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TMI Blog2004 (9) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... Intelligence) v. Nandanam Construction Co.[ 1999 (9) TMI 784 - SUPREME COURT] , which was followed by this Court in Appollo Saline Pharmaceuticals (P) Ltd. v. Deputy Commercial Tax Officer [ 2001 (9) TMI 1101 - MADRAS HIGH COURT] , and keeping in mind the object of section 7-A of the Act, as amended, as observed in State of Tamil Nadu v. M.K. Kandaswami [ 1975 (7) TMI 123 - SUPREME COURT] , to plug the leakage and prevent evasion of tax with respect to purchase of empty bottles purchased from unregistered dealers under the bought note, we reject the contention of Mr. C. Natarjan that the purchase turnover for the purchase of empty bottles from unregistered dealers under the bought note is not attracted for levy of purchase tax u/s 7-A of the Act. Question (i) is answered in affirmative, against the assessee and in favour of the Revenue. (ii) Whether purchase tax is leviable on the purchase turnover of the empty bottles purchased by the petitioner company to the extent of Rs. 24,78,20,465, u/s 7-A of the Act, in spite of the clarifications dated November 9, 1989 and December 27, 2000 issued in favour of the petitioner-company by the Special Commissioner and Commissioner of Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 27, 2000 till the same is withdrawn prospectively by the clarification dated January 28, 2002 and therefore, the impugned levy of purchase tax on the purchase turnover for the purchase of empty bottles from unregistered dealers under section 7-A of the Act is illegal. Question (ii) is answered in negative, in favour of the assessee and against the Revenue. (iii) Whether cash discount on the price offered by the petitioner-company to the TASMAC is taxable in view of explanation 2(iii) to section 2(r) of the Act? - Section 2(r) of the Act defines turnover . As per the said definition, turnover is defined as the aggregate of the sale or purchase price and accordingly, from the gross amount of such price, Here italicised. any cash or other discount on the price of the goods sold is deductible vide Deputy Commissioner of Sales Tax v. Advani Oerlikon[ 1979 (10) TMI 90 - SUPREME COURT] , which was also followed in Deputy Commissioner of Sales Tax, Ernakulam v. Kerala Rubber Allied Products[ 1993 (3) TMI 311 - SC ORDER] . Thus, we are convinced that in view of explanation 2(iii) to section 2(r) of the Act, the cash or other discount on the price of goods sold cannot be included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,510.00 Purchases of bottles Bought note through salesmen permits 2.4. The first respondent/assessing authority, by a notice dated 24,78,20,465.00 Total 33,88,10,209.00 April 30, 1999, proposed to levy purchase tax under section 7-A of the Act on the purchase of empty bottles effected from unregistered dealers under bought note through salesmen permits, viz., on a sum of Rs. 24,78,20,465, at the rate of 16 per cent, with surcharge and additional surcharge; and additional tax that would be levied in the above taxable turnover at the rate of 2.50 per cent, and called for objections from the petitioner. 2.5. In response to the said notice dated April 30, 1999, the petitioner-company submitted their objections on September 27, 1999 to the effect that the purchase of empty bottles for packing beer and IMFL products are not attracted under section 7-A of the Act for levy of purchase tax and in any event, the same is illegal and unjustified in view of the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes dated November 9, 1989, inasmuch as such clarification is binding on the assessing authorities as per section 28-A of the Act. The petitioner also pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional surcharge, as well as additional sales tax, as follows: ".......The assessment already made under the TNGST Act, 1959 for the year 1996-97 vide this office proceedings in TNGST-1380110/ 96-97, dated October 29, 1998 is revised under section 16(1)(a) of the TNGST Act, 1959 and the total and taxable turnover of the dealers for the year 1996-97 under the TNGST Act, 1959 is refixed and assessed to tax as detailed below: 1. Taxable turnover already determined and assessed to tax at the various rate of tax as per order in TNGST-1380110/96-97 dated 29-10-1998 (i) 1-4-1996 to 16-7-1996 Rs. 73,86,65,644 (ii) from 17-7-1996 to 31-3-1997 Rs. 1,75,78,57,210 2. Add purchases of empty bottles from unregistered dealers brought to assessment and assessed to tax at 16% under section 7-A of the TNGST Act, 1959 Rs. 24,78,20,465 3. Add: Exemption allowed already on cash discount allowed to TASMAC is disallowed and brought to assessment and assessed to tax at (i) 25% from 1-4-1996 to 16-7-1996 Rs. 59,66,788 (ii) 30% from 17-7-1996 to 31-3-1997 Rs. 1,68,22,630 4. Taxable turnover redetermined Rs. 276,71,32,787 5. Add exemption allowed already in the assessment order in TNGST. 