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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 ..... granted a reasonable opportunity of being heard and their contention, that the order of the Commissioner dated February 26, 2002 is in violation of the principles of natural justice, does not merit acceptance. Is the Commissioner of Commercial Taxes barred from exercising his powers of revision - Section 20(1) of the APGST Act - Appellant contended that as the APGST Act did not provide for a second revision, the Commissioner of Commercial Taxes could not again revise the order of the assessing authority as the said order had already been subjected to revision by the Deputy Commissioner - Held that:- it is necessary to note that the exemption granted by the assessing authority, for the second sales of HDPE bags, was not the subject-matter of revision by the Deputy Commissioner of Commercial Taxes. As such a power is explicitly conferred under section 20(1) of the APGST Act, the submission that the Commissioner, Commercial Taxes, lacks jurisdiction to revise the order of the assessing authority, when it has been subjected to revision by the Deputy Commissioner albeit on a different ground, is not tenable. Validity of leviability of tax - Packing material i.e. HDPE bags and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case that a part of their turnover is eligible for concessional rate of tax as G forms had been furnished. - Appeal disposed of by remanding the matter - Special Appeal No. 9 of 2002 - - - Dated:- 3-7-2015 - RAMESH RANGANATHAN AND S. RAVI KUMAR, JJ. For the Appellant : S. Dwarakanath For the Respondent : J. Anil Kumar, Special Standing Counsel for Commercial Taxes JUDGMENT This special appeal is preferred, under section 23(1) of the APGST Act, by the appellant-dealer aggrieved by the order of the Commissioner of Commercial Taxes dated February 26, 2002 revising the order of the Deputy Commissioner (CT), Hyderabad dated January 17, 1999, and the order of the Commercial Tax Officer, Mancherial dated March 20, 1998. Facts, to the extent necessary, are that the appellant herein manufactures cement, and is a registered dealer under the APGST Act. They are assessees on the rolls of Commercial Tax Officer, Mancherial, who finally assessed them to tax, for the assessment year 1994-95 under the APGST Act, exempting the turnover of ₹ 3,59,25,700, relating to the corresponding sale value of HDPE bags, from tax holding that it was not the first sale within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In their reply submitted thereto on December 26, 2001, the appellant informed the Commissioner that the initial time of fifteen days, allowed by him for submitting their reply, was insufficient having regard to the fact that the assessment year was old, and involved verification of voluminous records; the issue regarding the transaction of packing material was a factual issue, and required the old records to be studied; in response to their letter dated December 17, 2001 seeking one month time, they had received a telegram granting only one week time; they were also informed that the appeal was posted for hearing to December 27, 2001; the one week adjournment granted to them was insufficient to submit their objections; without prejudice to their request, they were submitting their preliminary objections on the legal issues; they reserved their right to elaborate, on further factual details, by the next date of hearing; the issue of exemption of second sales of HDPE bags was the subject-matter of the assessment order dated March 28, 1998; this issue did not arise in the order of the Deputy Commissioner; purporting to revise the order of the Deputy Commissioner, the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose condition, customers would not purchase it; the assessee-company, in its own interest, packs cement in HDPE bags as soon as it is produced, and dispatch them to their distributors both within and outside the State; these distributors purchase cement from the assessee-company, and sell it to their customers; they receive cement, as cement in bags, from the assessee-company, and sell it to the ultimate customers as cement in bags only; from the point of manufacture till the ultimate use by the customer, cement always exists in a packed condition, and is sold in that condition only; though they had artificially bifurcated the value of cement and packing material, as reported in the A2 returns, they had not charged the value for cement and packing material separately in the sale invoices raised by them; in the absence of such separate depiction, sale of cement and HDPE bags is an integral sale; even if the value of cement and HDPE bags are separately shown in the invoices, the customer would only be interested to know how much he is paying per bag of cement; he would not be interested in knowing whether the distributor has split the value of ₹ 120 or ₹ 150 into two sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply any independent sale of HDPE bags; this was merely an attempt to reduce the tax burden; in Raj Sheel [1989] 74 STC 379 (SC), the Supreme Court held that one should decide whether or not there is an independent sale of packing material, purely based on facts; this principle was followed in Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 (SC); AIR 1978 SC 1496 and Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu [1993] 88 STC 151 (SC); AIR 1993 SC 123, wherein it was held that packing material charges cannot be deducted even if they are charged separately under the Act; in the present case, customers negotiate and purchase cement packed in bags from the assessee-company at a particular price per bag; the packing material, i.e., HDPE bags, being the primary packing material, reach the ultimate consumer; the transfer of property, in the HDPE bags, is integral and inseparable from the sale of cement; the total amount collected by the assessee in the invoice represents a single sale to be taxed at the rate applicable to the cement; the contention of the assessee that there was a separate sale of packing material was not acceptable; there was only