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TMI Blog1997 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-sale expenses, includible in the turnover of the assessee-dealers. 3. The objections, of course, in fact, had been filed by the assessee-dealers stating that there was an agreement only in respect of the sale of polythene jerrycans to their customers and not for the sale of gunny bags. They would also take a stand that sugar, which was packed and sold in gunny bags was exempt from the levy of sales tax. There is no question of any levy of sales tax on the gunnies utilised for packing and sale of sugar. To put it otherwise, the gunnies so utilised are also exempt from the levy of sales tax. Yet another contention that they would take is that the packing materials-gunny bags did not form part of the bargain at all and they were used by the assessee-dealers only as a convenient and cheap mode of transport. Though the assessee-dealers had taken up such a stand as respects the gunny bags, yet, they had not at all whispered or murmured, in the sense of taking any stand as relatable to the use of polythene jerrycans, in the sale of chemicals to customers. 4. Overruling the objections, the Commercial Tax Officer, Central Assessment Circle IV, Madras, determined the turnover relatable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter further by filing appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Madras-104 (for short "the Tribunal") in respect of all the assessment years in Tribunal Appeal Nos. 1401, 1402 and 1898 of 1982 relatable to the assessment years 1973-74, 1974-75 and 1975-76. 10.. Pending those appeals, the Revenue in TMP Nos. 401, 389 and 297 of 1983 prayed for enhancement of the assessment by the inclusion of the deleted turnover relatable to gunnies for the aforesaid assessment years. 11.. T.A. No. 2024 of 1982 is relatable to the assessment year 1976-77. 12.. The assessee-dealers took up a stand before the Tribunal for the first time that there was no sale of polythene jerrycans (jars) for the sale of chemicals in respect of all the assessment years and what was done was that certain deposits were collected for the value of the containers in the process of sales of chemicals and the moment the containers were returned, the value collected for the containers in the process of sales of chemicals was returned. In order to support the said stand, no material, worth the name, had been placed before the Tribunal as respects the assessment years 1973-74, 1974-75 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Elango, learned Government Advocate (Taxes) representing the Revenue and Mr. Sriprakash, learned counsel representing Mr. N. Inbarajan, learned counsel appearing for the assessee-dealers, the points, as below, emerge for consideration: (1) Whether the gunny bags, in which sugar-a controlled commodityis packed and sold is assessable to sales tax, by including it in the turnover of the assessee, when especially sugar is exempt from tax? (2)(a) Whether gunnies for packing sugar, which it is said, do not form part of the bargain at all, were used by the assessee-dealers as a convenient and cheap mode of transport, and therefore, not exigible to tax? (b) Whether a mistake or error, apparent on the face of the record relatable to assessable turnover of gunny bags for the year 1974-75 prejudicially affecting the interests of the assessee required to be rectified or corrected and thereby relief to be given to the assessee-dealers? (3) Whether the remit order of the Tribunal as respects the acceptance of the contention projected for the first time by the assessee-dealers before the Tribunal as to the supply of chemicals either in the polythene jerrycans provided by the purchasers o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption granted in respect of the sale of "salt" cannot be extended to the sale value of the gunnies, though the gunnies have been found used for packing and selling the "salt" as a composite transaction. (b) The same view had been taken by a Division Bench of this Court in A.R. Manickam Chettiar & Sons v. State of Tamil Nadu [1992] 87 STC 134. It is but appropriate to pen down here, the rationale provided by the Division Bench, while dealing with these aspects: "The exemption under the Tamil Nadu General Sales Tax Act, 1959, is in respect of sale of paddy and rice. However, when those commodities are packed in gunny bags, the gunny bags cannot be said to lose their physical or commercial identity and merge as if they were part of the foodgrains themselves. The argument that since paddy and rice were exempt from sales tax and, therefore, no tax can be levied on the cost of the gunny bags in which they were packed is futile. When bags of paddy or rice are sold for a price which, as in the instant case as borne out from the reply of the assessee to the notice includes price of gunny bags, the turnover in respect of gunny bags would be liable to sales tax under the Act. (c) Such a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es specified in columns (2) to (7) of Schedule I hereto annexed, as the prices payable for the Indian Sugar Standard (ISS) grades of sugar mentioned therein packed in 'A' twill new gunny bags and produced in 1974-75 by all vacuum pan sugar factories situated in the areas specified in the corre sponding entry in column (1) of the said Schedule, that is to say, the factories specified in Schedule II hereto annexed, and required to be supplied to the persons, organisations or State Governments specified in the Order made by the Central Government under sub-clause (1) of clause 2 of the Levy Sugar Supply (Control) Order, 1972: Provided that where a sugar factory is situated at a distance exceeding five kilometres from the nearest railway station or an out-agency of the railway or from the godowns outside factory not concerned by rail, the producer may charge an additional one paisa per quintal of sugar per kilometre beyond five kilometres of the distance between the sugar factory and the railway station or out-agency of the railway, in case of despatches by rail or between the sugar factory and such godowns in case of delivery ex-godowns. Explanation.