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Andhra Cements Company Limited Versus Commissioner of Commercial Taxes, Andhra Pradesh, Nampally, Hyderabad

2015 (4) TMI 1090 - ANDHRA PRADESH HIGH COURT

Whether the appellant had established that the sale of cement and the containers/bags is not an integrated sale and that the sale of cement and HDPE bags/packing material - Engaged in business of manufacture and sale of cement - Appellant contended that containers are distinct and separate sales and that there was a contract express/implied for such separate sales of cement and the bags/packing material - Held that:- a reading of the invoice would clearly show that the sale of cement and packing .....

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the bag free of cost considering the significant cost of the bag. Therefore, from the contents of the invoice, the contention of the appellant that there is a separate and distinct sale of cement and packing material appears to be correct.

As there is no rebuttable evidence to rebut the presumption, which can be drawn, on the basis of the invoice which constituted an inclusive piece of evidence. Therefore, on facts that the appellant is able to establish that the sale is not an integ .....

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S. Ravi, Senior Counsel for G. Narendra Chetty For the respondent : The Special Government Pleader for Taxes JUDGMENT This appeal under Section 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 ('the Act' for short) read with Rule 41 of the Rules under the said Act by the appellant/assessee is directed against the orders dated 05.05.2001 of the Commissioner, Commercial Taxes in CCT's. Ref. L.V(2)/2103/98-2. 2. We have heard the submissions of the learned Senior Counsel for the .....

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ent is taxable under item 18 of first schedule; and, HDPE bags are taxable under the then relevant item 188 of first schedule to the said Act. The appellant was finally assessed for the assessment year 1991-92 under the APGST Act by the Commercial Tax Officer concerned ('the CTO' for short) and the CTO had passed final orders dated 17.03.1996 levying tax at the rate of 14.05% on the turnover of ₹ 4,80,86,526/- representing the amount received by the dealer towards the sales of pack .....

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is separate from the sale of cement and that the sale of packing material and cement is not an integrated sale. The appellant had further contended before the ADC that the turnover of packing material shall be subjected to tax at the rate applicable to the packing material/HDPE bags and that exemption shall be allowed on the sale of the said packing material to the extent purchased from other local registered dealers and sold along with the cement. The ADC had accepted the contentions of the app .....

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a show cause notice proposing to revise the order of the ADC in regard to the turnover of ₹ 4,80,86,526/-. After giving an opportunity to the appellant to file objections and make submissions, the respondent had passed the impugned orders confirming the proposal in the show cause notice. The respondent had finally held that the appellant had failed to prove that there is a separate sale of packing material and that therefore, there is only one integrated sale i.e., sale of cement with bag .....

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f cement and the packing material, in which the cement was packed and sold, are two independent and distinct sales and, therefore, the said two commodities should be taxed independently at the relevant rates applicable as per the relevant entries in the schedule to the Act. Packing material, which is purchased from other local registered dealers, should be granted exemption in the hands of the appellant as second or subsequent sale. The sale invoice is itself a contract between the appellant and .....

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material is used for convenience of transport; and, the quantity of goods as such is not dependant upon packing. The cement was sold in quantities of metric tonnes as is evident from the invoice. The rate of cement and the cost of packing material are separately shown in the invoice. The facts of the case and the documents produced clearly established that there is a separate sale of packing material and there is no integrated sale of cement with HDPE bags/packing material. The appellant has not .....

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on its own footing if there is an express or implied sale of packing material. It is the case of the appellant that there is a separate sale of HDPE bags/packing material. Hence, the second sale of packing material has to be exempted and the first sale of packing material has to be taxed at the rate of tax applicable to the packing material (gunnies)/HDPE bags. However, the tax was levied on first and second sales of packing materials on the rate applicable to the contents i.e., cement. The ADC .....

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s per the terms of G.O. Mos. No. 374 dated 26.04.1987. The recitals in the sale invoices are evidence of nature of transaction. Hence, packing material is not liable to tax at the rate of the content i.e., cement. It is pertinent to note that there is an amendment to entry 18 of Schedule I with effect from 01.08.1996. Though the said amendment is operative from 01.08.1996 the legislature itself recognizes that there can be separate sale of packing material and cement. Therefore, the order of the .....

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ement, the packing and the tolerance requirements of the packing material shall be in accordance with relevant provisions of the Standards of Weights and Measures (packaged commodities) Rules, 1977 ('the Rules' for short) and the standards prescribed by Bureau of Indian Standards ('the BIS' for short). The manufacturing process of cement in this case would show that the cement ultimately produced is being conveyed to automatic electronic packers and is being packed in 50 Kg polyt .....

