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TMI Blog1979 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the said question, it is necessary to decide whether under the relevant provisions of the Bengal Finance (Sales Tax) Act, 1941 (as extended to the Union Territory of Delhi), a dealer who manufactures goods for sale is entitled to deduct from his gross turnover the amount spent by him for containers or other materials for the packing of goods manufactured for the purposes of sale. It is not in dispute that the respondent-dealer's registration certificate since the year 1962-63 included the packing materials mentioned above (thereby permitting the dealer to exclude from the gross turnover the amounts spent on the packing material) and it was after thirteen years that the said benefit was taken away by the impugned order. 3.. For proper appreciation of the problem, it is necessary to understand the importance of packaging in the modern commercial life. Encyclopaedia Britannica, 1969 (edition), succinctly summarised them as follows: "Importance of marketing: In advanced economies where most of the population is engaged in specialised production of goods of which they themselves can use only a small part, marketing is a pre-activity...(thus) specialisation, industrialisation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of such dealer, as being intended for resale by him, and for such use by him as raw materials in the manufacture in the Union Territory of Delhi of goods (other than goods declared tax-free under section 6) for sale inside Delhi, etc., and for containers or other materials for the packing of goods of the class or classes so specified." Rule 4 prescribes the particulars to be given in the application for certificate of registration. The rule requires that it should be stated by a dealer as to whether the goods are for use as raw material for the manufacture of goods for sale or for resale or for containers or other packing materials. Although the principal section, namely, section 5(2)(a)(ii), entitles an assessee for deductions on account of the containers or packing materials and also provides for the said information in an application for registration, surprisingly, the actual form of a certificate of registration, which is a prescribed form, does not provide for the containers or packing materials. The said prescribed form, namely, S.T. III, in column 3(a), requires the authorities to specify the goods for purposes of manufacture and under column 3(b), which is on the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since no consumer or a reseller would accept crockery unless it is securely packed in appropriate boxes and other packing materials, the sale of crockery inevitably and necessarily implies sale of packing material as well. Since the manufacturer does not himself manufacture the packing materials and buys them from other dealers, the sale of the packing materials, it is contended, such as the boxes along with the crockery, is a resale within the meaning of section 5(2)(a)(ii). There is a great deal of substance in the contention of the dealer. So far as the present sales tax legislation is concerned, the crucial word in the phrase "raw materials for manufacture for sale" is sale under section 5(2)(a)(ii). Both the words "raw material" as well as "resale" used in the said section should be understood in the context of and for effectuating the idea of "manufacturing for sale". 8.. The learned counsel for the revenue strongly urged before us that the crucial words in section 5(2)(a)(ii) are "goods of the class or classes so specified". According to him, no deduction is permissible for containers or packing materials unless they are used for the specified goods, namely, the raw ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement of specification of goods in the registration certificate is to be treated as redundant or, in any case, as merely directory (and not mandatory), as is contended by the revenue, it destroys the argument of the revenue earlier made, that a dealer is not entitled to deduction for packing material unless goods as raw material or goods for resale are so specified in the registration certificate. Assuming that this argument is correct, it is equally applicable to the finished goods manufactured for sale. This argument is in the nature of a last ditch defence in order to avoid reinstatement of the items of exemption in the registration certificate. 11.. The law as regards exemption of packing material from sales tax is laid down by the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 (S.C.). , Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh[1966] 17 S.T.C. 624 (S.C.). and Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd.[1967] 19 S.T.C. 84 (S.C.). The Supreme Court has held that, for claiming exemption from sales tax, it must be proved that there is a separate and independent agreement, express or implied, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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