Gujarat High Court
Bengal Electric Lamp Works Ltd. vs State Of Gujarat on 19 June, 1991
JUDGMENT S.D. Dave, J.
1. The Gujarat Sales Tax Tribunal at Ahmedabad has referred the following two questions to the High Court for the consideration and reply under the provisions contained under section 69 of the Gujarat Sales Tax Act, 1969 :
"(1) Whether, on the facts and in the circumstances of this case the Tribunal was right in law in holding that the question regarding sales promotion expenses at 6 per cent on the price did or did not form part of sale price was beyond the scope of section 62(1)(e) of the Gujarat Sales Tax Act, 1969 and was rightly not entertained ?
(2) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that separate agreement of packing materials formed a part of an agreement to sell goods in packed condition and as such sales of packing materials cannot be considered independently and were taxable at the rates of sales of goods passed, by reference to section 21 of the Gujarat Sales Tax Act, 1969 ?"
2. The above said reference came to be made to this Court under the following facts and circumstances :
The assessee is a manufacturer of fluorescent tube lamps and general electric service lamps at its factory in the State of West Bengal. Its sales office is at Tilak Road at Ahmedabad, which is a registered dealer under the Gujarat Sales Tax Act, 1969. The applicant had effected certain sales and later on had made an application under section 62 of the Act of 1969 for the purpose of determination of certain questions by the learned Deputy Commissioner. It appears that the assessee had sold 3,550 Nos. of fluorescent tube lamps at the rate of Rs. 10.17 per piece to a sister concern known as M/s. Belrex India Ltd., for an amount of Rs. 36,103.50 and had charged sales tax at the rate of 14 per cent on the sale price as well as surcharge at the rate of 6 per cent on the amount of sales tax. Simultaneously the assessee had issued another bill, wherein it had charged an amount of Rs. 2,166.21 as sales promotion expenses at the rate of 6 per cent on the sale price charged in the earlier bill and had also charged another amount of Rs. 1,065 as the cost of packing materials used in packing the said tube lamps as per the rate fixed and agreed between the parties. The assessee had collected the amount of sales tax on the price of packing material at 4 per cent as per entry No. 12 of Schedule II, Part A of the Act and surcharge at 6 per cent. In the same way the assessee had sold general electrical service lamps following the same modus operandi by bill dated September 18, 1978. The bulbs were sold for an amount of Rs. 1,012.44 and the sales tax at 10 per cent and additional surcharge on the sales tax were separately charged by separate bill of the same date. The sales promotion expenses at 6 per cent on the price and the outer packing charges as per enclosure were charged at Rs. 42.12. On the same charge of outer packing the sales tax at 4 per cent and surcharge at 6 per cent were separately charged. Upon these facts the assessee had posed the following two questions for the determination of the Sales Tax Department :
"(1) Whether, the view taken by the appellant was correct and whether the expenses charged towards sales promotion would form a part of sales price of the goods sold and liable to tax ?
(2) Whether, an amount charged as packing charges can be said to be a sale of packing materials liable to pay tax at the rate of 4 per cent as sales tax ?"
3. The learned Deputy Commissioner after considering the necessary evidence had passed the necessary orders which ultimately came to be challenged before the Tribunal. So far as the question regarding the amount of sales promotion expenses forming part of the sale price of the goods sold and liable to sales tax is concerned, the Deputy Commissioner had reached the conclusion that it was not possible for him to pronounce any decision on this question in view of the framework under section 62 of the Act. As regards the second question the Deputy Commissioner had held that the charges relating to the packing materials in respect of the two bills would attract the sales tax at 14 paise in a rupee and at 10 paise in a rupee under entry No. 92 and entry No. 41 of Schedule II, Part A to the Act respectively and that the additional tax in accordance with the provisions of section 4A of the Act would also be leviable. The above said decision rendered by the Deputy Commissioner, Sales Tax, came to be challenged by the assessee before the Gujarat Sales Tax Tribunal by filing Appeal No. 13 of 1980. After hearing both the sides the Tribunal had taken the view that the decision rendered by the Deputy Commissioner, Sales Tax, was alright and that, therefore no interference was necessary. In view of this finding the Tribunal had taken the view that the appeal filed by the assessee deserves to be dismissed.
