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TMI Blog1992 (11) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 5(1) of the Act, apart from the levy of tax on the sale of chemical fertilizer mixtures; for this, a notification issued under section 8-A of the Act, prior to the introduction of entry 48-A(ii) was relied. This question is now concluded against the Revenue, by the decision of a Full Bench of this Court, in the very petitioner's case; the opinion of the Full Bench is reported in Shaw Wallace Co. Ltd. v. State of Karnataka [1993] 91 STC 37 supra.; ILR 1992 Kar 1494. After the receipt of the opinion of the Full Bench, the revision petition of the assessee was allowed, under similar circumstances. 3.. Following the above decision, these petitions are also allowed to that extent; the assessing authority, therefore, is directed to redo the assessment by applying the above decision regarding the chemical fertilizer mixture and its components. The learned Government Advocate sought a liberty to apply section 6 of the Act in respect of the components of the chemical fertilizer mixture; we are of the view that it is too late for the Revenue to raise this plea and hence reject the prayer without expressing any opinion about its legality. 4.. The petitioner is also a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the circumstances and in such a situation, it will not be part of the sale price of the liquor of the manufacturer. It is in these circumstances, the State Legislature enhanced the rate of sales tax on the sale of liquor, when consideration for the sale did not include the excise duty payable on the liquor. The decision of the Supreme Court was in McDowell Company Ltd. v. Commercial Tax Officer [1977] 39 STC 151; AIR 1977 SC 1459 (the first McDowell case). To get over the ratio of this decision, the State of Andhra Pradesh amended the Distillery Rules making it obligatory in effect, for payment of excise duty by the manufacturer; this amendment was made in August, 1981. According to the petitioner, the State of Karnataka, found it expedient to differentiate between the liquor on which the excise duty was paid and the liquor on which excise duty was not paid by the time of its sale by the manufacturer, by amending entry 38, so that revenue yield from the levy of sales tax may not suffer by the means adopted in the matter of paying the excise duty. The learned counsel for the assessee further contended that the phrase "bottled liquor" added to the entry, was to treat the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the tin was separately shown in the bills, was immaterial. Rule 6(cc)(i) of the Tamil Nadu Rules and section 2(v) of the Madras Act are similar to the respective Karnataka provisions with which we are concerned. The Full Bench agreed with the view expressed by this Court in Premier Breweries Ltd. v. State of Karnataka [1984] 56 STC 14. The Full Bench also agreed with the decision of a Bench of the Madras High Court in Natarajan and Sons v. State of Tamil Nadu [1977] 39 STC 443. The Full Bench observed, at page 206: "What is sold is 'tin of oil'. Not oil alone. Therefore the goods sold is 'tin of oil'. It may be called a composite goods. The bargain of sale is for this 'tin of oil'. Hence it follows that the price of the goods, i.e., tin of oil is taxable and no question of price of the oil content alone being taxable arises. Thus while calculating the total turnover, the total turnover price of the tins of oil sold has to be calculated. Thus it appears to us, when it is stated in K. Natarajan and Sons v. State of Tamil Nadu [1977] 39 STC 443 (Mad.) that the packing charges subsequent to the sale alone is deductible, it is correct. For instance when small tins of oil are sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x net. It has been found in the instant case, that the charges for packing materials and cost of labour were pre-sale expenditure; if so, certainly they are not eligible for deduction. Petitioner's contention is accordingly rejected. Re. "Bottled liquor" and entry 38: 6.1. The entry in the Second Schedule is in the inclusive language. For the purpose of levying different rates of tax on excise paid liquor and liquor on which excise duty was not paid, reference to "bottled liquor" specifically, was unnecessary. Excise duty is on the manufacture of liquor and the term "all liquor" would normally include "bottled liquor" also. Therefore, the purpose of specifically including "bottled liquor" in the entry shall have to be found elsewhere. 6.2. In State of Karnataka v. Shaw Wallace and Co. Ltd. [1981] 48 STC 169 (Kar) the present petitioner's case for an earlier period (before the amendment of entry 38 with effect from March 15, 1980) was involved. The assessee had shown the price of liquors and that of bottles separately, in view of the separate agreements in regard to the sale of bottles and crates; assessee claimed that bottles were to be taxed under entry 109. The Bench held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which had contrasted entry 38 with other entries regarding "canned and bottled foods", etc. 6.3. Mr. Kumar contended that this amendment would not affect the case of an assessee who sold the liquor and the bottles separately under two distinct contracts; the entry as amended was to cover cases where liquor is sold with bottles, under a single contract and in the latter case, the sale consideration is not liable to be bifurcated into two-one towards the liquor and the other towards the bottle. However, when there are two specific agreements, as in the instant case, entry 38 cannot be attracted to levy tax on the sale price of the bottle. 