1380110/96-97 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clarifications dated November 9, 1989 and December 27, 2000.] 2.12. The Tribunal, by order dated June 26, 2002, taking note of the amendment brought in vide the Tamil Nadu Act 78 of 1986 held that the ratio laid down in the decision in Associated Pharmaceutical Industries P. Ltd. v. State of Tamil Nadu [1986] 63 STC 316 (Mad.) is not applicable as the same was rendered prior to the amendment of section 7-A(1)(a) of the Act and held that the purchase turnover for the purchase of empty bottles from the unregistered dealers attracts purchase tax under section 7-A of the Act; and that Here italicised. in view of the clarification dated January 28, 2002, the earlier clarifications dated November 9, 1989 and December 27, 2000 could not be relied upon and thus, refused to interfere with the order of the first respondent dated March 27, 2002. Hence, the petitioner-company has preferred this writ petition for issue of a writ of certiorarified mandamus to call for the records on the file of the third respondent in O.P. No. 476 of 2002 dated June 26, 2002 confirming the orders of the first respondent in T.N.G.S.T. No. 1380110/96-97 dated March 27, 2002 and quash the same, while directing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beer and IMFL products are taxed, the value of the bottles are also taxed. Hence, section 7-A of the Act is not applicable for the purchase of empty bottles from the unregistered dealers under bought note. 3.1.6. Mr. C. Natarajan, inviting our attention to the proceedings of the Appellate Assistant Commissioner (CT), Chennai, with respect to the assessment years 1986-87, 1987-88 and 1988-89, contends that imposition of purchase tax on the purchase of empty bottles is unjustified. 3.1.7. In this regard, Mr. C. Natarajan, places reliance on the decisions in (i) Deputy Commissioner (C.T.), Coimbatore Division, Coimbatore-18 v. Vijaya Trading Company [1980] 46 STC 400 (Mad.); and (ii) Associated Pharmaceutical Industries Private Limited v. State of Tamil Nadu [1986] 63 STC 316 (Mad.), and contends that the purchase turnover of packing materials, in the instant case, the empty bottles, could not be brought to charge under section 7-A of the Act to levy purchase tax. 3.2.1. Secondly, Mr. C. Natarajan, learned Senior Counsel, relying on the decision in Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254 (SC), contends that as per the rules of interpretation, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned assessment year 1996-97, in view of section 28-A of the Act, till the said clarifications dated November 9, 1989 and December 27, 2000 were modified by a subsequent clarification dated January 28, 2002, which, could be given effect to only prospectively, viz., from the date of the clarification, viz., January 28, 2002. In this connection, Mr. C. Natarajan, learned Senior Counsel relies on the following decisions: (i) State Bank of Travancore v. Commissioner of Income-tax [1986] 158 ITR 102 (SC); (ii) Keshavji Ravji and Co. v. Commissioner of Income-tax [1990] 183 ITR 1 (SC); (iii) Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254 (SC); (iv) Paper Products Ltd. v. Commissioner of Central Excise [1999] 112 ELT 765 (SC); (v) UCO Bank v. Commissioner of Income-tax [1999] 237 ITR 889 (SC); (vi) Commissioner of Sales Tax, U.P. v. Indra Industries [2001] 122 STC 100 (SC); (vii) Commissioner of Income-tax v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi); (viii) Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [2002] 126 STC 122 (SC); (ix) Collector of Central Excise, Vadodara v. Dhiren Chemical Industries [2002] 143 ELT 19; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd modified by issuance of the clarification dated January 28, 2002 and the correctness of the clarification dated January 28, 2002 cannot be gone into by this Court, unless the same is challenged by the assessee in appropriate legal proceedings. In this regard, the learned Special Government Pleader places reliance on the decision in Amul Ploycure Industries Ltd. v. Tamil Nadu Taxation Special Tribunal [2004] 134 STC 526 (Mad.). 4.5. Finally, Mr. Ayyasamy, learned Special Government Pleader contends that the cash discount allowed is nothing but a commission availed for early payment by TASMAC to the petitioner and therefore, the same is liable to be taxed. V. CONSIDERATION AND FINDINGS: 5. We have given careful consideration to the submissions of both sides. 