4. Consequently the appeal came to be dismissed by the orders dated July 28, 1981, by the Tribunal. Later on the assessee had made the necessary application to the Tribunal for making a reference of the above said questions to this Court and ultimately the questions as referred above have been referred to this Court by the Tribunal under section 69(1) of the Gujarat Sales Tax Act, 1969.
5. The first question which falls for our consideration is as to whether on the facts and circumstances of the case the Tribunal was justified in coming to the conclusion that the question regarding sales promotion expenses at 6 per cent on price did not form part of the sale price was beyond the scope of section 62(1)(e) of the Act. When a reference is made to the provisions contained under section 62(1)(e) of the Act, it becomes clear that the Tribunal was justified in saying so. A reference to section 62(1)(e) shows beyond any manner of doubt, that if any question arises as to whether any tax is payable in respect of any particular sale the person concerned can move the Commissioner for making the necessary orders determining such question. It therefore becomes clear that section 62(1)(e) relates to the question as to whether any tax is payable in respect of any particular sale. Section 2(28) of the Act of 1969 defines the sale. Section 2(29) of the Act defines the sale price. But even reading the abovesaid two definition clauses along with the provisions contained under section 62(1)(e) of the Act of 1969, it cannot be stated that the questions which was posed for the determination of the Deputy Commissioner would fall within the purview of the abovesaid provision. Section 62(1)(e) refers to the question as to whether any tax is payable in respect of any particular sale. The question posed for the determination of the Deputy Commissioner of Sales Tax was not regarding as to whether any tax is payable in respect of any particular sale and the rate of tax payable thereon. On the contrary the question which was posed before the Deputy Commissioner was to the effect that as to whether the alleged sales promotion expenses at 6 per cent on the price would or would not form part of the sale price. It therefore becomes clear that the Tribunal was perfectly justified in confirming the view expressed by the learned Deputy Commissioner, Sales Tax, that the abovesaid question posed for determination would not fall within the purview of section 62(1)(e) of the Act of 1969 and that the abovesaid question was outside the scope of the abovesaid provision of law. On a correct interpretation of section 62(1)(e) of the Act of 1969, we feel that the abovesaid question which was posed for the determination of the Deputy Commissioner, Sales Tax, was definitely not covered within the purview of section 62(1)(e) of the Act of 1969. In view of this position we answer and reply question No. 1 in affirmative, that is in favour of the Revenue and against the assessee.
6. That takes us to the second question referred to the High Court which is in respect of the tax payable on the packing materials which had gone to the hands of the customer or the purchaser, namely a sister concern along with certain tube lights and the lumps. Mr. Pathak, the learned counsel, who appears on behalf of the assessee has invited our attention to certain documents on record with a view to persuade us to take a decision that as a matter of fact there were two different sales, one of the commodity sold and the other one of the packing materials in which the commodity was packed. The reference has been firstly made at annexure 3, the bill dated September 18, 1978, which is in respect of the sale of the article, namely, the fluorescent tubes. The bill which follows the abovesaid bill which finds its place at annexure 4, in which at item No. 2, the outer packing charges of an amount of Rs. 42.12 have been mentioned. Annexure 5 is the bill dated September 22, 1978, which is in respect of certain other articles of an amount of Rs. 36,103.50. The bill which follows the abovesaid bill is at annexure 6, in which there is a mention of an amount of Rs. 1,065 as the outer packing charges as per enclosure No. 1. The sales tax is at the rate of 4 per cent which comes to an amount of Rs. 42.60, a further amount of Rs. 2.56 has been charged on the abovesaid amount at the rate of 6 per cent.