-(a) The prices specified in colu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so passed, as relatable to the assessment years 1973-74 to 1975-76 had, of course, been set aside by the Appellate Assistant Commissioner on the rationale that receptacles, namely, gunny bags utilised for packing sugar was for the purpose of cheap mode of transport, without there being any intention on the part of the assessee-dealers to charge anything extra for such receptacles. The Tribunal also confirmed such findings culminating in a challenge, at the instance of the Revenue, before this Court. 21.. In arriving at a just conclusion on the issues focussed for consideration to this point, better it is, we feel, to refer to certain precedents, emerging from courts of superior jurisdiction-apex and High Courts-in this regard. (a)(i) In Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624 (SC) by a notification issued by the Andhra Pradesh State Government, sales or purchases of tobacco and all its products were exempted from sales tax. The department sought to assess the appellant, a manufacturer of and dealer in cigarettes, on the turnover in respect of packing materials consisting of cardboard and dealwood. The appellant contended that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimated turnover of gunny bags in which sugar was packed. The assessee filed an application under article 226 of the Constitution and contended that as sugar was exempt from tax, the value of gunny bags in which sugar was packed could not be subjected to sales tax. At the material time sugar was a controlled commodity and its price was fixed by the Government. There was no material on record to show that while fixing the sale price of sugar, the Government took into consideration the value of gunny bags, nor was there any indication as to the extent to which the sale price of sugar was enhanced on that account. (ii) In such a context, the Division Bench of the Allahabad High Court held: (i) that there being no express contract of sale of gunny bags between the assessee and its customers, the only question before the sales tax authorities was as to whether there was an implied contract of sale and such a question could not be decided on fictions and surmises. The burden lay upon the Sales Tax Officer to prove that the turnover was liable to tax and he could ask the assessee to produce relevant material. If the assessee did not produce the same, he could draw adverse inferences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, it could not be said that there was any implied sale of gunny bags and, therefore, the sale of gunny bags was not liable to sales tax. (d)(i) In Jamana Flour & Oil Mill (P) Ltd. v. State of Bihar [1987] 65 STC 462 (SC) for the assessment year 1964-65, the assessee, a registered dealer, under the Bihar Sales Tax Act returned a gross turnover of Rs. 53,39,981, which was accepted by the assessing officer. He determined the taxable turnover at Rs. 53,79,962 representing sale of wheat products taxable at 2 per cent. He found that the dealer had sold gunny bags in which wheat products had been packed and determined its turnover at Rs. 1,37,150 and assessed the same at 4½ per cent. (ii) The first appellate authority on assessee's appeal held that the learned assessing officer was not justified in adding back the price of container in the gross turnover. What he should have done is to tax a portion of the taxable turnover at a different rate or in other words out of the turnover taxable under the Bihar Sales Tax Act, the price of bags calculated at Re. 0.70 paise per hundred kilogram should have been deducted and taxed at 4½ per cent. The remaining was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid?" (c)(i) Reliance was placed on the provisions of clause 3 of the Roller Mills Wheat Products (Price Control) Order, 1964. That clause provides: "3. Maximum ex-mill prices of wheat products.-No owner or other person in charge of a roller mill shall sell, or offer for sale, ex-mill any of the wheat products specified in column 1 of Schedule II to this Order............ (b) In the State of Maharashtra (excluding Greater Bombay) and in any other State [not being a State specified in sub-clause (a)], to which this order applies, at a price exceeding the price specified against the clause 3 thereof. Explanation.-The prices referred to in this clause are: (i) exclusive of.................. (ii) for net weight (inclusive of the cost of the bag), but where wheat products are sold in cloth bags in quantities of 40 kgs., net, 20 kgs. net and 10 kgs. net, a sum of 70 np., 37 np. and 19 np. respectively, towards the cost of the cloth bag may be charged in addition to the said prices." (ii) The Supreme Court, in such context, held that as the Roller Mills Wheat Products (Price Control) Order contemplated a net weight which meant that the weight of the bag was included in the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... integral part of the sale price. Once this is so, it follows that these charges and the excise duty thereon cannot be excluded from the turnover for purposes of the Central Sales Tax Act." (g) In an unreported* decision of this Court in the case of State of Tamil Nadu v. Subramania Chettiar rendered in Tax Case (Revision) No. 885 of 1984, a Division Bench of this Court, in its order dated January 22, 1997 following the decision of the