Kerala High Court
Jamnadas Ramakissan Das And Co. vs State Of Kerala on 3 February, 1986
Equivalent citations: [1987]64STC155(KER)
Author: M. Fathima Beevi
Bench: M. Fathima Beevi
JUDGMENT P.C. Balakrishna Menon, J.
1. These revisions at the instance of the assessee is against the common order of the Sales Tax Appellate Tribunal, Trivandrum confirming the orders of the Appellate Assistant Commissioner of Sales Tax relating to the periods 1972-73 and 1973-74. The Appellate Assistant Commissioner had with certain modifications confirmed the orders of assessment by the Sales Tax Officer for these periods.
2. The assessee is a dealer in rose wood, hard wood and goods made of ivory. They effect sales locally as well as inter-State and also export rose wood and ivory articles for sale outside India. The questions raised in these revision cases relate to the validity of assessment under Section 5A of the Kerala General Sales Tax Act, 1963 in regard to (1) ivory purchased from the Travancore Devaswom Board (2) the purchase value of packing materials and (3) the, purchase value of finished articles locally purchased and exported to countries outside India. The statutory authorities have held that the purchase turnover in regard to these items is exigible to tax under Section 5A of the Act.
3. The assessment relates to periods prior to the commencement of the Sales Tax Amendment Act, 19 of 1974. The Travancore Devaswom Board from whom the assessee had purchased ivory is not a dealer in ivory within the meaning of the Act, nor is the sale by the Board to the assessee part of the business of the Board. Sale of timber by a Devaswom was held to be exempt from sales tax in the decision reported in Pulpally Devaswom v. State of Kerala 1977 KLT 549 on the ground that the Devaswom is neither a dealer, nor is it carrying on any business in timber within the meaning of the Act. On the principle as laid down by this Court in Pulpally Devaswom's case 1977 KLT 549, we are satisfied that the ivory purchased by the assessee from the Travancore Devaswom Board was not exigible to sales tax under Section 5 of the Act at the point of sale by the Devaswom Board. The purchase turnover would, therefore, be exigible to tax under Section 5A of the Act if any of the Clauses (a), (b) or (c) is satisfied. The orders of assessment relating to these periods show that the raw ivory purchased was partly sold locally and the balance used in the manufacture of ivory articles for sale in the market or for export outside India. The turnover relating to local sales of raw ivory has suffered tax at the point of sale and that quantity of ivory sold locally is not exigible to tax under Section 5A of the Act. Raw ivory consumed in the manufacture of ivory articles is liable to tax under Section 5A of the Act at the point of purchase by the assessee. Even if it is despatched outside the State in raw form, the purchase value will be exigible to tax under Section 5A as the assessee has no case that it was sold in the course of inter-State trade or commerce. We are, therefore, clearly of the view that the purchase turnover of ivory except to the extent of the quantity sold within the State is exigible to tax under Section 5A of the Act. The statutory authorities below have found that the packing materials purchased by the assessee are exigible to tax under Section 5A of the Act. A Full Bench of this Court in the decision reported in Deputy Commissioner of Sales Tax v. Raja Oil Mills [1979] 43 STC 78 (FB) in considering the question as to whether purchase turnover of gunny bags used for the purpose of packing copra is exigible to tax under Section 5A of the Act stated at page 90 :
The fact that the packing materials, namely, the gunny bags, retain their physical or commercial identity after the contents are removed may not be decisive of the question. We might add that how an ordinary customer would view the transaction concerned, whether he would consider the transaction as a composite one, purchasing the packing materials besides its contents, would be of considerable significance in the matter. Where the containers are of substantial value, it might be possible to infer more readily an implied agreement to pay an extra price for the containers than when they are insignificant in value The Full Bench after setting aside the orders of assessment challenged in that case remanded the case to the Tribunal to consider the question whether the purchase turnover of gunny bags can be assessed under Section 5A of the Act.
