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1997 DIGILAW 287 (MAD)

T. Natarajan and Brothers v. State of Tamil Nadu

1997-02-26

S.M.ABDUL WAHAB, THANIKKACHALAM

body1997
Judgment :- THANIKKACHALAM, J. The assessee is the appellant herein. Thiru T. Natarajan and Bros., Valangaiman, are dealers in coconuts. The assessee was assessed on a total and taxable turnover of Rs. 55, 71, 964 and Rs. 2, 58, 690 respectively for the year 1986-87, against the declared turnover of Rs. 55, 71, 964 and Rs. 2, 58, 690 respectively. In view of the defects found in the accounts, the assessing officer rejected the accounts and made the best judgment assessment. On appeal before the Appellate Assistant Commissioner, the assessee contended that the tax levied on the sales turnover of gunnies used as packing materials sold along with coconuts is not justified. Coconut is a commodity liable for exemption. If the content is exempt, the container is equally eligible for exemption and the container is taxable at the rates applicable to the contents. Relying upon the provisions of section3(7) of the Tamil Nadu General Sales Tax Act, 1959, as it stood prior to the amendment, the department contended that inasmuch as the packing materials were charged separately, tax is leviable on the container. However, the Appellate Assistant Commissioner held that when the content is not taxable, the container is also not taxable. Accordingly, he set aside the order of the assessing officer and allowed the appeal. 2. The Joint Commissioner scrutinised the order passed by the Appellate Assistant Commissioner. He was of the view that the order passed by the Appellate Assistant Commissioner in exempting the tax on gunny bags would amount to erroneous and prejudicial to the interest of the Revenue. Accordingly, he exercised his suo motu power under section 34 of the Tamil Nadu General Sales Tax Act, 1959. The Joint Commissioner, after hearing the learned counsel appearing for the assessee as well as the departmental representative and relying upon various decisions, held that the Appellate Assistant Commissioner was not correct in setting aside the order passed by the assessing officer and accordingly the Joint Commissioner set aside the order passed by the Appellate Assistant Commissioner and restored the assessment made by the assessing officer. It is against this order, the present appeal has been preferred by the assessee. 3. It is against this order, the present appeal has been preferred by the assessee. 3. The learned counsel appearing for the assessee submitted that a combined reading of the provisions of section3(7) and 3(8) of the Tamil Nadu General Sales Tax Act, 1959, as they stood, after amendment, would go to show that when the content is not taxable, the container is also not taxable. According to the learned counsel for the assessee, the earlier decisions relied upon by the Joint Commissioner are rendered with regard to the subject-matter arising prior to the amendment, and therefore those decisions are not applicable to the facts of the case. 4. On the other hand, the learned Additional Government Pleader (Taxes), while supporting the order passed by the Joint Commissioner, submitted that inasmuch as the price for the gunny bags was charged separately, the packing charges and the value of the container are not exempted under the provisions of section3(7) of the Tamil Nadu General Sales Tax Act, 1959. 5. We have heard both the learned counsel appearing for the assessee/appellant as well as the learned Additional Government Pleader (Taxes). The fact remains that the assessee sold during the year 1986-87 by way of inter-State trade, coconuts along with gunny bags. There was an amendment, amending the provisions of section3(7) of the Tamil Nadu General Sales Tax Act, 1959, with effect from May 22, 1984, by the amending Act 22 of 1984. The fact remains that the assessee sold during the year 1986-87 by way of inter-State trade, coconuts along with gunny bags. There was an amendment, amending the provisions of section3(7) of the Tamil Nadu General Sales Tax Act, 1959, with effect from May 22, 1984, by the amending Act 22 of 1984. The amended provisions of section 3(7) and 3(8) are read as under : "Section 3(7) : Notwithstanding anything contained in sub-sections (1), (2), (2-A), (2-B) or (3) but subject to sub-section (8), where goods are sold or purchased together with the containers or packing materials, the turnover of such goods shall include the price, cost or value of such containers or packing materials, and the packing charges, whether such price, cost or value or packing charges, are charged separately or not, and tax shall be levied thereon at the rate applicable to the goods contained or packed as if such containers or packing materials were the parts of the goods sold or purchased.Section 3(8) : Where the sale or purchase of goods contained in any container or packed in any packing material is exempt from tax at the hands of the dealer, then the price, cost or value of such container or packing material and the charges for packing, forming part of the turnover of the goods under sub-section (7), shall not be liable to tax. Explanation. - For the purpose of sub-section (7) and (8), 'containers' includes gunny bags, tins, bottle or any other containers." * 6. It remains to be seen that the Government have decided that the position regarding packing charges will have to be put on a rational basis with no scope for evasion, and at the same time, avoid harassment to dealers. The Government have, therefore, decided to amend section3 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959), so as to tax packing materials at the same rate as the contents, if the contents are taxable at the hands of the dealer and to exempt the packing materials, if the contents are exempt from tax at the hands of the dealer. Therefore, a combined effect of sub-sections (7) and (8) is that the price of the container or packing materials and the packing charges will be taxable or not, depending on the fact whether the goods contained in the container or packet are liable to, or exempt from tax in the hands of the dealer. In the present case, the sales turnover of coconuts is exempt from tax and therefore the value of the gunny bags in which the coconuts are packed is also exempt from tax. The decision cited by the learned Additional Government Pleader (Taxes) and the decision relied upon by the Joint Commissioner are relating to the subject-matter prior to abovesaid amendment. Therefore, they would not render any assistance to the learned Additional Government Pleader (Taxes), for supporting the order passed by the Joint Commissioner. Accordingly, on a plain reading of the abovesaid provisions contained in sub-sections (7) and (8) of section 3, we set aside the order passed by the Joint Commissioner and restore the order passed by the Appellate Assistant Commissioner. Accordingly, this tax case appeal is allowed. No costs. 7. T.C.M.P. No. 91 of 1997 : Since the main case, the appeal itself is allowed today, the above T.C.M.P. is dismissed.