TMI Blog1993 (3) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is sold, packed in gunny/ HDPE bags or in bulk unpacked condition. It is claimed that when cement packed in gunny/polythene bags is sold, separate price for the packing material is charged, which is indicated in invoice/challan. The applicant-company decided that in cases where cement packed in bags would be sold in West Bengal, such bags should be purchased within the State itself. Accordingly, gunny/polythene bags are purchased by the company in West Bengal for sale of cement in West Bengal. After purchase such bags are sent to the company's factory outside West Bengal, then filled with cement and then brought back into West Bengal for sale in packed condition. It is claimed that in the process no change is effected to the bags purchased in West Bengal and such bags retain the same character as originally purchased. Allegedly, such sale of bags packed with cement amounts to resale of the bags in West Bengal within the meaning of section 5 of the Bengal Finance (Sales Tax) Act, 1941. The applicant-company, being a registered dealer under the 1941 Act, made an application on or about June 21, 1988, for amendment of registration certificate by inclusion of gunny/polythene bags. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rayer was rejected. Revisions therefrom before the Assistant Commissioner and Additional Commissioner were rejected by their respective orders dated November 22, 1989 and November 5, 1990. As the company is a manufacturer of cement outside West Bengal, its registration certificate did not include the item, cement. Accordingly the company was not entitled to concessional rate for purchase of packing materials for cement. All the allegations in the application including those relating to contravention of articles 14, 19(1)(g) and 300A of the Constitution are denied. 4.. The applicant-company then affirmed the affidavit-in-reply on March 7, 1991, stating that the bags purchased by the company in West Bengal are sometimes stamped by it with the trade name, address, etc., but sometimes such bags are purchased in the already stamped condition with those points of information. The company contended that such marking or stitching and sealing of bags did not constitute any change in the form of the same. Even after packing cement in bags, the bags allegedly remain in the same condition and are reusable as empty bags. 5.. Thereafter, on March 11, 1991, the company filed a supplementary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit was filed by the company on the ground that in the hurry of filing the affidavit-in-reply certain matters could not be properly dealt with, the Revenue affirmed an affidavit-in-opposition to the supplementary affidavit on August 8, 1991, on the ground that new facts had been introduced therein. It was stated by the Revenue that previously the Cement Marketing Company of India Limited was the sole selling agent of the applicant. Since the time the applicant took over selling activity from the said company, the registration certificate was duly amended. Entitlement to the benefit of purchase at a concessional rate may arise only in terms of section 5(1)(bb) of the 1941 Act. If some error had been committed in regard to the previous company it cannot operate as estoppel. Originally the applicant wanted coverage in the registration certificate under section 5(1)(aa), but did not seek any coverage under section 5(1)(bb) on the ground that cement was manufactured in factories outside West Bengal. While disposing of company's application dated January 30, 1973, Commercial Tax Officer held that the Cement Marketing Company of India Limited had ceased to function from January 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those are sold for the first time and, according to him, could not be said to be resold. The Additional Commissioner in his revisional order dated November 5, 1990, held that the activity of sale of gunny bags in West Bengal after packing the same with cement cannot be said to be a resale for two reasons. In the first place, the company is not a reseller of cement in West Bengal. Secondly, the term "resale" implies a situation where goods are sold in the same condition in which they are purchased. Customers do not purchase gunny bags as such from the company. They, on the other hand, purchase cement which is packed in gunny bags. He also held that mere showing the value of packing materials separately in the bills does not change the character of the dealer from manufacturer/importer to a reseller. According to the applicant-company, if a bag is purchased in West Bengal and then it is sold in the same State together with cement packed therein after taking the bags outside West Bengal for the purpose of such packing, such sale of bags will still amount to "resale". Mr. Somen Bose, learned Senior Advocate for the applicant-company, contended that there was no change in the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a registered dealer of goods..........,of the class or classes specified in the certificate of registration of such dealer as being intended for resale,.........., by him in West Bengal and of containers and other materials for the packing of goods of the class or classes so specified:" 8.. The contentions of Mr. Somen Bose, learned advocate for the applicant, are that the applicant is entitled to purchase bags as packing materials in West Bengal (for resale in West Bengal together with cement packed therein) at the concessional rate of only one per cent tax, the normal rate being much higher, namely, eight