Hemraj Udyog Vs Commercial Taxes Officer and Others

J.S. Verma, C.J.@mdashThis is a revision by the assessee against the order dated 21st November, 1978, passed by the Board of Revenue in a revision u/s 14(2) of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as "the Act").

2. The assessee manufactures vegetable oil and carries on the business of selling vegetable oil as well as its packing material, empty tins, in respect of both of which it is a registered dealer under the Act and both these items are entered in its registration certificate. For the year 1975-76 assessment was made of the sales of vegetable oil packed in tins made by the assessee. In the bills prepared by the assessee the cost of empty tins used as packing material for the vegetable oil was shown separately. The sales tax charged for vegetable oil was at the rate of 7 per cent, while that for the packing material, namely, tins, was 3 per cent as prescribed for the packing material. The assessing authority also included the amount of freight in the taxable turnover. The assessee appealed to the Deputy Commissioner (Appeals), which was rejected. The assessee then preferred a revision to the Board of Revenue which has been partly allowed by the impugned order dated 21st November, 1978 and the case has been remanded to the assessing authority for further action according to the directions given in the order.

3. The grievance made in the further revision by the assessee is only on two counts. The first grievance is against rejection of the assessee''s contention that it is liable to pay sales tax at the rate of 3 per cent only on the cost of empty tins used as packing material for vegetable oil according to Notification No. F. 6(21) FD(CT)/71-3 dated 27th March, 1971 and the conclusion that its liability is to pay sales tax at the rate of 7 per cent prescribed for vegetable oil. The second grievance is against inclusion of the amount of freight in the sale price and consequently in the taxable turnover. It is only the first grievance which requires a detailed consideration, since the other grievance relating to freight will have to be considered and decided afresh by the assessing authority in the light of the Supreme Court decisions on the point. In order to decide which decision of the Supreme Court is attracted for the purpose of including freight in the sale price in the present case, certain questions of fact are to be decided on the basis of the terms and conditions of the contract of sale. No such findings of fact have been given and, therefore, the direction of the Board of Revenue for inclusion of the amount of freight in the sale price and consequently the taxable turnover is set aside and the assessing authority is directed to decide that question afresh in the light of the Supreme Court decisions laying down the principles which indicate the situation in which the amount of freight has to be included in the sale price. No further direction with regard to the item of freight is called for.

4. The petitioner''s grievance regarding the concessional rate of 3 per cent on the amount representing the value of the empty tins used as packing material for vegetable oil is based essentially on Notification No. F. 5(21) FD(CT)/71-3 dated 27th March, 1971 read along with 5th proviso to Sub-section (1) of Section 6 of the Act which reads as under :

Provided also that when any goods are sold, packed in any materials, the tax shall be leviable on the sale of such packing materials (when not separately charged for) at the same rate (if any) as is applicable to the sale of the goods themselves.

5. The aforesaid notification dated 27th March, 1971 has to be read along with this proviso. This proviso lays down that where the goods are sold, packed in any material which is not separately charged for, then such packing material shall also be taxed at the same rate which is applicable to the sale of the goods itself. In other words where the packing material is sold separate from the goods itself and also charged for separately, then the rate applicable is not the same as that prescribed for the goods itself, but that rate which is prescribed for the packing material. The aforesaid notification dated 27th March, 1971 issued in exercise of the power conferred by Section 5 of the Act prescribes the rate of tax as 3 per cent for packing material and empty tins are specified as one of the kinds of packing material therein. In other words, where there is also sale of the packing material, namely, tins, and they are charged separately from the goods, then the empty tins used as packing material are to be taxed at the rate of 3 per cent according to this notification. The question is whether the nature of transaction in the present case is of this kind.

6. A recent decision of the Supreme Court in Jamana Flour & Oil Mill (P.) Ltd. v. State of Bihar [1987] 65 STC 462 reiterates the principle applicable in such a situation with reference to earlier decisions of the Supreme Court. It has been pointed out that the real question for decision is whether there was an agreement to sell packing material along with the products contained therein. If the circumstances of the case indicate even an implied agreement of the sale of the packing material as a different commodity, then its sale is taxable at the rate prescribed for the packing material and not the commodity contained in it. Applying that test it is clear that there was at least an implied agreement to sell the empty tins along with the vegetable oil contained therein and to charge for them separately as has been done in the bills prepared in the present case. Merely because it is in the same bill that the sale transaction of tins is shown separately, this distinction of selling the tins separately does not get obliterated. It is like preparing one bill for the sale of two separate commodities. This is precisely what has been done in the present case.

7. In view of the above factual position which is patent from the record and which has obviously been overlooked by the Board of Revenue, the benefit of the concessional rate of 3 per cent prescribed by the aforesaid notification dated 27th March, 1971 is applicable to the tins used as containers of the vegetable oil and the 6th proviso in Sub-section (1) of Section 5 of the Act does not apply to permit taxing the tins used as packing materials at the same rate of 7 per cent applicable to the commodity of vegetable oil filled therein.

8. It was stated at the Bar that in a similar case a different view had been taken by me in S. B. Sales Tax Revision No. 90 of 1987 (old Ref. No. 72 of 1980), The Malva Vanaspati and Chemicals Co. Ltd. Vs. Commercial Taxes Officer, decided on 28th April, 1987. A perusal of that decision clearly shows that the above point was not even urged in that case on behalf of the assessee and, therefore, no question arose for deciding it. In the present case it has already been held that there was an implied contract for sale of empty tins separate from the contract of sale of vegetable oil and that the bills were prepared accordingly. That decision is, therefore, distinguishable. At any rate, this point was neither raised nor decided in that case.

9. Another decision referred by learned counsel for the department is Ramnagar Cane and Sugar Co. Ltd. Vs. Commercial Taxes Officer, No doubt the facts of the case appear to be similar, but there are significant differences which distinguish the decision. The benefit of the concessional rates under the above notification was not given in that case, since the assessee was not also carrying on the business of selling empty tins and there was no express or implied contract of sale of the packing material as in the present case. It has already been held that there was at least an implied agreement to sell empty tins separately which were used as containers for the vegetable oil and this is how the bills were made out regarding both the sale transactions. Moreover, in the present case the is also carrying on separate business of selling empty tins which is one of the items entered in his registration certificate so that he was competent to enter into two separate sale transactions, one for the sale of empty tins and the other for the sale of vegetable oil. In that decision the finding was that there was no separate or implied agreement to sell empty tins separately and moreover, the assessee was not competent to do so as he was not a registered dealer for the separate business of selling empty tins. That decision is also, therefore, distinguishable on facts.

10. As a result of the above discussion it follows that the Board of Revenue was unjustified in holding that the empty tins used as packing material for the vegetable oil were also to be taxed at 7 per cent instead of 3 per cent under the aforesaid notification dated 27th March, 1971. The revision is accordingly allowed and the assessing authority is directed to make a fresh assessment on both these counts, namely, relating to packing material and freight in accordance with the above direction. In the circumstances of the case, there shall be no order as to costs.