Research › Search › Judgment

Gauhati High Court · body

2005 DIGILAW 639 (GAU)

Sikaria Sons (P. ) Ltd. v. Commissioner of Taxes

2005-09-01

RANJAN GOGOI

body2005
JUDGMENT Ranjan Gogoi, J. 1. The petitioner is a dealer registered under the provisions of the Assam Sales Tax Act, 1947, which was in force at the relevant point of time. He was engaged in the manufacture and sale of food items like atta, made, suji, besan, bran, etc., which were exempted items under the Act. For the periods ending 31.3.1988, 30.9.1988, 31.3.1989, 30.9.1989, 31.3.1990, 30.9.1990, 31.3.1991, 30.9.1991, 31.3.1993, 30.9.1992, 31.3.1993 and 30.9.1993 the petitioner was assessed to tax on the containers in which the exempted goods were sold by him. Aggrieved, petitioner had filed revision petitions against the assessment orders in question. The point involved being common all the revision petitions were disposed by a common order dated 11.7.1998 upholding the assessment orders passed. Aggrieved, the present writ petition has been filed. 2. The Assessing Officer, upon examination of the respective cases of the parties and the documents brought before him in the course of the assessment proceedings, recorded certain findings on the basis of which the said authority thought it proper to hold that in the transactions of sale of the goods there was an implied agreement of sale of the containers for which the petitioner assesses should be made liable for payment of tax. The findings, recorded by the Assessing Officer, on the basis of which the above conclusion was drawn, being relevant for the purpose of the present adjudication, the same may be conveniently extracted herein under: 1. The price of one bag of such goods has been shown as the selling rate in the respective sale bills. 2. The price per quintal or K.G. of such goods has not been mentioned in such sale bills or challans. 3. The total sale price in each and every bill is found to have been worked out on the basis of the rate per bag and not as per quintel. 4. The quantity of wheat products contained in each bag has been shown at 90kg. net as per the challan. 3. The revisional authority, hearing the revision petitions filed by the petitioner-assessee against the assessment orders, recorded the conclusion that the goods were sold in net weight without taking the weight the containers and further that the containers used, i.e., gunny bags, are the cheapest and most convenient mode of packing and transporting the goods in question. 3. The revisional authority, hearing the revision petitions filed by the petitioner-assessee against the assessment orders, recorded the conclusion that the goods were sold in net weight without taking the weight the containers and further that the containers used, i.e., gunny bags, are the cheapest and most convenient mode of packing and transporting the goods in question. However, the revisional authority was of the view that as the purchase price of the containers, i.e., gunny bags were reflected in the trading account of the assessee, an inference must be drawn that the purchase turn over of the gunny bags have been neutralized against the sale price of the gunny bags which was included in the price of the goods. On the aforesaid basis the assessment orders in question were upheld by the revisional authority. 4. Dr. A.K. Saraf, learned Counsel appearing for the writ petitioner has argued that on the findings recorded by the learned Assessing Officer and the further findings recorded by the Revisional Authority that the goods were sold in net weight without taking the weight of the containers and that the containers used to pack the goods, i.e., gunny bags are the cheapest and most convenient mode of packing the goods, no inference of any contract or agreement to sell the containers i.e. gunny bags along with the goods could have drawn by the authorities below. Relying on the judgment of the Apex Court in the in case Hyderabad Deccan Cigarette Factory v. The State of Andhra Pradesh reported in 17 STC 624 and two judgments of the Bombay land Madhya Pradesh High Court in the case of Dhariwal Bottle Trading Co. v. State of Maharashtra and in the case of Commissioner of Sales Tax, Madhya Pradesh Indore v. The Bhopal Sugar Industries Ltd. reported in Vol. 99 STC 326 and Vol., 48 STC 45, respectively, learned Counsel for the petitioner assessee has contended that in the present case, admittedly, there is no express agreement of sale or purchase of the container, i.e., gunny bag. The basic facts that would be necessary to infer an implied agreement as held by the Apex Court in the case of Hyderabad Deccan Cigarette Factory (supra), according to learned Counsel for the petitioner, are absent in the present case. The basic facts that would be necessary to infer an implied agreement as held by the Apex Court in the case of Hyderabad Deccan Cigarette Factory (supra), according to learned Counsel for the petitioner, are absent in the present case. No such inference of an implied agreement can be drawn merely because in the trading account of the petitioner the purchase turn over of the containers have been reflected. The aforesaid turn over, according to learned Counsel for the petitioner, could have been very well neutralized by the petitioner assessee against his profits and the burden of proving that a sale transaction relating to containers had been entered into by and between the parties is on the Revenue, and not on the assessee. In the facts of the present case, the Tribunal has gone grossly wrong in holding that the required burden had been discharged by the Revenue so as to make the petitioner assessee liable to tax on the basis of any deemed transaction of sale of containers. 