TMI Blog2007 (4) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... --- RAJES KUMAR J. Present revision under section 11 of the U.P.Trade Tax Act, 1948 (hereinafter referred to as, "the Act") is directed against the order of Tribunal, dated August 16, 1995 for the assessment year 1989-90 under the U. P. Trade Tax Act. Dealer/opposite party was carrying on the business of manufacture and sale of Indian-made foreign liquor (hereinafter referred to as, "IMFL"). During the year under consideration, dealer had realised per bottle at Rs. 2.60, 2.30 and 1.57 from its customers under heading of P.P. caps, seal level and filling, etc. Total amount realised in this regard was Rs. 91,19,705.20, which was called as bottling charges. Dealer had admitted the liability of tax on the said bottling charges in the return but during the course of assessment proceedings, denied the liability on such amount. Assessing authority included the such bottling charges in the turnover and levied the tax thereon. First appeal filed by the dealer was allowed. First appellate authority relied upon the decision in the cases of Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh reported in [1966] 17 STC 624 (SC), Lal Chandra Shyam Sunder v. Commissioner of Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer in respect of the goods sold, at the time of or before the delivery thereof, other than cost of freight or delivery or cost of installation or the amount realised as sales tax on sale or purchase of goods when such cost or amount is separately charged: (ii) any cash or other discount on the price allowed in respect of any sale and any amount refunded in respect of articles returned by customers shall not be included in the turnover; and (iii) where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same without profit to the customer, the sale in respect of such goods shall be included in the turnover of the latter dealer alone." In the present case admittedly the liquor was sold in packed form. Liquor could not be sold without packing. The contract for sale of the liquor was for sale in bottle. Therefore, there was an implied contract for the sale of packing material. Merely because the bottling charges were charged separately it cannot be said that there was no contract for the sale of packing material. Section 2(i) defines "turnover" which contemplates the inclusion of "any sums charged for anything don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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. Nor will, for the reasons earlier discussed in relation to freight charges, the assessee be in a position to claim a deduction in respect of these charges by virtue of rule 6(cc) of the Tamil Nadu General Sales Tax Rules. In our view, this position has been correctly set out, applying the decision in the case of Rai Bharat Das and Bros. [1988] 71 STC 277 (SC); AIR 1989 SC 315 in State of Tamil Nadu v. Vanniaperumal and Co. [1990] 76 STC 203 (Mad)[FB], Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu [1991] 81 STC 327 (Mad) and Dalmia Cement (Bharat) Ltd. v. State of Tamil Nadu [1991] 83 STC 442 (Mad). We are, therefore, of the opinion that the packing charges and excise duty thereon cannot also be deducted in computing the taxable turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de from the taxable turnover any component of the price, expenditure incurred by the dealer which he had to incur before sale and to make the goods available to the intending customer at the place of sale." The aforesaid two decisions of the apex court clearly held that the in case where the goods are sold in packed form, there is implied contract for sale of material even if the price is separately charged for. It has been further held that the packing charges charged for the packing material and for labour charges, etc., fall within the purview of "any sums charges for anything done by the dealer in respect of the goods at the time of or before the delivery thereof" and thus, it is the part of turnover. Bottling of liquor is an integral part of the process of manufacturing. Liquor becomes marketable only after bottling. Liquor cannot be sold without packing. Thus, the packing charges are liable to be included in the turnover and liable to tax. I do not agree that bottling charge is a delivery charge. For the reasons stated above, order of the Tribunal is liable to be set aside so far as it relates to deleting the tax on the bottling charges is concerned. In the result, revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied agreement to sell the bottles. (7) The purchasers were purchasing only country made liquor and the appellant had only been selling the same. (8) Cost of packing material is very less and insignificant as compared to the cost of country made liquor and price of the goods is the same with or without bottles. (9) Tax on bottling charges is sought to be recovered only from tax-free country liquor, and in the course of sale of IMFL, the sale of bottle has not been held to be a separate sale and, thus, double standard adopted by the department is not justified. (10) Section 3AB inserted in the U.P. Trade Tax Act, 1948 (for short, the Act ) on August 1, 1990, being clarificatory/declaratory has retrospective effect. The learned counsel has placed strong reliance on a decision of the Allahabad High Court in Chhata Sugar Co. Ltd. v. Commissioner, Trade Tax, U.P., Lucknow [2001] 124 STC 33, in support of the said contention. Mr. Dinesh Dwivedi, the learned Senior Counsel appearing on behalf of the respondent, on the other hand, would submit that as sale of bottles finds place in entry 20 in the Schedule appended to the Act, despite the fact that no sales tax is payable on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work is included in the said rate of 2.30, 2.20 and 2.10 has not been mentioned in the aforesaid order of the Excise Commissioner. In this way, the recovery of the amount by the assessee under the head of bottling charges is the sale of cap and cork and labelled empty bottles in a separate contract under the definition of section 2-H of the Provincial Sales Tax Act. As far as the question of two judgments referred by the assessee is concerned, the facts of the aforesaid judgments were not relating to the bottling charges as the fact of this case. In the case of Gannon Dunkerley Co., [1958] 9 STC 353 the honourable Supreme Court has held that to constitute sale, the existence of two parties, transfer of goods and passing of consideration from purchaser to seller for this purpose is necessary. These all