one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed one month time; they had, by their letter dated December 26, 2001, filed preliminary objections, and had sought further one month time; the Commissioner had fixed the date of hearing as January 11, 2002; the appellant requested time as their counsel was indisposed; they were intimated by phone on February 20, 2002 that the hearing would be held on February 22, 2002; they requested time on February 22, 2002, as they were held up before the Deputy Commissioner at Mancherial, in connection with the show-cause notice issued by him which had a tax effect of more than rupees two crores for the assessment years 1997-98 and 1998-99; and, without any further opportunity, the Commissioner had confirmed the revision by his order dated February 26, 2002. The Commissioner, Commercial Taxes issued show-cause notice dated November 30, 2011 proposing to disallow the exemption granted by the assessing authority on the second sale of HDPE bags. The appellant was granted 15 days time to submit their objections thereto. By their letter dated December 17, 2001, the appellant sought one (1) month time to file their objections. The one month time, sought for by the appellant, expired on January 17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013), this contention may not be available to be urged before this court. Section 20 of the APGST Act related to revision by the Commissioner of Commercial Taxes and other prescribed authorities. Section 20(1) enabled the Commissioner of Commercial Taxes to, suo motu, call for and examine the record of any order passed or proceeding recorded by any authority, officer or person subordinate to him, under the provisions of the APGST Act, including section 20(2); and, if such order or proceeding recorded was prejudicial to the interests of Revenue, to make such enquiry, or cause such enquiry to be made, and, subject to the provisions of the APGST Act, to initiate proceedings to revise, modify or set aside such order or proceeding, and to pass such order in reference thereto as he thought fit. Section 20(2) stipulated that the powers of the nature referred to in section 20(1) could also be exercised by the Additional Commissioner, the Joint Commissioner, the Deputy Commissioner or the Assistant Commissioner and the Commercial Tax Officer in the case of orders passed or proceedings recorded by authorities, officers or persons subordinate to them. Section 20(3) provided that, in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 returns, in the order of the Commissioner, is without jurisdiction as it is not mentioned in the show-cause notice; the Commissioner erred in levying tax on HDPE bags at the rate on which tax is leviable on cement; HDPE bags are classified in item 188 of the First Schedule to the APGST Act; they are durable and reusable; they are of significant value, the cost being ₹ 5.50 ps. per bag during 1994-95; the sale of cement was not dependent on the HDPE bags, as it could be sold loose or in a gunny bag or in a paper bag; during 1994-95 the appellant had, in fact, sold cement in loose, by rail wagons, to Hyderabad Industries Limited; the issue must be viewed from the point of view of the marketing structure in the cement industry and different types of containers, and not from a narrow angle; item 18 of the First Schedule was amended with effect from August 1, 1996, providing for dual rates of tax on the sale of cement; the Legislature had, itself, visualised that cement could be sold without involvement of packing material; it is only from April 1, 1995 that section 6C was amended to provide for levy of tax on containers on par with its contents, whether or not there was separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs; the consumer consciously exercises a choice, balancing the cost and convenience; the issue must be viewed from the point of view of the marketing structure in the cement industry and different types of containers, and not from a narrow angle; without any enquiry from the stockists and the buyers, it cannot be surmised that there cannot be sale of cement without a container; the crucial aspect, that several types of containers exist in the cement market, cannot be overlooked; the transaction of sale of cement and the HDPE bag cannot be clubbed and integrated on the pretext that sale of cement without a bag cannot be visualised; the sale of loose cement is possible and was, in fact, effected by them; when there are multiple options, and as HDPE bags and gunny bags are separately classified in the First Schedule to the APGST Act, integrating the transaction of sale of the bag, with the sale of cement, is contrary to the judgment of the Supreme Court in Raj Sheel [1989] 74 STC 379 (SC); item 18 of the First Schedule was amended with effect from August 1, 1996, providing for dual rates of tax on the sale of cement; the Legislature had, itself, visualised that cement could be sold wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote of. The fact that the packing is of insignificant value, in relation to the value of the contents, may imply that there was no intention to sell the packing. However, where the packing material is of a significant value, it may imply an intention to sell the packing material. (Raj Sheel [1989] 74 STC 379 (SC)). It is not possible to state, as a proposition of law, that whenever particular goods are sold in a container, the parties did not intend to sell and buy the container also. There may be cases where the container is comparatively of a high value, and sometimes even higher than that contained in it. In such cases the agreement to pay an extra price for the container may be more readily implied. (Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624 (SC)), Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. [1967] 19 STC 84 (SC)). In cases where the packing material is an independent commodity, and the packing material as well as the contents are sold independently, the packing material is liable to be taxed on its own footing. Whether a transaction for sale of packing material is an independent transaction will depend upon several factors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for ₹ 28,388, and the value of packing material was shown separately therein as ₹ 2,000. As 20 metric tonnes of cement was sold, the value of packing material recorded in the invoice is ₹ 2,000, i.e., 20 metric tonnes at ₹ 100 per metric tonne. It is evident that packing material was not sold independent of its contents and, though the value of packing material is separately shown in the invoice, its value is arrived at on the basis of the weight of its contents, i.e., cement. The invoice, whereby cement was sold to Sri Krishna Cement, also shows the price of packing material separately at ₹ 100 per metric tonne; and, as 10 metric tonnes of cement was sold, the invoice reflects the value of packing material as ₹ 1,000. The invoice, raised on N. B. Vishal, shows the price of packing material as ₹ 115 per metric tonne; and, as 20 tonnes of cement was sold, the value of packing material is shown as ₹ 2,300. The value of packing material is shown, in the invoice relating to the Tribal Welfare Department, as ₹ 115 per metric tonne; and, as 117 metric tonnes of cement were sold, the value of packing material is shown to be ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, learned counsel for the appellant, that the Commissioner could not have placed any reliance on the A2 returns, without referring to it in the show-cause notice, has considerable force, the fact remains that, even if this finding of the Commissioner is ignored, his finding that there was an integrated sale of cement and HDPE bags, and the parties never intended to either sell or buy HDPE bags independent of its contents, i.e., cement, is based on an elaborate analysis of the material on record, and the prevalent practice in the cement industry. The Commissioner, Commercial Taxes, has on the material on record, rightly contended that there was no intention on the part of the appellant to sell, or on the part of the consignee to buy, the HDPE bags; and these bags were used by the appellant as a convenient and cheap mode of transport. Section 6C of the APGST Act related to levy of tax on packing material. Prior to its substitution by Act 22/1995, with effect from April 1, 1995, section 6C read thus: Levy of tax on packing material.-Notwithstanding anything in sections 5 and 6A, where goods packed in any materials are sold or purchased, the materials in which the goods are so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be applied to the packing material as is applicable to the goods themselves. (Raj Sheel [1989] 74 STC 379 (SC)). As neither the appellant who sold cement, nor their customers who bought it, intended to purchase HDPE bags independent of its contents, i.e., cement section 6C, as it stood prior to its amendment with effect from January 1, 1995, is attracted, and in view of the legal fiction provided therein, it must be deemed that the appellant had sold the HDPE bags along with cement, and the sale of HDPE bags was rightly subjected to tax at the same tax rate as was applicable to the sale of cement. It is no doubt true that, with effect from August 1, 1996, entry 18(a) of the First Schedule to the APGST Act stipulated that, where the sale price of cement included the value of the packing material, the point of levy would be the point of first sale in the State, and the rate of tax would be 16 per cent.; and entry 18(b) stipulated that where packing material and cement are sold separately, and the sale price of cement did not include the value of packing material, the point of levy would be at the point of first sale in the State and the rate of tax would be 20 per cent. The amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show-cause notice, issued by the Commissioner proposing to subject the sale of HDPE bags to tax at the rate of its contents, the appellant sought time contending that they were verifying the old records, correspondence, circulars, and stockists agreements to demonstrate an express agreement of sale of the HDPE bags. Except to produce the few sales invoices, referred to hereinabove, the appellant has not produced the purchase orders or the price charts or the quotations, if any, prepared by them and sent to their customers showing the value of cement and packing material separately. We see no reason, therefore, to differ from the conclusion of the Commissioner that the appellant intended to sell HDPE bags only as packing material for cement, and not independent thereof. Point No. 3 is answered accordingly. Point No. 4: Sri S. Dwarakanath, learned counsel for the appellant, would submit that the Commissioner, having noted the appellants alternative submissions that (i) a part of the turnover was covered by G forms under section 5B, and tax exceeding four per cent. could not be levied, (ii) even if section 6C is applied for packing material, set-off under G. O. Ms. No. 374 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the selling dealer was liable to pay only the concessional rate of tax of four per cent. It is the appellant's case that a part of their turnover is eligible for concessional rate of tax as G forms had been furnished. None of these aspects have been considered and decided by the Commissioner, Commercial Taxes in the order under appeal. We see no reason to examine these contentions regarding the extent of sale of packing material during different periods in 1994-95, or the turnover covered by G forms under section 5(b), or the validity of the appellant's claim for setoff in terms of G. O. Ms. No. 374 dated April 25, 1987, in this appeal as these are all matters which the Commissioner should have dealt with while exercising his power of revision under section 20(1) of the APGST Act. To this limited extent, the matter is remanded to the Commissioner, Commercial Taxes, who shall, after giving the appellant an opportunity of being heard, consider the aforesaid alternate submissions, and pass orders afresh in accordance with law. The appeal is, accordingly, disposed of. The miscellaneous petitions pending, if any, shall also stand disposed of. No costs. - - TaxTMI - TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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