Supreme Court in Ramco Cement Distribution Co. Pvt. Ltd. [1993] 88 STC 151, held that receptacles or gunny bags in which groundnut kernels and rice were sold are liable to be included in the sales turnover of the assessee for assessment of appropriate rate of tax. 22.. We shall now endeavour to give a legal fitment, in the light of the guidelines given by superior Courts of jurisdiction in various decisions, as referred to above, to the factual matrix of the case on hand. We may recapitulate here that there is a statutory obligation on the part of the assessee-dealers to pack the sugar-a controlled commodity-in the manner indicated as per the salient provisions adumbrated under S(P&M) Order and S(PDP) Order. This aspect of the matter was not at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93] 88 STC 151, squarely covers such charges, as packing is an integral element of transaction of sale and packing charges are an integral part of sale price. 24.. In this view of the matter, this point is answered accordingly. 25.. Point No. 2(b): A perusal of the pre-assessment notice issued relatable to the assessment year 1974-75 reveals that 3,60,700 gunny bags were utilised in packing and sale of sugar in inter-State and the value of gunny bags had been estimated at Rs. 3 per gunny bag, amounting to Rs. 10,82,100. Unfortunately, at the time of making final assessment order, the value of sugar with gunny bags sold in inter-State is put as Rs. 16,23,150 taxable at 10 per cent without making any reference to the total gunny bags utilised in such inter-State sales. As such, the assessee-dealers were wrongly assessed relatable to the turnover of gunnies to the tune of Rs. 5,41,050 (Rs. 16,23,150 minus Rs. 10,82,100). All canons of fairness, justice, equity and good conscience demand relief to be given to the assessee-dealers in respect of the turnover so wrongly assessed at 10 per cent. This point is answered accordingly. 26.. Point No. 3: There is no pale of controversy that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its account books, but debited to the customer's account. When the tins were returned, a reverse entry was made in both the accounts. No sales tax was charged on the deposits for the tins. A separate price list was issued by the respondent for the city of Bombay and its suburbs, which carried an endorsement that the deposit would be charged at the time of supply, but would be refunded on return of the tins in good condition within three months from the date of supply. In the invoices issued by the respondent there was a column showing the number of tins supplied to the purchaser and the amount of deposit received from him. At the top of the invoice there was an endorsement that the company's liability to refund the value of returnable tins extended only up to three months from the date of the invoice. Notwithstanding the endorsements on the price list and the invoice the respondent was, in fact, receiving tins returned even after the expiry of three months and refunding the deposit amount. For the year 1967-68, the respondent received a total deposit of Rs. 12,97,229.05, out of which it refunded Rs. 11,29,202 on receiving back the tins. At the end of the accounting year there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge'. It was in nature nearer to sale of goods 'on approval' or 'on sale or return', basis, a situation contemplated by section 24 of the Sale of Goods Act, 1930. It was a composite transaction. It was, to start with, an entrustment which could result in a sale in case of non return of the tins. If the tin was returned the transaction was one of entrustment. But if it was not returned within three months, it became a sale in accordance with the transaction. The fact that the respondent was receiving back the tins even after expiry of three months and returning the deposit, was more by way of grace rather than as a matter of obligation. Once there was no obligation to return the tins, the amount treated as trading receipt could not be anything but sale price and was liable to sales tax under the Bombay Sales Tax Act, 1959." 28.. This decision is applicable on all fours to the facts of the instant cases. In this view of the matter, the remit order made by the Tribunal, as relatable to the sales turnover of the cans or containers, in which chemicals were packed and sold, cannot at all be stated to be sustainable in law and the same deserves to be set aside, by restoring the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see whether anything or any occurrence prevented the assessee from filing the 'C' forms within time even in the position in which he actually found himself. The rule, however, casts the burden on the assessee and makes the position more difficult for him to invoke the power successfully. It also narrows down the discretion of the authority concerned. A rule cannot prevail against the statute by being repugnant to the statute. A study of the structure of the proviso to section 8(4) shows how Parliament's peculiar preference has worked in this regard. While Parliament was content to leave to the rule-making authority, namely, the Central Government, the task of prescribing a rule laying down the time-limit for furnishing 'C' forms, the power to allow further time, however, was not delegated to the rules, but deliberately enacted into the very text of the proviso to section 8(4). In this statutory format, with Parliament clearly expressing its mind on the subject, the Central Government must be held to possess no authority whatever to make any rules as respects the power to allow further time, let alone prescribe the conditions subject to which any such power could be exercised. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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