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2014 DIGILAW 802 (RAJ)

Shivdeep Food Products v. State of Rajasthan

2014-03-27

BANWARI LAL SHARMA, DINESH MAHESHWARI

body2014
Hon'ble MAHESHWARI, J.—By way of this writ petition, the petitioner-assessee has questioned the judgment dated 10.02.1999 as passed by the Rajasthan Taxation Tribunal, Bench at Jodhpur (‘the Tribunal’) in Original Application No.54/1996 whereby, the Tribunal rejected its challenge to the re-assessment proceedings under Section 12 of the Rajasthan Sales Tax Act, 1954 though while making observations that the facts and circumstances of the case did not warrant charging of interest or imposition of penalty. 2. The contextual facts are in a narrow compass and could be noticed in brief as follows: The petitioner, M/s Shivdeep Food Products Pvt. Ltd., is a Company engaged, inter alia, in the business of manufacturing and selling Bhujia, Papad and Namkeen. The petitioner has been registered under the Rajasthan Sales Tax Act, 1954 (‘the RST Act’) as also under the Central Sales Tax Act. 1956 (‘the CST Act’). 3. The State Government had, in exercise of the powers conferred by the relevant provisions of the RST Act and CST Act, framed the Sales Tax New Incentive Schemes for Industries, 1989 (‘the Schemes’). The petitioner was admitted to and availed of the benefits under the said Schemes while holding the valid Eligibility Certificate (‘EC’). Under the Schemes, the petitioner was entitled to avail the benefits subject to a maximum of 75% of the total tax liability. For the period in question, the petitioner, on the strength of the EC held by it, availed the benefits of sales tax exemption under the Schemes to the permissible extent on the taxable turnover inclusive of the cost of the packing material. According to the petitioner, as per the EC, it had been directed to, and it did, deposit the remaining amount of tax every month. 4. The petitioner had been selling the above-mentioned products, which were packed in pouches/polythene bags. It has been the case of the petitioner that nothing was charged separately towards the cost of packing material as the same was included in the price of the goods. Thus, according to the petitioner, the sale of packing material became an integral part of the sale of the goods. It has been the case of the petitioner that nothing was charged separately towards the cost of packing material as the same was included in the price of the goods. Thus, according to the petitioner, the sale of packing material became an integral part of the sale of the goods. It has further been the case of the petitioner that for the relevant assessment years, all the accounts were produced before the Assessing Authority (‘AA’); and the return clearly showed the turnover, inclusive of the cost of packing material; and that there was no separate charge for the cost of packing material in the sale price. Thus, according to the petitioner, there was full disclosure of all the facts; and the implied sale of packing material stood taxed at the rate applicable to the goods packed therein because, as reiterated by the petitioner, the price of the goods included the costs of packing material too. The petitioner pointed out that the assessment orders for the relevant assessment years were passed on 23.12.1995 (Annex.2 & Annex.3) wherein the AA accepted the above position that the price of goods was inclusive of the price of packing material. 5. The petitioner stated the grievance that despite the clear position and assessment having been completed, the AA issued notices under Section 12 of the RST Act for levy of tax on the packing material used. It was stated in the notices (Annex.4 & Annex.5) that while making the original assessment, tax on the sale of packing material could not be levied and the petitioner was called upon to show cause as to why the differential tax at the applicable rates be not charged on the estimated sale of packing material. The petitioner was further called upon to show cause as to why penalty be not imposed and interest be not charged. The petitioner stated that in the impugned notices, the alleged sale of packing material under the RST Act as also CST Act had been shown on the basis of mere estimates and surmises; and that neither any such estimate was permissible in law nor any separate tax was to be charged by presuming separate sale of packing material. The petitioner stated that in the impugned notices, the alleged sale of packing material under the RST Act as also CST Act had been shown on the basis of mere estimates and surmises; and that neither any such estimate was permissible in law nor any separate tax was to be charged by presuming separate sale of packing material. The petitioner also put to question the constitutional validity of Section 12 of the RST Act and preferred the OAs which have been considered and decided by the Tribunal in its common impugned judgment dated 10.02.1999. The Tribunal, in its impugned judgment dated 10.02.1999, after rejecting the contentions as regards constitutional