Premier
Breweries Vs. State of Kerala [1997] INSC 948 (18 December 1997)
S.P.
BHARUCHA, SUHAS C. SEN
ACT:
HEADNOTE:
THE
18TH DAY OF DECEMBER, 1997 Present:
Hon'ble
the Chief Justice Hon'ble Mr. Justice S.P. Bharucha Hon'ble Mr.Justice Suhas C.Sen
A.S.Nambiar, Sr. Adv., Sunil Gupta, Ms.A.K. Verma, C.N.Sreekumar, G.Prakash,
Ms. Bina Gupta, P.P. Vineeth, K.M.K.Nair and Vipin Nair, Advs. with him for the
appearing parties.
The
following Judgment of the Court was delivered:
(With C.A. Nos. 4871-74/91, 232/92, 6683-85/95, 6732-36/95 and
SLP (C) Nos. 6063-65/91).
Sen,
J.
Premier
Breweries Limited, the appellant herein, is a dealer in Indian Made Foreign
Liquor. The liquor is sold in bottles packed in cardboard cartons. The dispute
in this case arose in course of sales tax assessment for the year 1982-83.
Before the Assessing Officer the assessee's case was that the cardboard cartons
will have to be taxed at the rate of 8% under Entry 97 of the First Schedule of
the Kerala General Sales Tax Act, 1963 and not at the rate of 50% applicable to
sale of liquor. The appellant's case was that it had charged its customers
separately for the liquor and the cartons. Thee was no reasons to include the
value of the cartons in the value of the liquor for the purpose of levy of tax.
Initially, the assessee's stand was accepted by the Assistant Commissioner of
Sales Tax and an assessment order was passed accordingly.
Later
on the Deputy Commissioner, Palghat, thought that an error has been committed
in the assessment order and in exercise of his revisional power under Section
35 of the Act he set aside the assessment order. The Deputy Commissioner was of
the view that the Assessing Authority had erroneously levied tax at the rate of
8% on packing material viz.
cardboard
cartons. As per Section 5(5) of the Kerala General Sales Tax Act, where goods
sold were contained in containers or were packed in any packing material, the
rate of tax and the point of levy applicable to such containers or packing
materials, as the case may be, should, whether the price of the containers or
the packing materials was charged separately or not, be the same as that
applicable to goods contained or packed. In determining turnover of the goods,
the turnover in respect of the containers or packing materials will have to be
included therein.
Thereafter,
the assessment was revised in the manner indicated by the Deputy Commissioner.
The view of the Deputy Commissioner was uphled by the Tribunal and also the
High Court.
According
to the appellant, the High Court has overlooked the fact that the containers
were separately charged on the invoices raised by the appellant and the
customers paid separately for the liquor and the containers.
There
is a specific Entry in the First Schedule under which tax has to be levied at
the rate of 8% on the containers.
It was
not open to the Assessing Authority to include the value of the containers in
the value of the liquor for the purpose of calculating the assessee's turnover.
Secondly, it has been contended that the cardboard cartons, in any event, are
secondary containers provided for protection of the bottles in which the liquor
was sold. The bottles were the primary containers of beer. The cartons were
provided to ensure that the beer bottles were not broken in transit.
Therefore,
the turnover of the cartons could not in any way be included in the turnover of
the beer sold by the appellant. Lastly, a point was taken that under the Kerala
General Sales Tax Act, a single point duty is leviable on the cardboard
cartons. This duty has already been paid on these cartons by the manufacturers.
Further levy on these cartons at the point of time when was sold will be
contrary to law. A large number of decisions were cited on behalf of the
appellant as well as the respondents in support of their contentions.
Before
examining the decisions, it will be useful to refer to the relevant provisions
of the Kerala General Sales Tax Act. Tax on sale or purchase of goods has been
imposed by Section Act. Tax on sale or purchase of goods has been imposed by
Section 5 of the act. Sub-sections (5) and (6) of Section 5 of the Act provide:
"5(5).
Notwithstanding anything contained in sub-section (1) or Sub-section (2), but
subject to sub-section 6 where goods sold are contained in containers or are
packed in any packing materials, the rate of tax and the point of levy
applicable to the containers or packing materials, as the case may be, shall,
whether the price of the containers or packing materials is charged separately
or not, be the same as those applicable to goods contained or packed, and in
determining turnover of the goods, the turnover in respect of the containers or
packing materials shall be included therein.
5(6).
Where the sale or purchase of goods contained in any containers or packed in
any packing materials in exempt from tax, then the sale or purchase of such
containers or packing materials shall also be exempt from tax." The
language of sub-section (5) and (6) of Section 5 is clear and unambiguous.
These two Sub-sections deal with the method of valuation of packed goods and
the rate of tax payable thereon. The rules laid down are: (1) Where goods sold
are contained in a container or packed in any packing material, the rate of tax
payable on the containers shall be the same as that applicable to the goods
contained or packed. (2) This will be the position even if price of the
containers or packing materials is charged separately, (3) The turnover of the
goods will include the turnover in respect of containers or packing materials
in which the goods are contained or packed. (4) The point of levy of the tax on
the containers or the packing materials will be the same as applicable to the
goods contained or packed. (5) If the sale or purchase of 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 containers or packing materials
in which the goods are sold.
The
underlying idea behind these rules is that packed goods are to be taxed as
composite units. In calculating the turnover of the goods, the turnover of the
containers will have to be included. The appropriate rate of tax will be the
rate payable on the goods. It will not make any difference, if the containers
are shown to have been sold and charged separately. The logical corollary to
this principle is that when the goods are exempted from tax, no tax s leviable
on the containers. This will be the position even when the goods and the
containers are sold and charged separately.
