2021 (5) TMI 696 - HC - VAT and Sales Tax

Classification of goods - rate of tax - gunny bags sold along with rice to Food Corporation of India - taxable @4% or @8%? - HELD THAT - The Tribunal was right in applying the law explained by the Supreme Court in RAJ SHEEL AND OTHERS VERSUS STATE OF ANDHRA PRADESH AND OTHERS (AND OTHER APPEALS, WRIT PETITIONS AND SPECIAL LEAVE PETITIONS) 1989 (5) TMI 292 - SUPREME COURT , and concluding that the question had to be answered against the assessee and in favour of the Department. Factually, since it has been shown by the Department, on perusing the books of account of the Petitioner that the new gunny bags were separately sold and paid for by the FCI, the question framed by this Court is required to be answered in favour of the Department by holding that in the facts and circumstances of the case, the gunny bags sold along with the rice to the FCI is exigible to tax @ 8% as held by the Tribunal. Revision petition dismissed.

Summary

Issues:
Interpretation of sales tax rate on gunny bags sold along with rice to Food Corporation of India.

Analysis:
The case involved a revision petition regarding the sales tax rate applicable to gunny bags sold along with rice to the Food Corporation of India (FCI). The petitioner, a registered dealer under the Orissa Sales Tax Act, owned a rice mill and was required to sell a specified percentage of rice to FCI as levy rice along with the gunny bags. The Sales Tax Officer (STO) initially concluded that the sales tax on the gunny bags should be at the rate applicable to 'jute products' based on a Supreme Court decision. However, the Assistant Commissioner of Sales Tax (ACST) later held that the tax rate on the jute bags could not be separate from that applicable to the rice itself.

The Department appealed this decision before the Tribunal, which ruled in their favor, applying the law explained by the Supreme Court in a previous case. The petitioner's counsel relied on various legal precedents to argue that containers and packing materials should be taxed at the same rate as the goods themselves. The Court noted that in the present case, the gunny bags were separately sold and paid for by FCI, leading to the conclusion that the bags were exigible to tax at 8%, as held by the Tribunal. Therefore, the revision petition was dismissed, upholding the Tribunal's decision.

Additionally, due to the ongoing COVID-19 situation, the parties were allowed to use a printout of the order available on the High Court's website as a certified copy, subject to attestation by the concerned advocate, following the prescribed procedure.