5. The argument advanced on behalf of the petitioner assessee has met with strong resistance offered by' Sri. K.N. Choudhury, learned Additional Advocate General, Assam. Sri Choadhury has contended that the challans/sale bills brought on record in the course of the assessment proceedings clearly demonstrated that the sale price, of the goods was fixed as per the weight of the bag containing the goods and that the price per quintal or Kilogram was not mentioned in the challans. According to Sri Choudhury, the sale of the goods being on the basis of a bag/bags, it would, be reasonable to infer that such sale price included the price of the bag it is further argued that the purchase turn over of the bags having been reflected in the trading account of the petitioner, it cannot be said that the transfer of bags along with the goods was free of cost. In such circumstances, it was reasonable on the part of the authorities below to infer that the price mentioned in the challans was inclusive of the price of the bags and that there was an implied sale Of the bags so as to make the sale transaction exigible to tax. In support of his contention Sri Choudhury has relied on a judgment of the Apex Court in the case of Commissioner of Sales Taxes, Assam v. Prabhat Marketting Co. In support of his contention Sri Choudhury has relied on a judgment of the Apex Court in the case of Commissioner of Sales Taxes, Assam v. Prabhat Marketting Co. Ltd., Gauhati reported in [1967] 1 SCR 961. 6. In Hyderabad Deccan Cigarette Factory (supra) the question before the Apex Court was whether a manufacturer of cigarette would be liable for tax on account of an implied sale of the container in which the cigarettes are packed, in a situation where there was no express agreement of such sale of containers. In answering the above question the Apex Court held that to constitute a sale there must be an agreement between the parties for the purpose of transferring title in the goods which transaction must also be supported by monetary consideration and further that as a result of such transaction property in the goods actually passes to the buyer. The Apex Court also took the view that such a contract of sale may either be express or implied. In a situation where there is no express contract, before such a contract could be inferred the authority concerned must be satisfied by having regard to the fact's and circumstances of the case, that the parties had intended to sell or buy the packing materials. The Apex Court also took the view that it would not be correct to understand, as a general proposition of law, that whenever goods are sold in a container the parties do not agree to sell or buy the container also and that it is possible to visualize cases where an implied agreement to pay an extra price for the container can be understood. Illustratively, the Apex Court in Hyderabad Deccan Cigarette Factory (supra) laid down that in cases where items like scent or whisky is sold in costly containers or even cigarettes are sold in silver or gold caskets an implied agreement of sale of the containers can be easily inferred. However, the Apex Court clearly laid down that whether there was an implied agreement to sell the containers is a pure question of fact, the burden of proof of which fact lies on the Revenue and which question has to be answered by taking into account all relevant facts and circumstances of a given case. However, the Apex Court clearly laid down that whether there was an implied agreement to sell the containers is a pure question of fact, the burden of proof of which fact lies on the Revenue and which question has to be answered by taking into account all relevant facts and circumstances of a given case. In Dhariwal Bottle Trading Company (supra) the Bombay High Court was considering a reference made to it where the question involved was whether the gunny bags in which the empty bottles were purchased by the assessee from unregistered dealers' was the subject matter of a second sale to the distilleries for purposes determination of the liability of the assessee to purchase tax on the first transaction, vis-a-vis unregistered dealers. Relying upon the decision of the Supreme Court in Hyderabad Deccan Cigarette Factory (supra), the Bombay High Court proceeded on the basis that in the aforesaid decision, the Apex Court had laid down the law that an implied sale of containers cannot be inferred except in cases where the special facts and circumstances of the case would justify such an inference. In answering the reference the Bombay High Court took the view that certain goods have to be packed in containers of one kind or the other for the purposes of sale and in cases of such sale neither the seller nor the buyer intends to sell or buy the container which are merely used as a convenient and. cheap mode of packaging and transporting the goods. The Bombay High Court further took the view that the procurement of the containers by the seller of the goods for a price would not be wholly relevant for purposes of determination of an implied sale of the containers. Proceeding on the aforesaid basis the Bombay High Court thought it proper to take the view that only when the containers are of an extra ordinary nature, an implied sale of the container along with the sale of the goods can be inferred. In Commissioner of Safes Tax, Madhya Pradesh, Indore (supra) a similar question with regard to an implied sale of the bags in which sugar sold was contained came up for consideration before the Madhya Pradesh High Court. In Commissioner of Safes Tax, Madhya Pradesh, Indore (supra) a similar question with regard to an implied sale of the bags in which sugar sold was contained came up for consideration before the Madhya Pradesh High Court. Once again, relying on the judgment of the Apex Court in Hyderabad Deccan Cigarette Factory (supra), the Madhya Pradesh High Court took the view that though property in the container passes to the purchaser and the container does not become useless at the hands of the purchaser, the said fact, alone, would not be determinative of the implied sale of the container. The Madhya Pradesh High, Court took the further view that the ultimate conclusion as to the existence of an implied, sale must be drawn from the fact as to whether the containers were used by the dealer as a cheap and convenient mode of packing and transporting the goods and whether the cost of such, container is insignificant. Applying the above parameters, the Madhya Pradesh High Court came to the conclusion that as the said facts were present in the case before it no inference of an implied agreement of sale of containers could be drawn. 