TMI Blog2005 (9) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ons from the manufacturers, distributors, wholesalers, etc. The liquor and beer are exigible to tax under entry 1 of the Sixth Schedule to the Act and taxable at every point of sale, while the bottles and cartons as such are exigible to tax under entries 123 and 19 respectively of the First Schedule to the Act. But the dispute in the present cases is whether the bottles and cartons are to be taxed at the rates at which the contents housed in these bottles and cartons are to be taxed. Admittedly, the liquor and beer are exigible to tax at 25 per cent at the relevant point of time, while the bottles under entry 123 of the First Schedule at 9 per cent and the cartons under entry 19 of the First Schedule at 5 per cent. The State Legislature amended the Act, by inserting section 6-C in the Act, by Amendment Act No. 11 of 1984, with effect from July 8, 1983. By virtue of the said amended provision, a deeming sale was brought in as a result of which whenever the liquor and beer were sold in packed material, the packed material is deemed to have been sold along with the contents and tax is leviable on the packed material at the same rates as that of the material packed or housed in the pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Therefore, in view of the above finding, the matters were remanded to the assessing authority for ascertaining as to the nature of the transaction and to give a finding. Thereafter, the assessing authorities have taken up fresh assessment proceedings and in some of the assessments, the assessing officers negatived the claim of the assessees holding that though the packed material were shown as if they were sold separately, but the rate at which the tax was collected on the sale consideration of those packing material shows that tax was not collected at the rates at which the packing material was leviable, but at the rates at which the contents contained in the packing material were liable to tax. Therefore, the assessing officers negatived the claim of the assessees on the premise that separate sale was shown only in order to get the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ms. No. 376, dated May 2, 1991, originally with effect from July 8, 1983 the date from which section 6-C of the Act was inserted, declaring that the bottles and cartons used as packing material are liable to tax at the rates specified in the Schedules separately and not along with the contents. It is further contended that the Government for its own reasons amended the said G.O. on December 7, 1991 by issuing G.O Ms. No. 1106, restricting the application of G.O. Ms. No. 376 from May 2, 1991, the date on which the said G.O. was issued. Further by issuing G.O. Ms. No. 1182, dated December 10, 1992, the G.O. Ms. No. 376, dated May 2, 1991 was rescinded. Therefore, it is contended by the learned counsel that the above G.O. issued by the Government also supports the contention of the dealers that the Government had accepted that the packing materials are liable to tax as specified in the entries and not at the rates at which the goods packed or the contents contained in the packing material. The learned counsel further contended that section 6-C of the Act was again amended by Act No. 22 of 1995 with effect from April 1, 1995 as per which the rate of tax on the packing material sold a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l contentions, the issue that arises for consideration is what is the rate of tax at which the bottles and cartons are exigible to tax under the provisions of the Act. 7.. Section 5 of the Act, which is a charging section, provides that every dealer shall pay tax under this Act for each year on every rupee of his turnover of sales or purchases of goods in each year irrespective of the quantum of his turnover at the rates of tax and at the points of levy specified in the Schedules. As already referred to earlier, bottles and cartons, as such, when sold are liable to tax as per entries 123 and 19 at the rate of 9 per cent and 5 per cent respectively at the point of first sale. However, in the present case, we are concerned with how these items are to be treated when sold along with the goods, viz., liquor and beer when packed or filled in it. As far as the goods which are packed or filled in these items are exigible to tax as per entry 1 of the Sixth Schedule at the relevant point of time and the same is liable to tax at every point of sale at higher rate than what the packing material in which it is housed or filled is liable or exigible to tax. Section 6-C of the Act was inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... three possibilities, viz., (1) that the transaction of sale might consist of sale of the product and separate sale of the container housing the product with respective sale considerations for the product and the container separately; or (2) it may consist sale of the product and sale of container, but both the sales being conceived of an integrated components of a single sale transaction; or (3) it might consist of sale of the product and the transfer of the container without any sale consideration thereof, and that the question in every case as to what was the nature and ingredients of the sale would be a question of fact and that in every case the assessing authority had to ascertain the true nature and character of the transaction upon the facts and circumstances of each case". Therefore, remanded to the assessing authority for ascertainment of the above factual position. 