the High Court set aside the Tribunal's order, allowing the revision petition filed by the Petitioner. The judgment clarified the application of the fourth proviso to Section 5(1) of the Orissa Sales Tax Act in cases involving the sale of containers with tax-exempted goods, providing relief to the Petitioner and ruling in their favor against the Department.