7. With the help of the abovesaid documents which are in the nature of bills, Mr. Pathak, the learned counsel appearing on behalf of the assessee, wanted to urge that as a matter of fact there are different sales, one of the commodity, namely, the electrical goods and the second of the packing materials. Mr. Pathak also made a reference to certain position emerging out of the orders pronounced by the Tribunal. At para 7 of the judgment there is a reference to a letter written by the assessee to the sister concern on June 26, 1978, which shows that the goods will be sold to sister concern at ex-factory price basis. It appears that the offer made in the abovesaid letter was accepted by the sister concern, namely, M/s. Belrex India Ltd. by the letter dated June 26, 1978, subject to the deferred payment basis. The assessee in another letter bearing even date has stated that the prices are ex-factory and they do not include additional packing cost and as well as sales promotion expenses, etc.
8. On the basis of the abovesaid two letters and on the basis of the previously referred four bills, Mr. Pathak wants to urge that in the instant case with which we are concerned, there are two different sales, one of the electrical articles and the second one of the packing materials. But while deciding this question the reference may be made to the Supreme Court decision in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379. In this decision it has been said very clearly by the Supreme Court that the question in every case will be a question of fact as to what are the nature and ingredients of the sale. It is also emphasised that it is not right in law to pick up one ingredient only to the excursion of the others and deduce from it the character of the transaction. Examining the instant case in view of the abovesaid observation it becomes clear that the question of fact as to whether there are two sales or there is only one integrated sale is to be examined, regard being had to the nature and the ingredients of the sale. It appears very clearly in the instant case that the Tribunal has taken the view that though there are separate bills as stated above and though the abovesaid letters had existed, in the facts and circumstances of the case there was only one sale which can be stated to be the integrated sale. While making this observation the Tribunal has observed that the Deputy Commissioner, Sales Tax, has also stated in his orders, as an admitted position that all the sales of the company are in packed condition only and that there is not a single sale which would be effected in loose condition without being packed in the respective material.
9. The Tribunal has also preferred to make the position clear by making the following observation :
"But, as observed earlier, it would not be feasible for the manufacturer to sell goods throughout India in such loose condition unless the goods are packed in respective packing materials. Hence, the position emerges that the customer has to purchase the goods in such packed condition only. The agreement between the purchaser and seller as evidenced by letter SECT/DFTR/1/02, dated June 26, 1978, is merely a part of the agreement of non-exclusive dealership agreement executed on the same date. There is thus no option but to purchase the goods in packed condition for which the vendor charges the rate on the basis of a percentage of sale price. Shri Pathak's contention that the property in the goods would be passed since the order on the basis of ex-factory price is executed and the packing done to the goods would be as a result of the subsequent contract, cannot be accepted."
10. By making the abovesaid observations the Tribunal had endorsed the finding of fact made by the leaned Deputy Commissioner that in the instant case looking to the nature of the articles sold there would be no option on the part of the purchaser but to purchase the goods in packed condition for which the vendor would charge him at the rate on the basis of a percentage of sale price. It is also made clear that the case of the assessee that the packing done to the goods would be as a result of the subsequent contract cannot be accepted. Therefore, the abovesaid observations made by the Tribunal goes to show very clearly that definite question of fact has been considered and decided both by the leaned Deputy Commissioner, Sales Tax, and the Tribunal, taking up the view that in the instant case it cannot be accepted that there are two different and distant sales; one of the articles sold and the other one of the packing material.