facts are present in the case under consideration and in view of the same the amount shown as the bottling charges, is the sale of label, cap and cork used on the bottle. Under the case under consideration, the assessee has shown the price of the bottles as bottling charges and has not admitted the sale of the bottles, while amount recovered in the form of bottling charges is the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of bottles, it goes into the overheads of and is debited to the profit and loss account. Moreover, the packing material, which is used by the assessee is a bare minimum necessary as the assessee has no other commercial alternative." Differing with the findings of fact arrived at by the appellate authority as also the Tribunal, the High Court, in exercise of its revisional jurisdiction, however, in its judgment which is being impugned before us proceeded on the basis that in view of the definition of "turnover" as contained in section 2(i) of the Act, and also the fact that the liquor could not be sold without packing, a contract of sale of bottles would be presumed, holding: "The aforesaid two decisions of the apex court clearly hold that in case where the goods are sold in packed form, there is implied contract for sale of material even if the price is separately charged for. It has been further held that the packing charges charged for the packing material and for labour charges, etc., fall within the purview of 'any sums charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof' and thus, it is the part of turnover. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before different High Courts. We may notice only a few of them. In Commissioner of Sales Tax, Madhya Pradesh, Indore v. Bhopal Sugar Industries Ltd. [1981] 48 STC 45 (MP), a division Bench comprising of G.P. Singh C.J. and U.N. Bhachawat, J., (as the learned Judges then were) opined: "7. Sales tax on gunny bags can be imposed only on the basis that the assessee sold the bags to the purchasers of sugar. There was no express agreement for sale of gunny bags. The Tribunal has stated that there was no evidence to show even an implied agreement for sale of gunny bags. The learned Government Advocate, who appeared for the department, however, submitted that the other facts stated by the Tribunal lead to the inference that there was an implied sale of gunny bags. It is this argument which we have to examine. The property in the gunny bags no doubt passed to the purchasers of sugar and the gunny bags did not become useless in the hands of the purchasers. But from this alone it is not possible to hold that there was an implied sale of gunny bags. When goods packed in containers are sold, the property in the containers no doubt is transferred to the purchaser. But before holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no such grievance can be made in view of the question referred to us. That question is based on the assumption that there was material before the Board for giving a finding and that finding was accordingly given by the Board that there was no implied sale of the packing materials. In point of fact, the question referred to this court is a question of fact. The burden was on the department to prove that there was an implied sale of the packing materials. In the instant case, it was not disputed that there was no express agreement for the sale of the packing materials. The assessing authorities had not found that price was separately charged for the packing material. The contention advanced on behalf of the assessee before the Board that the price charged by the assessee for the cloth was either on the basis of meterage or on the basis of weightage was impliedly upheld by the learned Member as he relied upon the decision reported in Binod Mills Co. Ltd. v. Commissioner of Sales Tax [1971] MPLJ 1009, where a similar finding had been given. It must, therefore, be held that the Board had found that the burden to prove that there was sale of the packing material was not discharged b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken in isolation for the purpose of imposition of levy. Imposition of tax would be on the total turnover, assuming that the prices of the bottles were to be included in the price of the country liquor, provided one is leviable. If an exemption has been granted, it would be on sale of the articles in a deliverable form. There exists a serious dispute as to whether for the purpose of levying sales tax, a part of the commodity which is sold as a composite whole would come within the purview of the Act when sale of two different commodities can be bifurcated for levy of tax. Containers of the principal commodity which is the subject-matter of the contract of sale may have to be taken into consideration for the purpose of arriving at the total turnover, but even for that purpose there has to be an element of ad idem of mind between the purchaser and seller. If by reason of express contract or implied contract, the containers are also sold, indisputably the same would be exigible to tax, as has been held in Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd., Gauhati AIR 1967 SC 602, but it is difficult to accept the contention of Mr. Dwivedi that even in absence of such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bottles, he might have been exigible to sales tax in terms of the said provision. Thus, without adverting to the question as to whether there had been an implied sale, entry 20 will have no role to play. We may also consider the matter from another angle. A tax may be leviable at different rates. Definition of "turnover" having undergone an amendment and being expansive in nature, would it be permissible to segregate it to make different commodities for the purpose of imposition of tax at a higher rate, would, in our opinion, merit consideration. We are not oblivious of the fact that if the sale is in relation to two different commodities, it may be permissible to levy tax at different rates, but not when the definition of "turnover" includes a wide range of subjects including the package. Only for the purpose, the concept of implied contract of sale would assume significance. We, however, are not impressed with the arguments of Mr. Radhakrishnan that section 3AB of the Act introduced in the statute by reason of the U.P. Trade Tax (Amendment) Act, 1991 is clarificatory in nature. The said amendment came into force with effect from April 25, 1990. The assessment year, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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