8.. It is also relevant to note that the apex Court negatived the claim of the dealers that in spite of the fact that section 6-C of the Act contemplates fictional sale of the packing material, still the rate applicable to the packing material as provided in the Schedule was negatived and the relevant observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt observing that the principal used to collect the deposits from the assessee whenever liquor was sold and the amount collected towards the bottle deposit is kept separate and whenever the bottles are returned, the principal used to refund the amount of deposits. The assessee in turn collects deposits at the same rates from its customers and return the same after collecting the bottles. From a perusal of the judgment it is clear that the issue was not decided with reference to any specific provision dealing with the subject, on the other hand, the decision was rendered purely on the facts recorded. 11.. In United Breweries Ltd. v. State of Andhra Pradesh [1997] 105 STC 177 (SC) the assessee is a brewery, manufactures and supplies beer to the distributors, who in turn sells to the wholesalers or retailers. The assessee supplies its brand of beer to the selling agents who deposits security of Rs. 4.80 for the bottle and Rs. 5 for crates. These deposits were returned to the selling agents when the bottles and crates were returned. This was the method of carrying on of the trade by the assessee and two circulars were issued by the assessee to explain the scheme to its customers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment rendered by the apex Court, the said provision was not considered. 12.. In Kalyani Breweries Ltd. v. State of West Bengal [1997] 107 STC 190 a Bench of two learned Judges of the apex Court had an occasion to consider a similar issue as to the sale as well as the assessability of beer bottles. In that case, the issue relates to the assessment year 1974-75. The assessee brewed and sold beer in beer bottles. For the beer it gave to its purchasers one invoice and another for "the deposit on bottles". It was the case of the assessee that the rate per bottle of the deposit was adjusted so as to cover the cost of the bottles that were purchased by it. Up to March 1, 1974, the rate was Rs. 4.80 per dozen bottles, but due to the increase in their cost, the rate was raised to Rs. 9 per dozen bottles with effect from March 2, 1974. The amounts received as such deposits were credited to an account entitled "Deposit on bottles" in the assessee's ledger. When the empty bottles were returned by the customers, refunds were made at the same rate. There was no time-limit for the return and bottles taken from the assessee in one year might be returned in the next year. However, deposits w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex Court had an occasion to consider the provisions of sub-sections (5) and (6) of section 5 of the Kerala General Sales Tax Act, 1963. Premier Breweries Limited is a dealer in Indian-made Foreign Liquor. The liquor is sold in bottles packed in cardboard cartons. For the assessment year 1982-83, the dispute was what was the rate of tax that was applicable to cardboard and cartons, whether it has to be taxed at the rate of 8 per cent under entry 97 of the First Schedule to the Kerala General Sales Tax Act, 1963 or at 50 per cent applicable to the sale of liquor. The appellant's case was agreed by the assessing officer and taxed the turnover relating to cartons at 8 per cent under entry 97 of the First Schedule. The said assessment was revised by the Deputy Commissioner on the ground that there was an error in the assessment in levying tax at the rate of 8 per cent on the packing material, viz., cardboard cartons, as, according to the Deputy Commissioner where goods sold were contained in containers or packed in any packing material, the rate of tax and the point of levy applicable to such containers or packing materials, as the case may be, should, whether the price of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athak, C.J., gave a restricted meaning to the deeming provision contained in section 6-C. Therefore, distinguished the said decision in view of the clear and unambiguous language contained in sub-sections (5) and (6) of section 5 of the Act. 14.. In Mysore Breweries Limited v. State of A.P. [1992] 86 STC 394 a division Bench of this Court had an occasion to consider similar issue in the case of Mysore Breweries Limited, which is also a party in the present dispute. The assessee-manufacturer sells beer and other alcoholic beverages. The issue that was considered by the division Bench was as to whether there is a separate sale of bottles in which the beverages are sold and if so, what is the rate of tax applicable to such sales. The assessing authority rejected the claim of the assessee that the deposit of the bottles as well as the value of packing material like, cardboard boxes, cartons, labels, etc., shall not form part of the turnover and treated all the items as part of the turnover liable to tax. The assessee carried the matter to the Deputy Commissioner (Appeals) unsuccessfully and hence further appeal to the Sales Tax Appellate Tribunal. The Appellate Tribunal confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lower authorities will be valid. 