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TMI Blog2015 (7) TMI 1072X X X X Extracts X X X X X X X X Extracts X X X X ..... sale value of HDPE bags, from tax holding that it was not the first sale within the State, as the HDPE bags had earlier suffered tax in the State of Andhra Pradesh. The said assessment order was revised by the Deputy Commissioner (CT), Hyderabad, on January 7, 1999 levying tax on the self consumption of cement and steel, subjecting them to tax at four per cent. The Deputy Commissioner (CT), however, did not revise the order of the Commercial Tax Officer granting the appellant exemption on the turnover relating to the sale of packing material, i.e., HDPE bags. After the Deputy Commissioner (CT) passed the revision order dated January 7, 1999, a revised assessment order, along with the demand notice, was served on the appellant on January 27, 1999. The Commissioner, Commercial Taxes, found the orders of the Commercial Tax Officer and the Deputy Commissioner (CT) to be incorrect and prejudicial to the interests of the Revenue. On the ground that the Commercial Tax Officer had not correctly analysed the facts, before granting exemption on the turnover of HDPE/gunny bags as secondary sale of packing material, the Commissioner, Commercial Taxes exercised the powers vested in him under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purporting to revise the order of the Deputy Commissioner, the Commissioner of Commercial Taxes had, in effect, revised the order of the Commercial Tax Officer; and this amounted to revision of the assessment order for a second time, which was impermissible. They also put forth their objections on merits disputing the tentative opinion of the Commissioner that sale of HDPE bags by them was not independent of the sale of cement. The appellant also raised alternative contentions that, in any event, the proposal to levy tax at 13.8 per cent. on the value of packing material was not tenable; they had effected sales of cement at different rates during the year (a) at four per cent. against form G; (b) at the regular rate where the customers were not eligible; the relevant break up of the turnover was being compiled from their accounts, and they would file the break-up by the date of personal hearing; in any event, in view of G. O. Ms. No. 374 dated April 25, 1987, the tax paid on packing material was eligible for setoff from the tax payable on cement; and the set-off calculations would be filed by them by the date of personal hearing. The appellant requested the Commissioner to drop th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributor has split the value of Rs. 120 or Rs. 150 into two separate components; for him the splitting of the value into different components is only a formatting of the bill in which he is not interested; in the instant case, there is no splitting in the value of the goods, and it is an integrated sale of cement only; there is no evidence to show that the dealers depicted the price of cement and HDPE bags separately; it must be construed that such depiction, by the manufacturer alone, is merely an attempt to reduce the tax burden; it does not prove that there is a separate sale of cement and packing material; the assessee had failed to prove that the sale of packing material, involved in the sale of cement, is a separate and independent sale; the burden of proving that the sale or purchase, effected by a dealer, is not liable to be taxed or is liable to be taxed at a reduced rate lies on the dealer in view of section 7A of the APGST Act; the assessee had indulged in an inconvenient artificial bifurcation of the invoice; in the light of the judgment of the Supreme Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379 (SC), it was clear that there is no separate sale of pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of packing material was not acceptable; there was only one integrated sale of cement and the bags; and the entire amount collected by the assessee, in its invoices, was liable to be taxed at the rate applicable to cement, and not at two rates as pleaded by the authorised representative. The Commissioner confirmed the earlier proposal to revise the order of the Deputy Commissioner. The points, which arise for consideration in this appeal, are: (1) Is the order of the Commissioner, Commercial Taxes dated February 26, 2002 in violation of principles of natural justice, and was the appellant denied a reasonable opportunity of being heard ? (2) Is the Commissioner of Commercial Taxes barred from exercising his powers of revision, under section 20(1) of the APGST Act, in cases where the order of the assessing authority has been subjected to revision by the Deputy Commissioner (Commercial Taxes) ? (3) Is levy of tax on packing material, i.e., HDPE bags, at the same rate at which tax was levied on its contents, i.e., cement, valid ? (4) Was the Commissioner justified in not considering the appellants alternate submissions that (i) tax exceeding four per cent. could not be le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought for by the appellant, expired on January 17, 2002. The respondent, however, posted the matter to December 27, 2001. While submitting their preliminary objections the appellant, by their letter dated December 26, 2001, requested one more month time to present their case. The