6.. From the above rival contentions made on behalf of the assessee and the Revenue, the following questions arise for our consideration: "(i) Whether the purchase turnover of empty bottles purchased by the petitioner-company, who are engaged in the business of manufacturing beer and IMFL products, from unregistered dealers for bottling beer and IMFL manufactured by them, through the bought note to the extent of Rs. 24,78,20,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han one lakh of rupees. (2) Notwithstanding anything contained in sub-section (1), the provisions of section 7 shall apply to a dealer referred to in subsection (1) who purchases goods (the sale of which is liable to tax under sub-section (1) of section 3) and whose total turnover for a year is not less than one lakh of rupees but not more than two lakhs of rupees and such a dealer may, at his option, instead of paying the tax in accordance with the provisions of sub-section (1), pay tax at the rates mentioned in sub-section (1) of section 7. (3) Every dealer liable to pay purchase tax under sub-section (1), shall, for the purposes of this Act, be deemed to be a registered dealer." After amendment: "Section 7-A. Levy of purchase tax.-(1) Every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods, the sale or purchase of which is liable to tax under this Act in circumstances in which no tax is payable under sections 3, 4, or 5, as the case may be, either (a) consumes or uses such goods in the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods'. Accordingly, when folded clips were purchased from unregistered persons and used in the manufacture of office files, it could not be said that these folded clips were consumed in the manufacture of office files. Consequently, the purchase turnover of these folded clips does not attract tax under section 7-A of the Act." 7.4.3. In Associated Pharmaceutical Industries Private Limited v. State of Tamil Nadu [1986] 63 STC 316 (Mad.), whereunder the assessee purchased and used bottles for the manufacture and sale of medicine, drugs or syrups, it was held that though without bottling the drugs and syrups manufactured could not be sold, that could not be a reason for holding that the process of manufacture of drugs and syrups was not complete unless they were bottled or put in suitable containers and hence it could not be said that the bottles have been used up in the process of manufacture and consequently, the purchase turnover of empty bottles could not be brought to charge under section 7-A(1)(a) of the Act. 7.4.4. But, the above decisions, viz., (i) Deputy Commissioner (C.T.), Coimbatore v. Vijaya Trading Co. [1980] 46 STC 400 (Mad.); (ii) State of Tamil Nadu v. Associated Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Co. [1999] 115 STC 427, interpreting section 6-A(ii)(a) of the Andhra Pradesh General Sales Tax Act, which is pari materia to section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act, as rightly pointed out by Mr. T. Ayyasamy, learned Special Government Pleader, observed that the object of section 6-A(ii)(a) of the Andhra Pradesh General Sales Tax Act, 1957, is to levy purchase tax on goods purchased from persons other than registered dealers, either consumed for the purpose of manufacture of goods for sale or consumed otherwise. The intention of the Legislature is to bring to purchase tax in either event of consumption of goods in the manufacture of goods for sale or consumption of goods in any other manner. Once the goods are utilised in the construction of buildings, the goods cease to exist or cease to be available in that form for sale or purchase so as to attract tax, and held that the assessee, who is engaged in building of flats and houses for which purpose they bought materials which had not suffered any sales tax such as sand, bricks and granite from persons other than registered dealers, were liable to purchase tax under section 6-A(ii)(a) of the Andhra Pradesh Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in order to make those goods marketable, it must necessarily be held that the bottles used by the petitioner were bottles used in or for manufacture of I.V. fluids. Therefore, the Tribunal was right in upholding the levy of tax on the purchase of bottles by the petitioner from the unregistered dealers." 7.4.11. Even though Mr. C. Natarajan, learned Senior Counsel, placing reliance on (i) HMM Limited v. Administrator, Bangalore City Corporation [1990] 77 STC 17 (SC); (1989) 4 SCC 640; and (ii) Mafatlal Industries Ltd. v. Nadiad Nagar Palika [2000] 118 STC 494 (SC); (2000) 3 SCC 1, contends that the usage of bottle for filling beer and IMFL product manufactured by them for selling the same would not, by itself, attract purchase tax, as in the case of HMM Limited v. Administrator, Bangalore City Corporation [1990] 77 STC 17 (SC); (1989) 4 SCC 640, wherein it was held that where Horlicks transported in bulk container was repacked into the unit containers, namely glass bottles, the same would not attract octroi duty, viz., the tax on certain goods entering a town, as there was no use or consumption of the milk food within the octroi limit, we are of the considered opinion that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bottles from unregistered dealers under the bought note is not attracted for levy of purchase tax under section 7-A of the Act. 7.7. Question (i) is answered in affirmative, against the assessee and in favour of the Revenue. 