16.. In State of A.P. v. Phipson Co. [1995] 97 STC 622; (1995) 20 APSTJ 21 a division Bench of this Court had an occasion to consider whether there was an implied sale of bottles when the price of the bottles is realised by way of separate debit notes. In this case, the assessee sold beer along with bottles. The contention was that bottles were given to the purchaser by taking deposit for the price of the bottles and therefore, there was no sale of the bottles. The assessing authority on consideration of the record noted that both invoices and the debit notes had been raised on the same day and the amounts charged in the invoices and the debit notes pertain to a single sale and form the turnover. It also added that though the assessee called the price of the empty bottles as "deposit", it was not treated as such in accounts and that the accounts did not disclose that the amounts were deposited in individual khatas. It further added that there was no condition or any sale agreement that the bottles should be returned within a stipulated time and that there was clearly a transfer of property in the bottles for money consideration along with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gunny bags along with the wheat products contained therein, which were sold by the dealer at an all-inclusive price fixed under the Roller Mills Wheat Products (Price Control) Order. It was held the net weight as contemplated under the Control Order meant that the weight of the bag was included in the price to be charged by the dealer, the turnover of gunny bags was assessable and the direction of the Tribunal to separately ascertain the price of the gunny bags from the all-inclusive price and tax the turnover of gunny bags at the higher rate of 4.5 per cent was valid. 18.. In Commissioner of Sales Tax v. Gill Company Ltd. [1974] 33 STC 536 (MP) the assessee claimed deduction of freight on the ground that he had not charged the same although the same might have been shown in the bills produced. The assessing officer disallowed the claim, which was confirmed by the appellate authority. However, on further appeal, the Board of Revenue allowed the appeal by giving credit for the freight, but dismissed the appeal so far as packing materials were concerned. At the instance of the department, reference was made. While considering the said issue, the Madhya Pradesh High Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The said issue was considered by this Court where there was a challenge to the provisions of section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, as amended by Act No. 22 of 1995. 21.. In State of Andhra Pradesh v. Mysore Breweries Limited* (1999) 29 APSTJ 142 a division Bench of this Court while considering the issue as to the rate at which cartons are to be taxed held that the cartons being secondary packing material, which are intended to be used only for the convenient transport of the bottles packed in it, it could not be treated as packing material sold along with the contents. Therefore, this Court held that as far as cartons are concerned, the turnover has to be taxed under entry 19 of the First Schedule to the Act. 22.. In Rassi Cement Ltd. v. Commercial Tax Officer [1997] 106 STC 169; (1997) 24 APSTJ 100 a division Bench of this Court to which one of us (B.S.R., J.) is a party had an occasion to consider the constitutionality of the provision of section 6-C of the Act, as amended by Act No. 22 of 1995. The division Bench specifically noted the words "whether or not there is separate sale or agreement for sale for the packing material and the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In Kalyani Breweries Ltd. [1997] 107 STC 190 the apex Court while considering the issue of deposit on bottles, on facts though found the deposit on bottles were shown in the ledger maintained by the dealer as such, but to the extent of the deposits shown as forfeited was held to be correctly treated as part of the turnover liable to tax. The said decision was rendered after considering the decisions of the same court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379 (SC) and United Breweries Ltd. [1997] 105 STC 177 (SC). In Premier Breweries [1998] 108 STC 598 the apex Court was dealing with the similar issue with reference to the provisions of subsections (5) and (6) of section 5 of the Kerala General Sales Tax Act. The issue was whether the cartons are to be taxed as such or to be taxed along with the contents at higher rate. The apex Court negatived the claim of the dealer that cartons are the secondary packing material, and as such, it has to be taxed separately as per the scheduled rates and not along with the contents packed therein. The apex Court observed that Pathak, C.J., gave a restricted meaning to the deeming provision contained in section 6-C of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit it in the customer's vehicle. Thus, the apex Court held that the same was liable to tax. In K.C.P. Ltd. [2002] 126 STC 303 a division Bench of this Court rejected the claim of the assessee that packing material has to be taxed only as per the rates specified in the First Schedule while considering the provisions of section 6-C of the Act, as amended by Act No. 22 of 1995. In Mysore Breweries Limited (1999) 29 APSTJ 142 a division Bench of this Court considered the issue how the turnover relating to the cartons are to be taxed and the division Bench holding that cartons are being secondary packing material, which are intended to be used only for convenient transport of the bottles packed in it, it should not be