validity of Section 12 of the RST Act, proceeded to consider the principal issue involved; and, relying on its decision in the case of another assessee M/s Adarsh Minerals and Chemicals, rejected the contentions of the petitioner. The Tribunal, of course, found that interest could not be charged in the matter nor there was any warrant for imposition of penalty. The Tribunal proceeded to reject all the similar nature OAs while observing as under:- “11. The point at issue that remains to be decided is whether in the periods in question the benefits of sales tax exemption under the Scheme could be availed of even on the taxable turnover in packing material. This aspect of the matter is fully covered by the decision of this Tribunal in M/s Adarsh Minerals and Chemicals vs. Assistant Commissioner, Commercial Taxes Department, O.A. No.101/1997 decided on 14.5.98 where it was held with respect to identical provisions in similar Scheme notified in 1987 that benefits under the Schemes of exemption on sales tax was not permissible on the turnover in packing material. This decision squarely covers the point in controversy in the instant applications. 12. Therefore, the notices issued for escapement of tax cannot be faulted. However, it deserves to be pointed out that interest under section 11B, RST Act cannot be charged in the proceedings relating to assessments under the CST Act. 13. As there is no allegation that the petitioners had in any manner concealed the transactions in the packing material from their books of accounts or the returns filed the imposition of penalty under section 16(1)(e), RST Act would not be warranted. 14. Therefore the applications stand dismissed with the above observations. No order as to costs.” 6. 13. As there is no allegation that the petitioners had in any manner concealed the transactions in the packing material from their books of accounts or the returns filed the imposition of penalty under section 16(1)(e), RST Act would not be warranted. 14. Therefore the applications stand dismissed with the above observations. No order as to costs.” 6. Assailing the judgment dated 10.02.1999 so passed by the Tribunal, the petitioner has preferred this writ petition. This petition was admitted for consideration on 29.05.2000 and the operation of the judgment passed by the Tribunal was stayed. The interim order was confirmed to last until the decision of the writ petition on 23.01.2001. 7. It has strenuously been argued by the learned counsel for the petitioner that the impugned judgment suffers from errors apparent on the face of record. It is submitted that indisputably, the petitioner sold Bhujia, Namkeen etc. in pouches/polythene bags and no separate price was charged for the packing material. Thus, according to the learned counsel, the cost of packing material was included in the price charged for the goods. It is submitted that the proportionate benefits under the Schemes were granted to the petitioner on the strength of Eligibility Certificate and such benefits were availed on the taxable turnover, which was inclusive of the cost of packing material; and regular assessments were completed while allowing such benefits. In the given fact situation, according to the learned counsel, the completed assessments were sought to be reopened on a baseless assumption that exemption was available only in respect of the turnover of goods and not in respect of the turnover of packing material. It is contended that as per the provisions of Section 5(1) read with Section 2(s) and 2(t) of the RST Act, where goods were sold as packed in any material, it was to be treated as one composite sale of the commodity packed in the packing material; and the consideration received cannot be segregated by dividing it into two sales: one of the commodity and another of the packing material. According to the learned counsel, where separate price has not been charged, the question of splitting the sale price of the commodity and of the packing material does not arise. According to the learned counsel, where separate price has not been charged, the question of splitting the sale price of the commodity and of the packing material does not arise. The learned counsel has referred to the decisions of this Court in Commercial Taxes Officer, Bharatpur vs. B.R.Oil Mills & Anr.: 1986(2) WLN 111 and Udaipur Distillery Co. Ltd. vs. Rajasthan Taxation Tribunal & Ors.: (2003) 132 STC 489 . A decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Calcutta vs. Hindustan National Glass & Industries Ltd.: (2005) 3 SCC 489 has also been referred. 8. The learned counsel for the respondent-Revenue has contended that as per the amendment to 5th proviso to sub-sec. (1) of Sec. 5 of the RST Act by the Amendment Act No.9 of 1988, it is clearly provided that when any goods are sold as packed in any material, tax is to be levied on such packing material whether charged separately or not. It is submitted that in these matters, the tax on the packing material having escaped, the action under Sec. 12 of the RST Act is legal and justified. It is also submitted that the petitioner has availed of the tax benefits on the turnover in the packing material too which is not permissible in law as only the sale of manufactured Bhujia and Namkeen was exempted and not the sale of packing material included in the turnover. Thus, according to the learned counsel, the Tribunal has rightly rejected the contentions of the petitioner on the principal issue involved. 