11. The Tribunal had tried to take support from two decisions of this Court, one of Deepak Industries v. State of Gujarat [1975] 35 STC 183, and the other one in State of Gujarat v. Ashok Oil Mills (S.T.R. No. 5 of 1978) decided on December 19, 1978. In Deepak Industries' case [1975] 35 STC 183 (Guj) which was in respect of section 15A of the Bombay Sales Tax Act, 1959, which is similar to the provisions contained under section 21 of the Gujarat Sales Tax Act, 1969, it was held that, even if technically speaking there are two transactions by the operation of section 15 of the Bombay Act, 1959, the sales shall have to be considered or treated as one integrated sale under the provisions of section 15A of the Bombay Act of 1959. This decision of this Court clearly speaks of two transactions but ultimately taking shelter under section 15A of the Bombay Act, 1959, it was resolved that by the process of a deeming fiction the packing material shall also have to be taxed at the rate of goods packed. We have also seen the unreported decision in case of Ashok Oil Mills (S.T.R. No. 5 of 1978 decided on December 19, 1978 - Gujarat High Court) in which also a similar position had existed. In that case the assessee, M/s. Ashok Oil Mills, Jamnagar, was running an oil mill. The Mamlatdar, Jamnagar, in pursuance of certain powers conferred on him under the levy scheme had directed the assessee to sell edible oil to specified buyers at fixed price. The assessee ordinarily used to supply edible oil to specified buyers in loose condition in their own containers, but some of the buyers, however, had requested the assessee to supply edible oil in packed tins and therefore the assessee-mill was required to sell the edible oil in packed tins. The assessee had effected separate sales of the tins and edible oils and had issued separate bills in respect of both the goods. But again resorting to provisions contained under section 15A of the Bombay Act of 1959, a Division Bench of this Court had taken the view that both the sales will have to be treated as a single or integrated sale for the purpose of the rate of sales tax leviable on the sales and taxes shall have to be leviable in respect of both the sales at the rate applicable to the sale of edible oil.
12. It appears that the Tribunal had tried to take support from the abovesaid two decisions, namely, one of Deepak Industries [1975] 35 STC 183 (Guj) and the other one of Ashok Oil Mills (S.T.R. No. 5 of 1978 decided on December 19, 1978 - Gujarat High Court). But it requires to be appreciated that the Tribunal was very much conscious of the fact that the facts and circumstances before the Tribunal were entirely different. The Tribunal has stated so at para 9 of the judgment by observing that the case before the Tribunal was different but even if there were two sales as envisaged by the abovesaid two decisions in Deepak Industries [1975] 35 STC 183 (Guj) and Ashok Oil Mills (S.T.R. No. 5 of 1978 decided on December 19, 1978 - Gujarat High Court) then also both the sales shall have to be treated as a single sale for the purpose of tax and the tax would be leviable in respect of both the sales at the rate applicable to the relevant goods.
13. If the decision of the Tribunal were to be based solely upon the abovesaid two decisions in Deepak Industries' case [1975] 35 STC 183 (Guj) and in Ashok Oil Mills' case (S.T.R. No. 5 of 1978 decided on December 19, 1978 - Gujarat High Court) then the position would have been slightly different, regard being had to the Supreme Court decision in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379, to which a reference has been made earlier. We do not propose to enter into the question as to whether the abovesaid two decisions rendered by this Court are impliedly overruled or as to whether the ratio laid down in the abovesaid two cases is slightly modified by the Supreme Court decision. We do not propose to do so because of the pertinent reason that there is a finding of fact which goes to show very clearly that in this case there are no two different sales. In view of this position even if it is accepted for the sake of argument that the abovesaid two decisions rendered by the High Court of Gujarat are impliedly overruled or slightly modified by the Supreme Court decision in Raj Sheel case [1989] 74 STC 379, then also, our conclusion would be the same. We would prefer to assign our reason for the abovesaid view once more by saying that there is a clear finding of fact in the instant case that there are no two different sales, namely, one of the commodity or the articles sold and the other one of the packing material.
14. In view of this position it becomes clear that the Tribunal was perfectly justified in coming to the conclusion that the packing materials were also taxable at the rate of sale of the goods which passed to the purchaser.
15. Looking to the abovesaid position, we answer and reply the questions referred to this Court in affirmative and in favour of the Revenue and against the assessee, with no order as to costs.
16. Reference answered in the affirmative.