treated as packing material sold along with the contents, therefore, liable to be taxed under entry 19 of the First Schedule to the Act. 24.. From the above it is clear that the issue has to be considered more on the facts as to the existence of an agreement, express or implied, for the sale of the packing materials, viz., bottles and cartons. Therefore, it would be appropriate to refer to the facts in some of the cases as recorded by the authorities. In fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is impermissible to sell the contents without the containers housing the contents. The Commissioner also referred to the decision of the Supreme Court in Raj Sheel's case [1989] 74 STC 379, and after examining the said decision and the ratio laid down therein, came to the conclusion that there cannot be two separate sale transactions with reference to the liquor, beer and the containers in which they are filled. Therefore, the order of the Appellate Deputy Commissioner was set aside. The same dealer, i.e., M/s. Mysore Breweries Limited is the petitioner in tax revision cases (T.R.C. No. 24 of 1998, etc.). The assessment years are 1984-85 to 1991-92. The assessment proceedings show that as per the accounts maintained by the dealer, it was maintaining only single account for the sale of beer and liquor, which is inclusive of all taxes. In the assessments which were made in December, 1984 and thereafter till G.O. Ms. No. 376, dated May 2, 1991 was issued, no separate claims have been made either for deduction or for levying tax at the scheduled rates separately with reference to packing material, viz., bottles and cartons. Therefore, the entire turnover was assessed and the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial is capable of being reused after the contents have been consumed. The packing is used for convenience of the transport and the quantity of the goods as such is not dependent on packing. The mere fact that the consideration for the packing is merged with the consideration of the product would not make the sale of the packing material as integrated part of the sale of the product. The assessing officer after considering the said objections and after verifying the invoice came to the conclusion that the dealer may show at varying figures with reference to the value of the packing material, than the total cost of the packing material along with the product. But, however, the invoice shows that the dealer was charging sales tax not at the rates as was applicable to the bottles or cartons, but was charged at almost near the rates that are applicable to the contents. Therefore, concluded that the sale of bottles and cartons was not a separate sale, but was an integral part of the content housed in the said packing material. Therefore, the assessing officer rejected the claim of the assessee and levied the tax at the rates that are applicable to the liquor and beer, as per the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the cartons are concerned, as the issue has already been decided in favour of the dealers treating them as a secondary packing material not required to be sold along with the contents packed therein, the dealers are entitled for the relief that the turnover representing the cartons are to be taxed at the rates fixed under entry 19 of the First Schedule to the Act and not along with the contents and at the rates at which the contents are liable to be taxed. Insofar as the bottles are concerned, categorical findings are recorded by the authorities that even in cases where the sale consideration was separately shown in the sale bill, the rate of sales tax levied on the sale consideration of the bottles clearly shows that they were not intended to be sold separately to be taxed as per the rates shown in the First Schedule to the Act. In fact, in respect of M/s. Mysore Breweries Limited, Vijayawada (Special Appeal No. 41 of 1994) for the assessment years 1984-85 to 1991-92, the assessing officer recorded a finding that as per the accounts maintained by the dealer, it was maintaining only a single account for the sale of beer and liquor, and therefore, the assessing officer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale. Further, even to curb or restrict such claim of separate sales and to avoid the dispute the Legislature had amended section 6-C by Act No. 22 of 1995 so as to include the turnover of the packing material, viz., bottles and cartons even if there is a separate sale of such materials. 28.. From the above facts, it is clear that though the learned counsel for the dealers contended that there was separate sale of packing material, the findings recorded by the authorities are otherwise. In the light of the specific findings recorded by the authorities, the dealers are not entitled for the benefit of taxing the turnover representing the bottles at the rates provided in the First Schedule to the Act. But, the turnover relating to cartons is to be taxed as secondary packing material at the rate provided in the First Schedule to the Act in the light of the decisions of this Court referred to earlier. 29.. In view of the above, the dealers are not entitled to any relief in the special appeals as well as tax revision cases to the extent of the bottles, but, however, they are entitled to the relief in respect of the cartons. 30.. The special appeals and tax revision cases, are accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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