Trends Polymer Pvt. Ltd. Vs The Asst. Commissioner-III

C.N. Ramachandran Nair, J.@mdashPetitioner is challenging Ext. P3 issued by the Assessing Officer revising the petitioner''s sales tax assessment for the year 2002-03 u/s 19 of the K.G.S.T. Act, 1963 bringing to tax the turnover of polythene sheets at the higher rate of 12%, as against the original assessment of the item at 4% treating it as packing material under entry 102 of the first Schedule to the K.G.S.T. Act, 1963. Petitioner was engaged in the manufacture and sale of polythene film to those engaged in production, packing and sale of milk, oil etc. The main supply of the product was to the milk supplying organisation "MILMA" alter printing their logo and name in the polythene sheets. The polythene sheets are converted into polythene bags in the course of packing milk wherein, the automatic packing machine converts the sheets to cover form and packs the same with specified quantity of the milk therein. The petitioner relying on Ext.P1 clarification of the commissioner of Commercial Taxes on 05-04-2001 collected and remitted tax at the rate of 4% treating polythene film as packing material "falling under entry 102 of the First Schedule to the K.G.S.T. Act". This was accepted by the Assessing Officer and tax was assessed on the turnover of the polythene film at 4%. However, the Government took Ext. P1 clarification issued by the Commissioner as a notification issued under entry 102 of the First Schedule to the K.G.S.T. Act and held that Commissioner has no power to declare polythene film as a packing material because, according to the Government, only the Government has the power under the above entry of the Schedule to declare a new material as a packing material. Since the impugned revised assessment issued u/s 19 read with Section 43 of the K.G.S.T. Act is based on Government Orders, petitioner has chosen to challenge the same before this Court even after filing statutory appeal before the appellate authority.

2. I heard me learned Counsel appearing for the petitioner and the learned Government Pleader appearing for the respondents. In order to appreciate the contentions raised, the relevant entry 102 of the First Schedule to the K.G.S.T. Act has to be gone into the detail and for this purpose the said entry is extracted here.

102. Packing cases and packing materials including cork, cork sheet, gunny bags, shooks, tea chests, waste paper, wooden boxes, wooden shavings, wooden crates, wooden cable, drum or other materials notified by Government in this behalf.

S.R.O. No. 1095/1999:

In exercise of the powers conferred by entry 102 of the First Schedule to the K.G.S.T. Act, 1963 (Act 15 of 1963) the Government of Kerala hereby notify the goods mentioned below as packing materials for the purpose of the said entry, namely:

