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TMI Blog1997 (6) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. They collected and remitted tax only at the concessional rate on their turnover of sale of empty bottles to the industrial units. The assessment of Smt. Saramma Joy for the year 1983-84 was originally completed granting the benefit of concessional rate as provided under section 5(7) of the Act accepting form 18 declaration submitted by her. Subsequently, the said assessment was re-opened under section 19 of the Act alleging that the empty bottles are not industrial raw materials or packing materials, but they are only containers as per explanation given under sections 5(5) and 5(6) of the Act. According to the assessing authority empty bottles are nothing but glassware containers taxable at 10 per cent under the First Schedule to the Kerala General Sales Tax Act, 1963 and therefore the concessional rate of tax allowed in the original order of assessment is a mistake apparent on the face of the records. Similarly, for the assessment years 1984-85 to 1987-88 and in the case of M/s. Thomason Bottle for the assessment year 1989-90, the assessing authority took the same view. Notwithstanding the valid objections raised by the petitioners, the assessing authority completed the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e packed. If the goods to be packed are liquid articles then the nature of the packing materials can only be in the forms of containers whereas for carrying solid articles it will be in the form of gunny bags, wooden cases, etc. Because the packing material used is empty bottles which are containers of liquid articles, learned counsel submitted, it will not be taken out of the term packing material used in section 5(7) of the Act. Learned counsel in support of his contention relied on the decision of the Supreme Court in Lt. Governor v. Ganesh Flour Mills Co. Ltd. [1973] 31 STC 354 and the decision of this Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Thomas Varghese [1996] 103 STC 177 and also the decision in Padinjarekkara Agencies Ltd. v. Asst. Commissioner (1996) 2 KLT 641. He has also relied on a decision of the Madhya Pradesh High Court in United Excise v. Commissioner of Sales Tax, M.P., Indore [1971] 28 STC 16. 5.. Learned counsel for the petitioners further pointed out that the Legislature substituted the First Schedule to the Act by the Kerala Finance Act, 1992 published in Kerala Gazette, Extraordinary No. 896, dated July 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in holding that empty bottles are not packing materials. 6.. We have considered the matter. The petitioners are dealers in empty bottles. They purchased empty bottles from various sources and sold them to industrial units for using them as containers of goods manufactured by those industrial units. The petitioners have obtained form 18 declaration as contemplated under section 5(7) of the Act based on which they collected tax only at the rate of 4 per cent from the customers. These facts are not disputed by the assessing authority. The only contention taken by the assessing authority, as already stated, is that empty bottles are containers and they cannot be treated as packing materials . Concessional rate is available under section 5(7) of the Act only in respect of industrial raw materials and packing materials. So the only question to be considered is as to whether empty bottles sold by the petitioners can be treated as packing materials for the purpose of section 5(7) of the Act. Section 5(7) was inserted in the Act by Amendment Act 3 of 1983 with effect from October 14, 1982 and the same was omitted by the Kerala Finance Act, 1987 (Act 18 of 1987) with effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a specific item in any of the Schedules to the Act. It was specifically included as item No. 91 of the First Schedule, which was substituted by the Kerala Finance Act with effect from April 1, 1992. Item 91 of the First Schedule introduced with effect from April 1, 1992 reads as follows: 91. Packing cases and packing materials including cork, cork sheet, gunny bags, shooks, tea chests, waste paper, wooden boxes, wooden shavings, wooden crates, wooden cable, drum or other materials notified by Government in this behalf. Explanation.-Planks, panels and battens when assembled will form tea chest or packing case will come under packing cases for the purpose of this entry. Point of levy and rate of tax are shown as at the point of first sale in the State by a dealer who is liable to tax under section 5 at 5 per cent. Regarding packing materials the Government have issued a Notification S.R.O. No. 375/92 (vide G.O. (P) No. 78/92/TD dated March 31, 1992). The said notification reads as follows: PACKING MATERIALS S.R.O. No. 375/92.-In exercise of the powers conferred by section 10 of the Kerala General Sales Tax Act, 1963 (15 of 1963), and in supersession of the Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose applicable to goods contained or packed, and in determining turnover of the goods, the turnover in respect of the containers or packing materials shall be included therein. (6) Where the sale or purchases of goods contained in any containers or packed in any packing materials is exempt from tax, then, the sale or purchase of such containers or packing materials shall also be exempt from tax. Explanation.-In sub-section (5) and sub-section (6), the word containers includes gunny bags, tins, bottles or any other containers. 9.. Under sub-section (5) of section 5 of the Act, where goods are sold in containers or are packed in packing materials the rate of tax and the point of levy applicable to such containers or packing materials as the case may be shall be the same as those applicable to the goods contained or packed. In determining the turnover of the goods the turnover in respect of the containers or packing materials shall be included. The explanation thereto says that for the purposes of sub-sections (5) and (6) the word container includes gunny bags, tins, bottles or other containers. Before proceeding to consider the question as to whether empty bottles can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... column for resale in the certificate of registration issued to it. The petitioner wanted the words tin sheets and tin plates to be added to the registration certificate under the appropriate heading of materials for packing of goods for sale. In order to get the same included in the registration certificate, the petitioner has shown that the goods sought to be added to the registration certificate come within the category of goods referred to in clause (b), (c) or (d) of sub-section (3) of section 8 of the Central Sales Tax Act, 1956. A contention was taken that tin plate is obviously used for the manufacture of containers and the oil is contained in those tin containers, and therefore the expression materials intended for being used for the packing of goods for sale can only mean those materials in which the goods to be sold are merely wrapped and is in the context to be confined to wrapping of solid goods. In that context, the Delhi High Court referred to the meaning of the words container and packing and observed as follows: The word container as defined generally by the Century Dictionary means one who or that which contains. In one of the American Statutes the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles of sale as such, but as receptacles for storage or transportation of goods contained therein for sale. 14.. The Supreme Court affirmed the view taken by the Delhi High Court. In that, the Supreme Court observed as follows: We are also of the view that packing materials are necessary not only for solid articles but also for those in liquid and semi-liquid form. According to observations on page 22 of Encyclopaedia Britannica, Vol. 17, 1968 Edition, in a society that produces foodstuffs and manufactured articles in one locality and uses them in another, a wrapping or container is necessary during storage, transport and sale. The functions of a package are: (1) to contain in a convenient-sized unit or amount of a product; (2) to protect it in transit; (3) to aid its safe delivery to the consumer; and (4) in some cases to display the product and promote its sale or to act as a dispenser of it. Originally instituted to produce simple containers, the packaging industry has expanded to meet the demands for processed and preserved foods, rather than seasonal crops, and to distribute increased varieties of manufactured items. Packaging reflects developments in other industries, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question as to whether the sale of corks or capsules, the sealing asphalt or wax used, the labels attached to the bottles, etc., as packing material. In that context, it is observed that the main packing material is the bottle which is neither taxable nor is sold, and the cork, the capsule, the sealing wax and the label, etc., are merely attached to the bottle, and are not separately of any use, and in that view of the matter, it was held that no sales tax was chargeable upon the packing material used in the process of bottling . 18.. It is also relevant to note that packing material was not included as a specific item in any of the schedules to the Act till April 1, 1992. For the first time packing material was included as an item-item No. 91 in the First Schedule to the Act by the Finance Act with effect from April 1, 1992. That item which has already been extracted in this judgment is made taxable at the point of first sale in the State by a dealer, who is liable to tax under section 5 at 5 per cent. In this context it is also relevant to note that under section 5(5) of the Act in cases where goods sold are contained in containers or are packed in any packing materials, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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