one month further time, sought for by the appellant on December 26, 2001, expired on January 26, 2002 before which date the appeal was posted for hearing on January 11, 2002. The appellant again sought time. They were informed by the office of the Commissioner, more than a month thereafter on February 20, 2002, that the case was posted for hearing to February 22, 2002. While the appellant contends that the two days time granted to them from February 20, 2002 to February 22, 2002 was extremely short, and they were thereby denied the opportunity to prepare their case, the fact remains that the appellant was granted two adjournments firstly for a fortnight from December 27, 2001 to January 11, 2002; and, thereafter, for more than a month from January 11, 2002 to February 22, 2002. As the order of the Commercial Tax Officer, which was sought to be revised, was passed on March 20, 1998, the four year period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. Section 20(3) provided that, in relation to an order of assessment passed under the APGST Act, the powers conferred by sub-sections (1) and (2) of section 20 should be exercised only within such period not exceeding four years from the date on which the order was served on the dealer. While section 20(2) of the APGST Act enabled officers, subordinate to the Commissioner, to revise the orders passed by their subordinates, section 20(1) enabled the Commissioner to revise the orders passed by officers subordinate to him, including those under section 20(2) of the Act. Section 20(1) of the APGST Act was a special provision which conferred power on the Commissioner not only to revise the order passed by the original authority, but also to revise the order, passed by the revisional authorities, under section 20(2) of the Act. In Agarwal Industries Limited [2013] 61 VST 346 (AP); [2013] SCC Online AP 44, a Division Bench of this court held that section 20(1) of the APGST Act authorized the Commissioner of Commercial Taxes to revise the revisional order passed by any subordinate officer under section 20(2) of the said Act. In Handum Iron & Steel Enterprises (P) Ltd. v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether or not there was separate sale of packing material; from the amendment to section 6C, and item 18 of the First Schedule, it is evident that it is legal and practical to sell cement without a container, or in a variety of containers; and there is an implied sale of HDPE bags, along with the sale of cement. On the other hand Sri J. Anil Kumar, learned Special Standing Counsel for Commercial Taxes, would submit that neither did the appellant produce the sales invoices before the Commissioner, nor did they even refer to the sales invoices in the show-cause notice; in the absence of even a reference thereto, in the reply filed by the appellant to the show-cause notice, the Commissioner could not be faulted for not taking into consideration the alleged sales invoices; the Commissioner had rightly come to the conclusion that the sale of cement and HDPE bags is an integrated sale, and was liable to be taxed under section 6C of the APGST Act; and the order of the Commissioner does not necessitate interference. It is for the first time before this court that Sri S. Dwarakanath, learned counsel for the appellant, has placed reliance on certain invoices to contend that there is an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement could be sold without involvement of packing material; it is only from April 1, 1995 that section 6C was amended; the sales tax authorities could not estimate the value of containers, and levy tax on the basis of its statutory classification, significant value and durability of the container, even though the contents are exempt, or are taxable at concessional rates; it is not correct to state that there is no express or implied agreement for sale of the bag; the guidelines laid down by the Supreme Court, to infer separate sale of packing material, are satisfied in their case; there is an implied sale of HDPE bags, along with the sale of cement; they were once again verifying their old records for the correspondence, circulars and stockists agreements to locate and demonstrate an express agreement of sale of the HDPE bags; even de hors such evidence, and having regard to the nature of the packing material, an implied agreement can always be inferred. It was not even the appellant's case, in their reply to the show-cause notice issued by the Commissioner, that the invoices reflected the sale of HDPE bags, independent of the sale of its contents, i.e., cement. The Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral factors, some of which are: (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 the content; (3) the packing is capable of being reused, after the contents have been consumed; (4) the packing is used for convenience of transport, and the quantity of the goods as such is not dependent on packing; (5) the mere fact that the consideration for the packing is merged with the consideration for the product would not make the sale of packing an integrated part of the sale of the product. (Raj Sheel [1989] 74 STC 379 (SC)). In determining whether the turnover, relating to sale of HDPE bags, is liable to tax the question to be asked is whether the parties, having regard to the circumstances of the