CTO, A/E, Bhilwara vs Suzuki Textiles Ltd.

Vineet Kothari, J.—1. The present Sales Tax Revision Petitions have filed by the petitioner-Revenue against the order dated 29th July, 2005 passed by the learned Rajasthan Tax Board, Ajmer in different appeals of the petitioner-Revenue which were dismissed by the learned Tax Board. The dispute in the present matter is about imposition of the tax on the packing material used for packing the clothes.

The relevant portion of the impugned order dated 29th July, 2005 is quoted herein below for ready reference:-

"6. This section goes to show that the rate of tax on packing material will depend upon the rate of tax on the goods sold. If the tax to be charged is 16% on the goods sold then the tax on the cost of the packing material will also be 16%. Similarly if no tax is payable on the goods being packed then no tax shall be chargeable on the packing material also. This legal position is clear from the above provisions and from the judgment of the Supreme Court is is reported in , 1998 Sales Tax Cases Page 598 (Premier Breweries Vs. State of Kerala). In this case it was held that if the sale or purchase of the goods contained in a container or packed in a packing material is exempted from tax, then no tax shall be payable on the sale or purchase of the container or the packing material in which the goods are sold. It was further held as under:-

"The underlying idea behind these rules is that packed goods are to be taxed as composite units. Various rates of tax have been fixed by the Act for sale or purchase of various types of goods. If the goods are sold in packages or containers then for purpose of imposition of tax, the turnover of the goods will have been calculated by including therein the turnover of the packages and containers."

Keeping in view the above position, I am of the view that packing material used for packing the cloth was not subject to tax and therefore neither the tax nor the penalty could be imposed on the appellant.

The result is there is no merit in these appeals, they deserve to be dismissed which are hereby dismissed.

sd/- (G.S. HORA) Member"

Today, both the learned counsels for the parties submit that the controversy involved in the present cases relating to the imposition of tax on the packing material is covered by the decision of the co-ordinate Bench of this Court in the case Commercial Taxes Officer, Anti Evasion, Bhilwara Vs. M/s. Suzuki Textiles Ltd., Village Gudda, Post Office-Mandal, District Bhilwara, SB. Civil (Sales Tax) Revision Petition No. 288/2006, decided on 19.02.2013 in which, this Court, while following the earlier decision of the coordinate Bench of this Court at Jaipur Bench, Jaipur in the case of Assistant Commissioner, Commercial Taxes Department Vs. Teletube Electronic Ltd., Sales Tax Revision Petition No. 864/1999, decided on 26.04.2002, had proceeded to dismiss the revision petition (No. 288/2006) filed by the petitioner-Revenue.

The relevant portion of the findings in the aforesaid case of Assistant Commissioner, Commercial Taxes Department Vs. Teletube Electronic Ltd. (supra) is also quoted herein under for ready reference:-

"4. In the aforesaid case, the court has held that unless the Revenue authorities decide as a fact that sale of packing material has taken place independently of the principal material by establishing that the transfer of property in the packing material has taken place for consideration referable to the transfer of property in packing material, no tax can be levied where there is a single transaction for one sale price by splitting up the sale price by splitting different items of expenses which go to make the sale price of the commodity as one single unit.

The court has also found on analysing the proviso to Section 5(1) that it merely provides the rate structure for computing the tax chargeable on taxable turnover. 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. It has to be established as a fact before invoking rates to be applied under last proviso to Section 5(1) of the Act or proviso 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 whether 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 packing material independent of it.

In view of the aforesaid judgment of this Court, the revision must fail as in the present case a tax has been levied only by invoking the last proviso to Sub-section (1) of Section 5 without establishing the fact necessary for establishing the sale of packing material independent of the sale of the principal commodity. Accordingly, this revision fails and is hereby dismissed."

Having heard the learned counsels for the parties and upon perusal of the material available on record, including the judgments cited at bar, this Court is satisfied that the aforesaid revision petitions of the petitioner-Revenue are liable to be disposed of in terms of the judgments rendered in the aforesaid cases of Commercial Taxes Officer, Anti Evasion, Bhilwara Vs. M/s. Suzuki Textiles Ltd., Village Gudda, Post Office-Mandal, District Bhilwara (supra) and Assistant Commissioner, Commercial Taxes Department Vs. Teletube Electronic Ltd. (supra).

Accordingly and in view of the agreement of both the learned counsels for the parties, all the aforesaid three revision petitions of the petitioner-Revenue are disposed of in the same terms, as mentioned above. No costs. A copy of this order be sent to the learned Rajasthan Tax Board, Ajmer and to the parties forthwith.