9. Having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that this writ petition deserves to succeed. 10. A bare look at the fact situation of the case, the stand of the respondent-Revenue as also the observations of the Tribunal makes it clear that the Revenue proceeded on the presumption that there had been a separate turnover in respect of the packing material. The Tribunal has accepted this contention and rejected the OA. The question, thus, is as to whether there could be such splitting of the turnover into two: one referable to the price of the commodity; and another referable to the price of the packing material? On the facts of the case, in our view, it cannot be. 11. The Tribunal has accepted this contention and rejected the OA. The question, thus, is as to whether there could be such splitting of the turnover into two: one referable to the price of the commodity; and another referable to the price of the packing material? On the facts of the case, in our view, it cannot be. 11. In the case of B.R. Oil Mills (supra), a Division Bench of this Court summed up the principles for consideration if the packing material was subject to the levy of sales tax as follows:- “(1) There should be a contract to sell the packing material between the parties and to constitute sale there should be passing of title to such goods and the property, in fact, must actually pass in the goods and it must be supported by money consideration. Unless all these elements are present, there could be no sale; (2) That simply because the property in the packing material is transferred to customer an implied agreement for sale of the packing material cannot be inferred; (3) That the assessing authority is to consider if the parties intended to sell or buy the packing material, or whether the subject-matter of contract for sale was of some commodities and packing material did not form of part of bargaining at all, but were used by the seller as a convenient and just vehicle of transport; (4) That in order to decide the liability to be taxed regarding packing material, it should be taken into account whether the packing materials are comparatively of insignificant value; (5) That it is not possible to state proposition of law that when ever particular goods are sold in a container the parties did not intend to sell or buy the container also; (6) That the burden lies upon the taxing authorities to show that there was a taxable sale and that the burden is not discharged by merely showing that property in the goods which belongs to the party performing the service or executing the contract stands transferred to the other property; (7) That the question whether there is an agreement to sell packing material is a pure question of fact depending upon the circumstances of each case.” 12. In the case of Udaipur Distillery Co. In the case of Udaipur Distillery Co. Ltd. (supra), another Division Bench of this Court considered the question as to whether sale of packing material was included in tax under Section 2(p) of the RST Act. The Court observed that the question whether there is a transaction of sale of packing material or not, really arises only in case where no separate or independent price for packing material is charged and the transaction apparently stands as the one individual transfer of goods in packed condition. The Court found that there was no room for raising any presumption that in a case where price is not charged separately and the principal commodity is exempt from tax, it would be a transaction of transfer of principal commodity and packing material for separate considerations so as to constitute two transactions independent of each other. The Court said,- “……..The question whether there is a transaction of sale of packing material or not really arises only in case where no separate and independent price for packing material is charged and the transaction apparently stands as one individual transfer of goods in packed condition. In case where statute provides like in the present case, that where commodity is sold packed in any material, tax on the sale of packing material shall be same as applicable to commodity that is packed, whether price is charged separately or not, can it be presumed that where no separate price is charged for packing material still it must be deemed to be two separate sales of commodity packed and packing material ? 46. 