case, intended to sell or buy the packing material or whether the subject-matter of the contract of sale was only the article, and the packing material did not form part of the bargain at all, but were used by the seller as a convenient and cheap vehicle of transport. The assessing, appellate and revisional authorities ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of cement to the A. P. Housing Board, shows the value of packing material as Rs. 115 per tonne; and, as 12 tonnes of cement was sold, the price of packing material is shown therein as Rs. 1,380. The invoice raised on Vishal Industries also shows the value of packing material as Rs. 115 per metric tonne; and, as 349 metric tonnes of cement was sold, the price of packing material is reflected therein as Rs. 40,135. These invoices were not placed before the Commissioner of Commercial Taxes, and have been brought on record for the first time in this appeal. While the appellant has, no doubt, charged a separate price for packing material, the very fact that the price of HDPE bags is not computed per bag, but on the quantity of the cement sold, goes to show that there was an integrated sale of cement and HDPE bags; and neither the appellant nor the consignee intended to purchase HDPE bags independent of its contents, i.e., cement. The very fact that the price charged for HDPE bags is less than 10 per cent. of the value of its contents, i.e., cement, makes it clear that the value of packing material, when compared to the value of its contents, is insignificant. This would also im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the goods and the tax shall be leviable on such sale or purchase of the materials at the rate of tax, if any, as applicable to the sale, or as the case may be, purchase of goods themselves." Section 6C of the APGST Act, as it stood prior to April 1, 1995, envisaged a situation where it was the goods which were sold, and there was no actual sale of the packing material. The section provided, by legal fiction, that the packing material shall be deemed to have been sold along with the goods. In other words, although there was no sale of packing material, it was to be deemed that there was such a sale. In that event, the section declared that tax would be leviable on such a deemed sale of packing material at the rate of tax applicable to the sale of the goods themselves. This provision was a clarification of an existing legal situation. If the transaction was one of sale of the goods only, clearly all that could be taxed, in fact, was the sale of the goods, and the rate to be applied should be the rate as in the case of such goods. Even if the price of the goods was determined upon a consideration of several components, including the value of the packing material, nonetheles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust 1, 1996 has no application to the present case as the assessment year in question is 1994-95. The mere fact that, subsequent to August 1, 1996, the Legislature has chosen to prescribe two different tax rates one for sale of cement and packing material separately, and the other for an integrated sale of cement and packing material, does not mean that, prior thereto, tax could not be levied on the sale of HDPE bags, at the tax rate applicable to its contents, i.e., cement. The subsequent amendment to the entry with effect from August 1, 1996 only makes it explicit, what was implicit earlier, that in cases where packing material is sold along with its contents, the rate of tax applicable to the sale of packing material would be the rate of tax applicable to its contents. Section 6C of the APGST Act, as substituted by Act 22 of 1995 with effect from April 1, 1995, provided that, notwithstanding anything contained in sections 5, 5F, 6 and 6A of the APGST Act, the rate of tax on packing material, sold with the goods, should be the same as that of the goods packed or filled, whether or not there was a separate sale or agreement for the sale of packing material, and the goods packed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax on cement varied during the assessment year 1994-95, tax was levied throughout the year uniformly at the maximum rate of 13.8 per cent., did not consider the same in the order under appeal. Though the Commissioner, Commercial Taxes has, in the order under appeal, recorded the appellants alternative contentions, no finding is recorded, in the order, in respect thereto. It does appear that, during the year 1994-95, the rate of tax on the sale of cement varied periodically from time to time. While the rate of tax on the sale of cement was 13.2 per cent. from April 1, 1994 to June 30, 1994, it was 12.65 per cent. from July 1, 1994 to December 31, 1994, and 13.8 per cent. from January 1, 1995 till March 31, 1995. With regards the appellant's contention regarding entitlement of concessional rate of tax, on production of G forms, section 5B of the APGST Act provided for the levy of concessional tax in respect of component parts. Under sub-section (1)(a) thereof, notwithstanding anything contained in the APGST Act, every dealer was required to pay tax at the rate of four per cent., or at the rates specified in section 5 in respect of goods other than declared goods, or under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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