8.1. Question (ii)-Whether purchase tax is leviable on the purchase turnover of the empty bottles purchased by the petitionercompany to the extent of Rs. 24,78,20,465, under section 7-A of the Act, in spite of the clarifications dated November 9, 1989 and December 27, 2000 issued in favour of the petitioner-company by the Special Commissioner and Commissioner of Commercial Taxes, Chennai, in view of section 28-A of the Act? 8.2. Concededly, the Special Commissioner and Commissioner of Commercial Tax, in the clarification dated November 9, 1989 clarified that since the sale value of the bottles is subjected to tax at the time of sale of contents, there is no liability to tax under section 7-A of the Act, and the said clarification had also been reiterated by the Principal Commissioner and Commissioner of Commercial Taxes in the clarification dated December 27, 2000 with respect to the assessment years 1991-92, 1993-94, 1994-95 and 1995-96, clarifying that the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go into the same. But, we are unable to appreciate the said contention of the learned Special Government Pleader for the simple reason that there is no necessity for the assessee to challenge the said clarification dated January 28, 2002, so long as the clarifications dated November 9, 1989 and December 27, 2000, issued in favour of the petitioner-company are, admittedly, binding on the revenue, and the writ petitioner/assessee is not aggrieved by said clarifications dated November 9, 1989 and December 27, 2000. Therefore, no reliance could be made by the Revenue on the decision in Jayam Traders v. Tamil Nadu Taxation Special Tribunal [2004] 136 STC 302 (Mad.) to refuse the benefits of the clarifications dated November 9, 1989 and December 27, 2000 granted by the Revenue to the petitioner. 8.5. By one another attempt, of course placing reliance on the decision in Amul Ploycure Industries Ltd. v. Tamil Nadu Taxation Special Tribunal [2004] 134 STC 526 (Mad.), Mr. T. Ayyasamy, learned Special Government Pleader, strenuously argued that once a clarification is issued on January 28, 2002 clarifying that the purchase of empty bottles from unregistered dealers used for packing of beer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of section 28-A of the Act, which was inserted by the Tamil Nadu Act 60 of 1997, which came into force with effect from November 6, 1997. 8.6.3. In Collector of Central Excise, Patna v. Usha Martin Industries [1998] 111 STC 254, three-Judge of the apex Court, held that when the Central Board of Excise and Customs made all others to understand a notification in a particular manner and when the latter have acted accordingly, it is not open to the Revenue to turn against such persons on a premise contrary to such instructions, and such circulars would be binding on the department. 8.6.4. The apex Court in Paper Products Ltd. v. Commissioner Of Central Excise [1999] 112 ELT 765, while interpreting section 37-B of the Central Excise Act, 1944 which is pari materia to section 28-A of the Tamil Nadu General Sales Tax Act held that circulars issued by the Central Board of Excise and Customs are binding on the departmental authorities and they cannot take a contrary stand, and that the department cannot repudiate a circular issued by the Board on the basis that it was inconsistent with a statutory provision and further held that the assessee can contest the validity or legality of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in operation, the Revenue is bound by it and cannot be allowed to plea that it is not valid nor that it is contrary to the terms of statute. 8.6.10. It is, therefore, clear that even though the clarification dated November 9, 1989 is executive in nature, the same is binding on the authorities till the concessions given to the petitioner under the clarification were withdrawn, which could be done only prospectively, viz., in the instant case, with effect from January 28, 2002, and the revenue could not refuse the benefit of the clarifications dated November 9, 1989 and December 27, 2000 in respect of levy of purchase tax under section 7-A of the Act for the impugned assessment year 1996-97. 8.7. For all these reasons, we are convinced that even though the purchase turnover with respect to the purchase of empty bottles from the unregistered dealers under bought note can be charged for purchase tax under section 7-A of the Act, the petitioner is entitled for the benefit of the clarifications dated November 9, 1989 and December 27, 2000 till the same is withdrawn prospectively by the clarification dated January 28, 2002 and therefore, the impugned levy of purchase tax on the purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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