per cent. His first contention is that it cannot be said that there is no resale of bag, because bag is always sold together with cement packed therein. According to him, the sale of a bag of cement constitutes sale of cement and sale of bag. In this connection he referred to the decision of the Supreme Court in the cases of Commissioner of Taxes v. Prabhat Marketing Co. Ltd. reported in [1967] 19 STC 84 and Jamana Flour Oil Mill (P.) Ltd. v. State of Bihar [1987] 65 STC 462. In the first case it was held that although hydrogenated oil sold in containers was tax-free, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f in West Bengal do not constitute "resale"; nor was the intention of the applicant at the time of purchase that there would be a plain "resale" of bags. It is clear from section 5(1)(aa) that the concessional rate of tax would be applicable to purchases by registered dealers of the class or classes of the goods specified in the certificate of registration "as being intended for resale". The applicant claims that the sale of bags simultaneously with the sale of cement amounts to "resale". According to the respondents, such sale of bags with the intervening packing of cement and other changes effected thereto does not qualify as "resale", contemplated by section 5(1)(aa). Mr. Somen Bose, learned advocate for the applicant, referred to a decision of a learned single Judge of the Calcutta High Court in the case of Delhi Cloth and General Mills Co. Ltd. v. Commercial Tax Officer reported in [1975] 36 STC 575, in order to support his contention that packing of cement did not alter the character of bags so that the sale in West Bengal should be construed as "resale". In [1975] 36 STC 575 (Cal) (Delhi Cloth and General Mills Co. Ltd. v. Commercial Tax Officer) the question arose in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal and who also purchases containers or packing materials of such goods in West Bengal. The goods packed in the bags should be purchased in West Bengal for resale in the State, in which case the bags being packing materials could also be purchased in West Bengal to qualify for the same benefit. There may be other dealers directly dealing in bags qua goods who have to purchase bags in West Bengal intended for resale of the same in West Bengal, if they intend to reap the benefit under section 5(1)(aa). 10.. Mr. D. Majumdar, the learned State Representative, submitted that if a registered dealer of the basic goods which is packed in the bags is a reseller in West Bengal, only in that case under section 5(1)(aa) he may claim the benefit for purchase of bags in West Bengal for packing of the basic goods. Only in such a case, according to him, an endorsement may be made in the registration certificate regarding the bags so that the concessional rate of tax under section 5(1)(aa) is available at the time of purchase. Cement is the basic goods in the present case. Therefore, Mr. Majumdar said, since cement was not purchased, nor manufactured in West Bengal by the applicant, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dictionary of Finance by E.A. Avneyon, McMillan Publishing Company, New York, 1988, the term "resale" has been defined at page 398 as: "The second consecutive sale of items purchased with no substantial change to those items, such as goods purchased by a retailer from a wholesaler or a manufacturer, which he then sells to the public". Mr. Majumdar, learned State Representative, urged that in the trade circle "resale" means a subsequent sale of the goods originally purchased in the same condition without any change. According to Mr. Somen Bose, learned advocate for the applicant, although cement is packed in bags before subsequent sale thereof together with cement, there is no change and the bags continue to remain in the original condition. In this context, two things are to be remembered. Although there is a sale of bags simultaneously with sale of cement, the intention of the contract between the applicant and its customers is not basically or chiefly for purchase of bags simpliciter. There is a composite contract, express or implied, for purchase of bags, because cement is packed in bags and must be delivered in bags. In other words, there is no contract for purchase of bags fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deny the claim of the respondents that packing of cement in bags and the other activities are a part of the manufacturing job. Only after packing, cement becomes marketable. Intervention of these activities, whether amounting to manufacture, or not, makes a world of difference. A new bag purchased loses its character of a new bag and becomes a used bag. In that view of the matter also, sale of bag packed with cement cannot be said to be a "resale" of bag within the meaning of section 5(1)(aa). 13.. In the written notes of submission furnished by Mr. Bose, learned advocate for the applicant (furnished after arguments were closed), he mentioned the ground of contravention of articles 303 and 304 of the Constitution. This was not contended orally during the arguments. No such ground appears to have been taken in the main application. Be that as it may, in our view, there is no question of contravention of articles 303 and 304 or 301 of the Constitution in the instant case. 14.. Accordingly, we hold that having regard to the activities of the applicant in West Bengal, there is no question of "resale" of cement, namely, the basic goods, for which the applicant is not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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