4. In the present case the packing materials purchased were utilised for sale of manufactured goods within the State, for inter-State sales and also for consignment to foreign countries. Considering the nature of the manufactured goods made of ivory and rose wood, we are clearly of the view that the sale of such articles would have taken in also the price of the packing materials and would have suffered tax at that point. But that will not be the case in regard to packing materials used for export of articles to foreign countries and also for consignment sales. The packing materials used for export and for consignment sale outside the State have not suffered tax at any point and the purchase turnover to that extent is exigible to tax under Section 5A as it falls squarely under Clause (c) of Sub-section (1) to the extent the sale is not as a direct result of inter-State trade or commerce. To what extent the purchase turnover of packing materials is exigible to tax as aforesaid is not considered by the statutory authorities below and that question will have to be considered afresh in the light of the principles stated above.
5. The next point urged on behalf of the assessee relates to the purchase turnover of manufactured articles locally purchased by the assessee and exported to foreign countries. These articles are admittedly purchased from persons who are not dealers within the meaning of the Act and had not suffered sales tax under Section 5. We are therefore clearly of the view that the purchase turnover of these articles is exigible to tax under Section 5A of the Act. Subramonian Poti, J., as he then was stated in the decision reported in Malabar Fruit Products Co. v. Sales Tax Officer [1972] 30 STC 537 (Ker.) as follows at page 555:
29. Yet another possible case is where casual sales are made by persons who are not dealers as the term is defined in the Act. The goods may be such as to attract tax on their sales, but the sales are under circumstances which would not attract the levy on account of the character of the seller. The conditions to attract Clauses (a), (b) or (c) of Section 5A (1) may be present. The transactions of sales are not taxable in the circumstances in which they were effected because the person who effected the sales was not a dealer liable to tax under the Act and the circumstances indicate that at no subsequent point the goods would suffer taxation in the State. It is then sought to be taxed in the hands of the purchaser under Section 5A. This, according to me, is the scheme of Section 5A of the Act and bearing this in mind, I am proposing to resolve the questions of tax liability of the various petitioners whose petitions are before me.
The decision of the learned Judge was accepted as laying down the correct law by the Supreme Court in the decision reported in State of Tamil Nadu v. Kandaswami [1975] 36 STC 191 (SC). The Supreme Court stated thus at page 201 :
In our opinion, the Kerala High Court has correctly construed Section 5A of the Kerala Act which is in pari materia with the impugned Section 7-A of the Madras Act. 'Goods, the sale or purchase of which is liable to tax under this Act' in Section 7-A(1) means 'taxable goods', that is, the kind of goods, the sale of which by a particular person or dealer may not be taxable in the hands of the seller but the purchase of the same by a dealer in the course of his business may subsequently become taxable. We have pointed out and it needs to be emphasised again that Section 7-A itself is a charging section. It creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act have not, due to the circumstances of particular sales, suffered tax under Section 3, 4 or 5 and which after the purchase, have been dealt by him in any of the modes indicated in Clauses (a), (b) and (c) of Section 7-A(1).
6. In view of these decisions we are clearly of the view that the turnover of ivory purchased from the Travancore Devaswom Board and consumed in the manufacture of other articles or exported to places outside India is exigible to tax under Section 5A of the Act. The purchase turnover of packing materials used for export of articles outside India is also exigible to tax under Section 5A. So also the purchase turnover of manufactured or finished articles locally purchased and which had not suffered tax under Section 5, is exigible to tax under Section 5A of the Act. In the light of our decision as aforesaid it is necessary to reconsider the purchase turnover of packing materials exigible to tax under Section 5A of the Act.
7. In regard to purchase turnover of raw ivory, the Appellate Assistant Commissioner has found that the entire amount is not assessable as there were local sales and inter-State sales as well. In the absence of separate accounts liable to tax under Section 5A, the Appellate Assistant Commissioner had modified the purchase turnover of ivory exigible to tax under Section 5A, "on the basis of transfer and exports after deducting the margin earned". The assessing authority was accordingly directed to adopt the figure arrived at by the Appellate Assistant Commissioner on a best of judgment estimation of the purchase turnover of ivory exigible to tax under Section 5A. Even though the taxability under Section 5A was challenged before the Appellate Tribunal, the assessee had no challenge against the quantum estimated by the Appellate Assistant Commissioner.
The result of the foregoing discussion is : the orders of the statutory authorities below are set aside to the extent they relate to levy of purchase tax under Section 5A on the packing materials and remit the case to the assessing authority for reconsideration in the light of the directions and observations contained in this judgment. In all other respects the order of the Tribunal is confirmed. There will be no order as to costs.