46. We do not find any room for raising any such presumption, that in a case where the price is not charged separately and the principal commodity is exempt from tax as a matter of law, it should be presumed that it is a transaction of transfer of the principal commodity as well as packing material for separate considerations so as to constitute two transactions independent of each other.” The referred proviso to sub-section (1) of Section 5 was also taken into consideration by the Division Bench of this Court which reads as under:- “Provided also that when any goods are sold, packed in any material, the tax shall be leviable on the sale of such packing material, whether charged separately or not, at the same rate as is applicable to the sale of the goods themselves : and if the goods are exempted from tax under Section 4 or have already been subjected to tax under the Act, then at the rate notified for such packing material from time to time."” After a detailed reference to several of the decided cases, the Court said,- “52. The proviso to section 5(1) of the Act merely provides the rate structure to be charged on the commodities which have been sold and if it is analysed minutely, we may bifurcate it into three parts, viz., (i) that where the commodity has been sold in packed condition and no separate consideration is charged for packing material ; (ii) where such commodity is sold in packed condition where price is charged separately for the packing material and with these two conditions ; and (iii) it further provides rates on which turnover of packing material is to be charged. If this provision is read in its entirety, it nowhere raises the presumption that where the commodity is sold in packed condition and no separate price is charged but still for the purpose of computing the turnover it shall be split up into two turnovers of the principal commodity and of the packing material to be aggregated for the purpose of levying the same rate. It is only where the assessee claimed deduction from turnover of the principal commodity by raising claim that there are two separate sales and that law provides notwithstanding there may be two separate sales, rates chargeable on the turnover of two different commodities would be same where the sale of packing material is a part of the one single transaction and the commodity sold in the packing material. It is only in cases where the principal commodity is exempt from tax then the question may arise for levying tax on different rates on the turnovers referable to the packing material. However, merely because different rates have been prescribed for packing material in cases where the goods sold in packed condition are exempt from tax, does not give rise to any such legal fiction to assume that where there is a single price charged for the commodity sold in packed condition, invariably, there is a sale of packing material independent to the sale of the principal commodity. In all such cases where the assessee claimed deduction by raising plea of independent transaction to reduce his taxable turnover of the principal commodity or the Revenue wants to tax it independent of the principal commodity, it has to be established as fact before invoking rates to be applied under section 5(1) of the Act or provisions thereto that there is a sale of the commodity sought to be taxed in accordance with the well-established norms and one of such norms in all circumstances is the transfer of property in goods where the principal or packing material must be for a consideration referred to such commodity alone. The intendment of the parties to transfer the property in packing material independent of goods packed therein for a price must be shown to exist and if it is transferred under compulsion without there being a voluntary agreement it must be shown that the transfer is of the packing material independent of it.” 13. In Hindustan National Glass (supra), the assessee was manufacturing glass bottles which were used by its buyers for packing their own products. The assessee had been delivering the bottles to the buyers in loose condition at the factory gate but at the option of the buyer, was also providing packing to ensure safety during transit and getting the cost of packing reimbursed by such buyers. The assessee had been delivering the bottles to the buyers in loose condition at the factory gate but at the option of the buyer, was also providing packing to ensure safety during transit and getting the cost of packing reimbursed by such buyers. In some cases, buyers were supplying their own packing materials where besides the ex-factory prices, the assessee had been charging initial packing charges. In the given circumstances, the Hon'ble Court held that findings of CEGAT with reference to the background that packing was not necessary for the glass bottles in the condition in which they were sold in the wholesale market at the factory gate, was factual and not perverse so as to warrant interference. The Hon'ble Supreme Court referred to several of its past decisions including those in CCE vs. Hindustan Safety Glass Works Ltd.: (2005) 3 SCC 468 and Govt. of India vs. Madras Rubber Factory Ltd.: (1995) 4 SCC 349 . The test to be employed for the measure of cost for the purpose of Excise Act was indicated by the Hon'ble Supreme