1. Bituminised materials used in packing of goods.

2. Bottles made of glass or any other materials.

3. Carton, boxes, cones, cylinders or tubes made of paper, corrugated paper or card board paper, labels, paper cuttings.

4. Cellophane tapes.

5. Empty tins, barrels and drums.

6. Jute Hessian cloth.

7. Jute Twine including jute yarn.

8. Packing cases including planks, rafters, battens which assembled together from packing case.

9. Palm gum tapes.

10. Paper gum tapes.

11. Pilfer proof caps.

12. Plastic tapes and metal clips.

13. Polythene (Plastic) - tins, tubings, bags and covers of all sizes and varieties.

14. Tin containers and tin seals.

15. Rubber bands.

16. Woodwool.

17. Disposable cups, bowls and ice cream cups.

18. Plastic containers.

3. On an application for clarification u/s 59A of the K.G.S.T. Act by the Kerala Plastic Manufactures Association, the Commissioner of Commercial Taxes vide Ext. P1 dated 05-04-2001 clarified mat polythene film printed with the logo of the purchaser sold by the producer or manufacturer is a packing material falling under entry 102 of the First Schedule to the K.G.S.T. Act and the rate of tax is 4%. It is based on this clarification that the assessment was originally completed at the rate of 4% on the turnover of polythene film vide Ext.P2. Even though the Government''s order based on which the assessment was revised by the Assessing Officer u/s 19 read with Section 43 of the K.G.S.T. Act is not produced in Court, the learned Government Pleader has produced the copy of the communication issued by the Government on 12-09-2006. I have gone through the said communication and I find that the stand of the Government is that the Commissioner has no authority u/s 59A of the K.G.S.T. Act to declare any item as packing material and according to the Government, only the Government has authority to declare any item as packing material. It is also stated in the communication by the Government that the polythene film is not covered by notification of the Government and what is covered among the other items notified is only polythene bags which is not the item sold this petitioner and therefore, the petitioner is liable to pay tax at higher rate applicable i.e., at the rate of 12% as against the original assessment of the item at 4%. Counsel for the petitioner contended that polythene film is a "packing material" which is also covered by entry 102 of the First Schedule to the K.G.S.T. Act and therefore, irrespective of the Commissioner''s clarification, the petitioner''s turnover of polythene film has to be assessed at 4% under entry 102 of the First Schedule to the K.G.S.T. Act as initially done. He also contended that the communication issued by the Government declaring Ext.P1 clarification issued by the Government declaring Ext.P1 clarification issued by the Government declaring Ext.P1 clarification issued by the Commissioner of Commercial Taxes as illegal, is also without jurisdiction. He has referred to the Commissioner''s finding in Ext.P1 that notification required from Government side is only on other packing materials which will not come within the meaning of "packing case'' and "packing materials" referred to in the above entry to the Schedule. The Government Pleader on the other hand pointed out that the Government has, through notification, notified several items like bottles made of glass, plastic etc. rubber band, cellophane tapes, gunny bags etc. as packing materials and according to him, only such materials notified by the Government under 102 Schedule K.G.S.T. Act will be entitled to be assessed at the rate of 4% as provided by the Schedule-entry.

4. It is clear from the above stated entry 102 that if an item comes within the ordinary connotation of the word "packing case" or "packing material", it will certainly be assessable under the said entry at the rate of 4%. Besides this what the Government is authorised to do, is to notify materials other than those items stated in the entry as packing materials. In fact, among the several items notified by Government are cork sheet, shooks, waste paper etc. which probably may not answer the description of ''packing case'' or "packing material" within the ordinary connotation of the said terms. The purpose of giving authority to the Government to notify other materials as packing cases or packing materials is to enlarge the scope of the entry so that Government enjoys the power to notify any item which do not come within the meaning of "packing case'' or packing materials" also so such goods to provide the rate of tax provided under entry 102 of the Act to such goods also. In the other words, if an item comes within the normal connotation of the words "packing case" or "packing materials", no notification is required by the Government declaring it as a packing case or a packing material to attract entry 102 of the first Schedule to the K.G.S.T. Act. In the case of Commissioner of Income Tax, Andhra Pradesh Vs. Taj Mahal Hotel, Secunderabad, , the Supreme Court held as follows:

The word ''includes'' is generally used to enlarge the meaning of words or phrases used in the statute so that, words and phrases may be construed as comprehending not only such things as they signify according to their nature and import, but also there things which the interpretation clause declares that they shall include.

5. Similarly, in the case of The Regional Director, Employees''State Insurance Corporation Vs. M/s. High Land Coffee Works of P.F.X. Saldanha and Sons and another, a , the Supreme Court held that the word "including" was only illustrative and was intended to enlarge the meaning of the preceding word or words and it is by way of extension and not with restriction. Therefore, going by the principles laid down in these decisions it is clear that the notification by the Government declaring an item as packing case or packing material is required only if such items do not come within the normal meaning of these words. In fact, the Government rightly notified rubber bands, Cellophane tapes etc. as packing materials because, but for such notification declaring those items also as packing materials, they would not have come within the normal connotation of "packing materials". However, it is seen that the Government has notified certain other items like bottles made of glass, plastic etc. and gunny bags, as packing materials which is an unnecessary exercise engaged in by the Government because without any such notification, those items are intrinsically "packing materials" covered by entry 102 of the Schedule to the Act. Therefore, I am of the view that the Commissioner rightly interpreted entry 102 vide Ext.P1 declaring the polythene film sold by the petitioner as packing materials. The statement by the Government in their order that polythene film is not packing case is correct but mistake happened in their order because they have not considered whether polythene film is "packing material" which it is and is therefore covered by the entry 102. Packing cases and Packing bags are made to pack items of specified volume shape or size. However, packing materials are purchased by the producers of goods, to cut or shape it and use it as packing materials depending on the nature of the packing required. In this case, it is conceded that the purchasers of polythene films from the petitioner are purchasing and using the item to make polythene covers to pack goods like milk, oil, etc. So long as the item sold is used for packing goods, it is packing material, irrespective of the fact whether the petitioner has sold it is rolls or sheets and the purchaser in the course of packing in the automatic packing machine only made it into covers and packed the goods.

Following the above findings, I quash Ext.P5 to the extent of assessment of polythene sheets at the rate in excess of 4% and restore the original assessment. The writ petition is allowed as above.