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it depends upon the circumstances that may be found in each case. Therefore, it is the duty of the appellant to discharge the burden of proof and establish that there is an agreement to sell packing material separately. Except the invoice, which is being stated to be a contract by itself, there is admittedly no agreement in that regard. Even though the invoice shows sale of cement in quantity of tonnes and sale of packing material separately, the cement sold was delivered in bags and the cement .....

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o not allow the sale of cement contrary to the Rules and Standards. Considering that the commodity sold is cement, it cannot be accepted that there are two different and distinct sales of cement and bags." 6. (a) In support of his submissions, the learned Special Government Pleader had placed strong reliance on the following decisions: (i) Bengal Electric Lamp Works Ltd., v. State of Gujarat STC 1991-83-309; (ii) Dalmia Cement (Bharat) Limited v. State of Tamil Nadu STC 1991-83-442; and (ii .....

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ar (1987) 65 STC 462 (SC) 5. State of Tamilnadu v. EID Parry (India) Ltd., (1998) 109 STC 146 (MAD) 6. State of Tamilnadu v. Subramania Chettiar (1998) 109 STC 52 (MAD) 7. Annapurna Insecticides Industries v. Commissioner of CT (1992) 87 STC 206 (AP) 8. The Government of Madras v. Simpson and Co. Ltd., (1968) 21 STC 21 (SC) 9. Hindustan Coco Cola Beverages Pvt. Ltd., v. State of A.P. (2013) 61 VST 393 (AP). 10. Commissioner of Sales Tax., M.P. v. Gill and Co., Ltd., Ujjain (1974) 33 STC 536 (MP) .....

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e Commissioner/respondent is liable to be set aside and the order of the ADC and the consequential order of the CTO are to be restored as contended by the appellant/dealer" 8. POINTS 1 and 2: 8. (a) There is no dispute with the facts, which are narrated supra. We have given earnest consideration to the facts, the submissions and the law applicable. The appellant is contending that there is a contract and that it is the agreement and intention of the parties that the sales of cement and pack .....

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the respondent had held on facts that the dealer/appellant had failed to establish that the sales of cement and packing material are distinct and separate. Thus, the respondent had held that the sale of cement and packing material is an integrated sale. Before proceeding to determine the issues based on the factual matrix of the matter, it is necessary to refer to the following decisions. 8. (b) In Raj Sheel v. State of Andhra Pradesh (4 supra) the Supreme Court having regard to the facts of the .....

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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 tax on its own footing. Whether a transaction for sale of packing material is an independent transaction will depend upon several factors, some of them being:- 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 t .....

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the several factors as above, having regard to the facts of the cited case, had observed as follows:- "We are constrained to observe that no attempt has been made by the tax authorities to ascertain the facts of each case and to determine what were the actual ingredients of the contract and the intention of the parties........... We are unable, in the circumstances, to hold that the cases can be regarded as disposed of finally. It is regrettable but the cases must go back for proper findin .....

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adatta Cements v. State of Karnataka and another (1996) 101 STC 168 (SC) the Hon'ble Supreme Court while following the ratio in the above-cited decision, had held as follows:- "The appeals are, therefore, allowed and the writ petitions filed by the appellants are disposed of with the direction that the liability of the appellants for sales tax under Section 5(3-D) on the gunny bags/plastic bags in which the cement manufactured by the appellants is packed for sale would have to be determ .....

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eld as follows:- 'We are unable to hold that the Tribunal has decided the question of law erroneously. The TRC is devoid of merits and it is accordingly dismissed.' It is pertinent to note that the Tribunal in that case followed the decision in Raj Sheel case (4 Supra). In Hyderabad Deccan Cigarette Factory v. The State of Andhra Pradesh 1966 (Vol. XVII) STC page 624 the facts of the case show that there was no express contract of sale of packing material between assessee and its consume .....

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ial and in the light of the observations made in the judgment. If in its opinion the necessary material is not on record, it can get a finding from the Sales Tax Appellate Tribunal in that regard." In Commissioner of Taxes, Assam v. Prabhat Marketing Co., Ltd., (6 supra) the respondents sold hydrogenated oil which was exempted from sales tax under the Assam Sales Tax Act. The question involved was this: 'Whether the value of the containers in which the oils were sold can be assessed to .....

