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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 ..... lers. 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 to gunnies and polythene jerrycans for the various assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer as relatable to the disallowance of the claim for non-production of E1 forms for the said assessment year. He, however, granted the relief, as respects the sale of gunny bags to the tune of Rs. 14,052 and assessed the sales turnover thereto only to the tune of Rs. 21,783 at 10 per cent relatable to the said assessment year. Thus, he partly allowed the appeal as above and dismissed it in other respects. 9.. The assessee-dealers agitated the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the inclusion of the gunny bags in the turnover of the assesseedealers in a sum of Rs. 35,835 to the assessing officer for verification of the records and give relief therefor. The said appeal was thus disposed of by the Tribunal. 15.. Aggrieved by the orders so passed by the Tribunal, the present actionsTax Case (Revision) Nos. 917 to 920, 1010, 1011 and 1563 of 1985 had been resorted to by the Revenue. 16.. From the pith and submission of Mr. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted, but not the gunny bags in which it is packed and sold, if we exempt the gunny bags without a special exemption to that effect, then gunny bags in which rice and other articles are packed, and drums and tins in which oil is packed, etc., will also claim exemption, and it is admitted that they have not been exempted and that they cannot be exempted because they will be included in the definition of turnover under the rules. (ii) Consequently, the exemption 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Standards in force at the time and shall also ensure that the quality of sugar contained in the bag corre sponds to the quality of sugar marked thereon until it is sold and delivered by him. (b) Clause 3 of the Sugar (Price Determination for 1974-75 Production) Order, 1974 [for short S (PDP) Order] dealing with the price of sugar produced in 1974-75 season reads as below: 3. Price of sugar produced in 1974-75 season.-The Central Government hereby determines the prices 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween them and the purchasers for the sale of gunnies. They did not, however, produce the agreement or contract containing terms, as respects gunny bags utilised in appropriating and packing sugar for the purpose of sale. The assessing officer simply overruled the objections, estimated the value of gunny bags, perhaps, at the market rate prevailing then and included the value of gunny bags in the turnover and assessed the dealers at the appropriate rate then in existence. The order 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 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty the packing materials were not separated from the cigarettes, but that could not possibly preclude the sales tax authorities from taxing the packing materials if they were the subject-matter of the agreements to sell. (b)(i) In Burhwal Sugar Mills Company Ltd. v. Sales Tax Officer [1969] 23 STC 241 (All.), the assessee-company was engaged in the manufacture and sale of sugar, the turnover of which was exempt from sales tax. The assessee, however, was assessed to sales tax on the 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: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also transferred to the purchaser. But before holding that there was an implied sale of containers, one had to exclude the possibility that the containers were used by the dealer as a convenient and cheap mode of transporting the goods to the purchaser without charging any price for them. Moreover the burden of proof that there was an implied sale of packing material or container was on the department and the assessee was not required to prove the negative. Having regard to the facts and circumstances 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 4 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bihar Sales Tax Act, 1959. (b) The following question was referred to the High Court for its opinion, by the Commercial Taxes Tribunal of Bihar: Whether, in the facts and circumstances of the case, the direction of the Tribunal to ascertain the price of the containers (gunny bags) of wheat products sold for an all-inclusive price under the provisions of the Roller Mills Wheat Products (Price Control) Order, 1964, for taxing the same at a higher rate of 4 per cent is legally valid? (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.................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As pointed out by this Court in the Hindustan Sugar Mills case [1979] 43 STC 13 and in Commissioner of Sales Tax v. Rai Bharat Das Bros. [1988] 71 STC 277 (SC), packing charges form part of sale price because the expression any sum charged for anything done by the dealer in respect of the goods used in the definition in section 2(h) of the Central Sales Tax Act, 1956, squarely covers such charges, as packing is an integral element of the transaction of sale and packing charges are an 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not a wise business proposition not to charge anything for the specialised type of gunny required to be utilised statutorily for packing, which are not of insignificant value. This apart, packing charges form part of the sale price, because of the expression any sum charged for anything done by the dealer in respect of the goods used in the definition of section 2(h) of Central Sales Tax Act as had been stated by the Supreme Court in the case of Ramco Cement Distribution Co. Pvt. Ltd. [1993] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent included the cost of the tins. But, while selling the biscuits in tins in the city of Bombay and its suburbs, the respondent collected the price of biscuits alone, and in regard to the tins it took a refundable deposit (20 per cent more than their value), with the stipulation that if the tins were returned within three months in good condition, the deposit would be returned. The deposits were credited in the deposit account returnable tins . The tins so supplied were shown as its stock 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list and the invoice nor the practice of the respondent in accepting tins returned after the expiry of the period of three months created an obligation upon the customer to return the tins. It was left to his choice. If he found it more advantageous to return the tins and get back the deposit amount, he could do so. On the other hand, if he found it more advantageous to retain the tins and forego the deposit, it was equally open to him not to return them. The transaction was neither a bailment nor a pledge . 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Rules, 1957, is severely circumscribed by the language of its proviso which is more or less fashioned after section 5 of the Limitation Act, 1963. Under the requirement laid down by the rule-making authority, the burden is on the assessee to make out sufficient cause by explaining why he did not file, and what prevented him from filing, the C forms before the completion of the assessment. Under the statutory provision, the prescribed authority can allow further time for sufficient cause, without bothering to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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