Court with reference to the said two decisions in the following:- “12. In Government of India vs. Madras Rubber Factory, it was, inter alia, held as follows: "The test is: whether packing, the cost whereof is sought to be included is the packing in which it is ordinarily sold in the course of a wholesale trade to the wholesale buyer. In other words, whether such packing is necessary for putting the excisable article in the condition in which it is generally sold in the wholesale market at the factory gate. If it is, then its cost is liable to be included in the value of the goods; and if it is not, the cost of such packing has to be excluded. Further, even if the packing is 'necessary' in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. Further, even if the packing is 'necessary' in the above sense, its value will not be included if the packing is of a durable nature and is returnable by the buyer to the assessee. We must also emphasize that whether in a given case the packing is of such a nature as is contemplated by the aforesaid test or not, is always a question of fact to be decided having regard to the facts and circumstances of a given case." After analyzing various decisions, the position was succinctly summed up by this Court in Hindustan Safety Glass Works case as follows: "14. We are in complete agreement with the above conclusions. The question is not for what purpose the packing is done. The test is whether the packing is done in order to put the goods in a marketable condition. Another way of testing would be to see whether the goods are capable of reaching the market without the type of packing concerned. Each case would have to be decided on its own facts. It must also be remembered that Section 4(4)(d)(i) specifies that the cost of packing is includible when the packing is not of a durable nature and returnable to the buyer. Thus, the burden to show that the costs of packing is not includible is always on the assessee." 14. Applying the principles in the above-referred decisions to the facts of the present case, we find no justification for the Revenue suggesting any segregation and splitting of the turnover into two parts: one relating to commodity and another to the packing material. It is not the case of the Revenue that any price has been charged separately for the packing material. The price of the commodity and the packing material has been taken together for the purpose of turnover and taxable turnover. It is also not the case of the Revenue that packing was merely a matter of convenience and used only for the purpose of transport. There is nothing, even remotely, available on the record to show any intendment of the parties to transfer, for a price, the property in the packing material independent of the goods packed therein. 15. It is also not the case of the Revenue that packing was merely a matter of convenience and used only for the purpose of transport. There is nothing, even remotely, available on the record to show any intendment of the parties to transfer, for a price, the property in the packing material independent of the goods packed therein. 15. Moreover, exemption under the new Schemes was available to the Industrial Units covered thereunder; and thus, the exemption had been provided to the persons concerned and not to the commodity; and that had been only regarding payment to the specified extent. Indisputably, the remaining of the tax amount on the turnover, which included packing material component too, had been paid by the assessee. 16. In an overall comprehension of the matter, we are clearly of the view that no sale of packing material has been involved in the present case. It has not been the case of the Revenue that the sale of Bhujia, Papad and Namkeen could have been made without putting them in pouches/bags, which are primary packing material required to be used for making the said goods marketable. 17. Viewed from any angle, we are inclined to accept the contention of the petitioner that in the sale transaction in question, the price consisted of both the components viz., the price of goods as also the price of packing material. In other words, the turnover had been of one single event i.e., of the sale comprising of goods as also packing material, which were integrated components of the transaction; and there had been no separate sale of packing material. The ratio of the decisions above-referred, in our view, directly support the case of the petitioner. In fact, broadly on these very propositions, this Court, while admitting this writ petition, stayed the operation of the impugned judgment where the Tribunal had purportedly split the composite sale price. 18. The judgment as passed by the Tribunal that exemption was not available on the turnover in packing material proceeds, in our view, on baseless presumptions and cannot be sustained. 19. Accordingly, and in view of the above, this writ petition is allowed. The impugned judgment dated 10.02.1999 is set aside; and the impugned notices dated 01.03.1996 (Annex.4 & Annex.5) are quashed. No costs. .