6A. An analysis of the decisions referred to above, without expressing any opinion on what appears to be an apparent extension of the principles discernible in Hyderabad Deccan Cigarette Factory (supra) as made by the Bombay High Court in the case of Dhariwal Bottle Trading Company (supra), would go to show that the question as to whether there is an implied sale of the containers is a question of fact that has to be decided having regard to the totality of the facts and circumstances of each case. Merely because the sale transaction of the goods does not reflect a separate price for the Containers and the transaction is apparently a sale of only the goods included in a container, it would not be correct to rule out an implied sale of the container also. Merely because the sale transaction of the goods does not reflect a separate price for the Containers and the transaction is apparently a sale of only the goods included in a container, it would not be correct to rule out an implied sale of the container also. The inference of an implied sale is a question that has to be decided by having regard to the intention of the parties and in drawing such an inference, the intention of the parties, the value of the material used, the convenience of the container for the purpose of handling, carriage, etc., would all be relevant factors and no inference of an implied sale should be made by having regard to one single factor. In the present case, the container for which the petitioner assessee has been made liable to tax is gunny bags. The transactions of sale of the goods was on the basis of the net weight without taking the weight of the container as has been found by the revisional authority. The particular container used in the transaction of the sale of the goods, i.e., gunny bag was again found by the learned revisional authority to be the cheapest and most convenient mode of packing and transporting the goods. In such circumstances, the more acceptable and reasonable inference that should be drawn, in the considered view of the Court, is the one that would negate any implied sale of the container. It would have been in convenient, if not impossible, for the seller and even for the buyer to sell or purchase the different wheat products in a loose form. The packaging material used was of the cheapest variety. When each of the transactions entered into was in respect of a sizeable quantity of the wheat product, i.e. 90 Kgs., no such transaction could have been made without the goods being packed in one form or the other. The circumstances relied upon by the revisional authority that the purchase turnover of the gunny bags was reflected in the trading account, though a relevant fact, could not have turned the scales in favour of an implied sale. The relevant entries in this regard in the trading account of the petitioner assessee, which is available on record, would go to show that such turnover has been shown as sales expenses. The relevant entries in this regard in the trading account of the petitioner assessee, which is available on record, would go to show that such turnover has been shown as sales expenses. If it is possible to infer that the seller could have tried to offset the said expenditure by including the cost of the gunny bag in the price of the goods, it is equally possible to draw an inference that for purposes of making the sale possible, the petitioner assessee could very well have adjusted the said expenses against his possible profits. In such a situation, it is the other facts, which may point to a conclusion against an implied sale, that would tilt the balance and it is by having regard to the said circumstances, as already recorded, that the Court is of the view that in, the facts of the present case and in view of the weight of the materials on record, it would be more reasonable to hold that there was no implied sale of the container, i.e., gunny bag between the seller and buyer of the wheat products contained therein. The decision of the Apex Court in Commissioner of Sales Taxes, Assam (supra) relied upon by the learned Additional Advocate General Turns on its own facts and can have no application to the present case. In the aforesaid case, the Commissioner of Commercial Taxes, Assam, had challenged the conclusion of the High Court to the effect that unless the value of the containers is shown separately the same could not be exigible to tax. The Apex Court answered the question by holding that whether the value of the containers would be exigible to tax or not would depend on the existence of an express on implied agreement for sale of the containers. It is the aforesaid conclusion of the High Court that was interfered with the Apex Court with the finding as mentioned above. It is, therefore, difficult to see as to how the said decision can be of any assistance to the Revenue in view of the question involved in the present case. 7. In view of the foregoing discussions and for the reasons assigned, I am of the view that this writ petition has to be allowed. It is accordingly allowed. It is, therefore, difficult to see as to how the said decision can be of any assistance to the Revenue in view of the question involved in the present case. 7. In view of the foregoing discussions and for the reasons assigned, I am of the view that this writ petition has to be allowed. It is accordingly allowed. The impugned assessment orders for the periods in question as well as the revisional order dated 11.7.1998 is hereby set aside. In favour of Department