6.4. The learned counsel relied on the decision of the Supreme Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379. In the year 1983, section 6-C was inserted in the Andhra Pradesh General Sales Tax Act, stating that when goods packed in any materials are sold or purchased the materials in which the goods are so packed shall be deemed to have been sold or purchased along with the goods and the tax shall be leviable on such sale or purchase of the materials at the rate of tax as applicable to the sale, or, as the case may be, purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit may be pursuant to a transaction where there is no sale of the container and its return is contemplated, and in the event of its not being returned the security is liable to forfeiture. Alternatively, it may be a case where the container is sold and the deposit represents the consideration for the sale, and in the event of the container being returned to the dealer the deposit is returned by way of consideration for the resale. In every case, the assessing authority is obliged to ascertain the true nature and character of the transaction upon a consideration of all the facts and circumstances pertaining to the transaction." At page 386, the decision of this Court in Shaw Wallace case [1981] 48 STC 169 was referred. The approach to the question was to be with reference to several factors; it was held at page 387: "Whether a transaction for sale of packing material is an independent transaction will depend upon several factors, some of them being: 1.. The packing material is a commodity having its own identity and is separately classified in the Schedule; 2.. There is no change, chemical or physical, in the packing either at the time of packing or at the time of using t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the petitioner, the five factors enumerated by the Supreme Court in Raj Sheel case [1989] 74 STC 379, would still govern the field while examining the question; as the bottle has its own identity and retains its identity throughout and is capable of being reused after the liquor is consumed, first three factors are in favour of the petitioner. The fifth factor, also, is in favour of the petitioner, because, here, consideration for the bottle is not even merged with the consideration for the liquor. The fourth factor, could be held in favour of the petitioner, because, in Raj Sheel's case [1989] 74 STC 379, the Supreme Court had not found the said factor against the petitioner, even though the subjectmatter included beer and the bottle in which beer was sold. The fact that under excise law, liquor is compelled to be sold in bottles is irrelevant to the factsituation, as held by this Court in Shaw Wallace case [1981] 48 STC 169, as well as by the Supreme Court in Raj Sheel's case [1989] 74 STC 379. It is only in a case where there are no two independent sales (of bottle and liquor), entry 38 would be attracted, because, in such a case, the seller cannot plead, that the said sale sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the context of considering the reasonableness of the provision, the observations referred to above, were made. The idea was to emphasise that, if the Legislature acts to treat the container in the same manner as the content, there is nothing arbitrary or discriminatory in it. The above observation cannot be read in isolation, so as to convey a meaning which would run counter to the observations of the Supreme Court in Raj Sheel case [1989] 74 STC 379. The Supreme Court has recognised the fact, that in reality, a packing material may have its own identity; therefore individual transactions are to be closely scrutinised with reference to several factors, of which five were enumerated. The reason for upholding section 5(3-D) is also found in paras 25 and 26 where, it was observed: "The principle behind section 5(3-D) seems to us to be that a buyer bargains for the goods and pays the price in its entirety inclusive of the value of the packing material, whenever the goods are sold in a packed condition (or housed in a container); the consideration for the sale essentially, is the consideration for the goods, though, the price (i.e., the consideration) may have as a component of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.. In Commissioner of Sales Tax v. Rai Bharat Das Bros. [1988] 71 STC 277, the Supreme Court was considering the transactions under which silica sand had to be packed in gunny bags under the terms of contract; therefore, the consideration for sale included the packing charges. This decision is relevant on the question of packing charges and rule 6(4)(ff), which, we have already considered. 12.. Jamana Flour Oil Mill (P) Ltd. v. State of Bihar [1987] 65 STC 462 is a decision of the Supreme Court on the scope of the taxability of the packing material; it was held that turnover of gunny bags was assessable. 13.. In the case before us, taxability is not the issue, but the rate of tax leviable is the real issue, and this depends upon the construction of entry 38 read with entry 109. 14.. Ramnagar Cane Sugar Co. Ltd. v. Commercial Taxes Officer [1987] 64 STC 96 is a decision rendered by the Rajasthan High Court. Value of tins was separately charged in the sale bills, while selling the ghee in tins; assessee contended that tax on the turnover of tins should be assessed at the rate applicable to tins. The High Court rejected this contention, relying on section 5(1)(v) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate sales". 17.. There can be no doubt that it is permissible to have two distinct agreements of sales, one pertaining to the liquor and the other pertaining to the bottles. How far and to what extent such agreements could be accepted as evidencing bona fide transactions, is essentially a question of fact. The fact that liquor is sold in a bottle and it is not practical nor legal to sell liquor in any other mode by itself is not conclusive to find out the real nature of the transaction. In Raj Sheel's case [1989] 74 STC 379, the Supreme Court held that this depends upon several factors; out of several factors, only five were enumerated. In fact, it is not possible to envisage exhaustively the several factors that may have to be considered. One of the factors would be to examine whether the transaction is a device to avoid tax. (Vide: McDowell Company Limited v. Commercial Tax Officer [1985] 59 STC 277 at 286; AIR 1986 SC 649 at 655). In the case of liquor having a brand name or a trade mark, the embossment of the said brand name or trade mark on the bottle would indicate the integrality of the bottle with the liquor contained in it; the transaction of sale, will be the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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