1995 (8) TMI 288 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sale of wheat products (atta, maida, sooji) in one kilogram polythene bags constitutes sales in "sealed containers" under the Pondicherry General Sales Tax Act, 1967.
2. Whether the assessee is entitled to an exemption from tax on the sale of these products.

Detailed Analysis:

1. Definition of "Sealed Containers" and Applicability:
The primary issue is whether the one kilogram polythene bags used for selling atta, maida, and sooji by the assessee qualify as "sealed containers" under the Pondicherry General Sales Tax Act, 1967. The Act states that flour, including atta, maida, and sooji, is exempt from tax unless sold in sealed containers.

The Tribunal had earlier ruled that these polythene bags do not constitute sealed containers, thereby granting the assessee an exemption from tax. However, the department contended this decision, arguing that the polythene bags were sealed by a mechanical process, making them sealed containers as per the Act.

2. Legal Interpretations and Judicial Precedents:
The court examined various legal precedents to interpret the term "sealed containers":

- Bombay High Court in Commissioner of Sales Tax v. National Chikki Mart (1977) 39 STC 447: The court held that containers are considered sealed if access to the contents is impossible without breaking the fastening. This applied even if the container was a polythene bag.

- Karnataka High Court in Nanjundeshwara Mart v. State of Karnataka (1992) 84 STC 534: The court ruled that goods sold in polythene bags stitched at the openings were considered to be in sealed containers since access to the contents required breaking the fastening.

- Supreme Court's Interpretation: The Supreme Court clarified that a sealed container is one that is so closed that access to the contents is impossible without breaking the fastening. This definition does not require the traditional affixation of a seal but includes any secure closure that must be broken to access the contents.

3. Arguments by the Parties:
- Government Pleader: Argued that the polythene bags used by the assessee were sealed containers because they were tightly sealed by a mechanical process, making it impossible to access the contents without tampering with the bag. The plea was supported by various Supreme Court and High Court decisions.

- Assessee's Counsel: Contended that polythene bags are not containers as contemplated under the Act. They argued that the products were merely packed, not sealed in containers, and hence should be exempt from tax. They differentiated between packing and sealing, asserting that the polythene bags did not meet the criteria for sealed containers.

4. Court's Conclusion:
The court concluded that the polythene bags used by the assessee were indeed sealed containers. It emphasized that the bags were sealed by a mechanical device, making access to the contents impossible without breaking the fastening. The court referenced multiple judicial precedents to support this interpretation.

5. Final Judgment:
The court set aside the Tribunal's order, ruling that the sale of atta, maida, and sooji in one kilogram polythene bags by the assessee during the assessment years 1988-89 to 1991-92 constituted sales in sealed containers. Consequently, the sales were liable to be taxed at the rate of 3%, and the assessee was not entitled to the claimed tax exemption.

Outcome:
Petitions allowed, and the Tribunal's order was reversed. The court ruled in favor of the department, confirming the tax liability on the sales of wheat products in sealed polythene bags. No order as to costs was made.