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ur and Oil Mill (P) Ltd., v. State of Bihar (7 supra) the Supreme Court had considered the ratio in the before mentioned cited case. In State of Tamil Nadu v. E.I.D. Parry (India) Ltd., (8 supra) the facts show that the respondent dealer had sold sugar, a controlled and exempted commodity, in gunny bags and chemicals in plastic jerricans. The assessing authority brought to tax an estimated turnover of gunny bags and the turnover of plastic jerricans for the years, which are relevant. He had disa .....

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The department had filed enhancement petitions in respect of the turnover of gunny bags. The Tribunal had dismissed the enhancement petitions and ordered remand of the dealer's appeals in two respects i.e., in respect of the collection of deposit for the sale of chemicals in the polythene jerricans and refund of the same as and when the said cans were returned, besides allowing exemption therefor; and in respect of the exemption claimed on the basis of"E1" forms to consider the ge .....

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se also, gunny bags, in which sugar - an exempted commodity - is packed and sold cannot at all be said to be exempt from tax on the ground that the contents of the container are exempt from tax." It is not out of place to state that in Raj Sheel case (4 supra) the Supreme Court upheld the validity of Section 6-C which was inserted by Act 11 of 1984 and had held that the said provision was only clarificatory in nature and observed that the question whether there was actual sale of containers .....

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evy of tax on packing material: Notwithstanding anything contained in Section 5, Section 5F, Section 6 and Section 6A, the rate of tax on packing material sold with the goods shall be the same as that of the goods packed or filled, whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled." In the present case the assessment year being 1991-1992, the section 6C as it stood prior to its amendment in 1995 is applicable. Section 6-C pri .....

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he amended new Section 6-C the words 'whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled' were introduced. Therefore, the amended section provides that the rate of tax on packing material sold with the goods shall be the same as that of the packed or filled"whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled". The said words were not there in the unam .....

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in the case on hand, except the invoice there is no [other] contract. A reading of the invoice would clearly show that the sale of cement and packing material is not an integrated sale and that the sale of cement and packing material are distinct sales. The invoice on a perusal would lay bare that the cement was sold in quantities of metric tonnes and that the rate of cement and the cost of packing material are separately shown. Therefore, the invoice produced clearly establishes that there is a .....

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t detain us for long. In Commissioner of Sales Tax, M.P v. Gill and Company Ltd., Ujjain (13 supra) and in Government of Madras v. Simpson and Co., Ltd., (11 supra) it was held that in the absence of any other material, recitals in invoices will furnish good proof of the intention of the parties relating to the terms of the agreement and that by themselves, they will be inclusive piece of evidence. In Commissioner of Sales Tax, M.P (13 supra) the question before the Supreme Court was whether the .....

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might charge the purchaser-customer. If these two things are present, the amount of freight or other sundry expenses can be said to constitute a part of the sale price. But, if there be other materials to show that there was agreement in this behalf not to charge freight so as to be included in the sale price, in that event, the freight cannot at all be made a part and parcel of the sale price and the bills would certainly constitute inclusive piece of evidence. But they cannot be treated to be .....

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ebuttable evidence to rebut the presumption, which can be drawn, on the basis of the invoice which constituted an inclusive piece of evidence. Therefore, on facts we are satisfied that the appellant is able to establish that the sale is not an integrated sale but, the sale of cement and packing material is distinct and separate. Therefore, when there is an agreement to sell separately the packing material and the goods packed or filled, the appellant/dealer can successfully contend that the sale .....

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ntegrated sale of the cement and the HDPE bags/packing material cannot be accepted. In regard to these contentions, suffice if it is observed that such a contention cannot be countenanced more particularly in view of the amendment to entry 18 of First Schedule of the Act which came into effect with effect from 01.08.1996 and which reads as under:- S. No. Description of goods Point of levy Rate of tax Effective from 18. *Cement (1018) (a) Where the sale price of cement includes the value of packi .....

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y is relevant to this limited extent in the present context of the matter. Coming to the decisions (1 to 3 supra) relied upon by the learned Government Pleader, in our well considered view, the said decisions are not helpful to advance the case of the respondent as the decision in the instant case has to be made having regard to the facts of the instant case as per the ratios in the decisions, particularly, the decisions of the Supreme Court. The decision in Bengal Electric Lamp Works Ltd., v. S .....

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e the transactions would be to find out whether there was express/implied agreement between the parties to sell the goods along with the packing materials; and, in that case there is an implied agreement to sell magnesite in gunny bags. In the decision in Annapurna Insecticides Industries v. Commissioner of Commercial Taxes (3 supra) this High Court remanded the matter to the Commissioner with a direction to consider the matter afresh taking into consideration the entire correspondence etcetera .....

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