Various
rates of tax have been fixed by the Act of sale or purchase of various types of
goods. If the goods are sold in packages or containers then for the purpose of
imposition of tax, the turnover of goods will have to be calculated by the
including therein the turnover of the packages or the containers. The rate of
tax applicable to the turnover so calculated will be the rate payable on the
goods contained in the containers, the tax payable on beer will be the
appropriate rate of tax payable on the turnover calculated in the manner stated
hereinabove. It has not been found by any of the authorities who heard the case
that the carton were specially provided for protection of the bottles and
bottled beer usually was not delivered in cartons even in cases of bulk sales.
The argument based on secondary packing is misconceived.
On
behalf of the appellants, it has been contended that sub-sections (5) and (6)
of Section 5 are based upon an inarticulate premise that actual sale of the
containers or packing has been made along with the goods contained therein.
These provisions will not apply if the goods and the containers are actually
sold view of the clear language f the statute. When packed goods are sold,
provisions of sub-sections (5) and (6) will apply. There will be one rate of
tax and one point of levy for such packed goods. This rule will apply
"whether the price of the containers or packing is charged separately or
not". In view of this, there is no scope for any assumption that
sub-section (5) was based on an inarticulate premise that the provisions of
that sub-section will not apply if the goods and the containers are sold and
charged separately.
Mr.
Sunil Gupta, on behalf of the appellant referred us to two decisions of this
Court in support of his contention that if the containers were shown to have
been sold separately, then the provisions of sub-section (5) of Section 5 will
not apply. The first case relied upon for this proposition is the judgment of
this Court in the case raj Steel & Ors. vs. State of A.P. & Ors. 91989)
3 SCC 262 where the question of validity of Section 6-C of the Andhra Pradesh
General Sales Tax Act was examined by this Court.
Section
6-C of the Act provided:
"6-C.
Levy to tax on packing material Notwithstanding anything in sections 5 and 6A,
where the goods packed in any materials are sold or purchased, the materials in
which the goods are so packed shall be deemed to have been sold or purchased
along with the goods and the tax shall be leviable on such sale or purchase f
the materials at the rate of tax, if any, as applicable to the sale or, as the
case may be, purchase of goods themselves." That was also a case where
bottled beer was sold in cartons and cement was sold in gunny bags. R.S.Pathak,
C.J.
Pointed
out in that case that there could be three types of cases :
"It
is commonly accepted that a transaction of sale may consist of a sale of the
product and a separate sale of the container housing the product with
respective sale considerations for the product and the container separately; or
it may consist of a sale of the product and a sale of the container but both
sales being conceived of as integrated components of a single sale transaction;
or, what may yet be a third case, it may consist of a sale of the product with
the transfer of the container without any sale consideration therefor."
Dealing with the deeming provision of Section 6-C, Pathak, C.J. observed :
"Turning
to Section 6-C of the Act, it seems to envisage a case where it is the goods
which are sold and there is not actual sale of the packing material. The
section provides by legal fiction that the packing material shall be deemed to
have been sold along with the goods. In other words, although there is no sale
of the packing material, it will be deemed that there is such a sale. In that
event, the section declares, the tax will be leviable on such deemed sale of
the packing material at the rate of tax applicable to the sale of the goods
themselves. It is difficult to comprehend the need for such a provision. It can
at best be regarded as a provision by way of clarification of an existing legal
situation." Pathak, C.J. ultimately concluded:
"We
find it difficult to accept the contention of the appellants that a rate
applicable to the packing material in the Schedule should be applied to the
sale of such packing material in a case under Section 6- C, when in fact there
was no such Section 6-C, when in fact there was no such sale of packing
material and it is only by legal fiction, and for a limited purpose, that such
sale can be contemplated. In the circumstances, no question arises of Section
6-C being constitutionally discriminatory, and therefore invalid." It has
to be borne in mind that a deeming clause may be used in a statute for very
many purposes. It was observed by Lord Radcliffe in St.Aubyn (L.M.) vs. A.G.
(No.2) (1952) AC 15.
"The
word 'deemed' is used a great deal in modern legislation.
Sometimes
it is used to impose for the purposes of a statute an artificial construction
of a word or phrase that would not otherwise prevail. Sometimes it is used to
put beyond doubt a particular construction that might otherwise be uncertain.
Sometimes it is used to give a comprehensive description that includes what is
obvious, what is uncertain and what is, in the ordinary sense,
impossible." Pathak, C.J. was of the view that in Section 6-C the deeming
clause should be given a restricted meaning and at best, should be regarded as
a provision by way of clarification of an existing legal situation. In other
words, the deeming clause merely restated what was otherwise obvious.
Pathak,
C.J. by giving a restricted meaning to the deeming clause ruled out the
possibility of taxing the packing material or the containers in cases where
only the goods were sold but the packing material or the containers were not
actually sold.
This
observation of Pathak, C.J. does not help Mr.
Gupta's
case in any way in the facts of this case. In the case before us, not only the
beer but also the cardboard cartons wee actually sold. In fact, the assessee
was willing to pay tax on the containers at the rate of 8%. The grievance of
the assessee was that he was called upon by the Deputy Commissioner to pay tax
at 50% which is the rate of tax payable on the beer itself. As we have noted
earlier, the provisions of sub-section (5) of Section 5 of the Kerala General
Sales Tax Act are quire clear in this regard and the Deputy Commissioner's
decision was in accordance with the law.
The
next contention of Mr. Gupta was that Pathak. C.J.
was
also of the view that if the containers or the packing materials were shown to
have been sold separately, two separate transactions may have taken place. In
such a case the containers or the packing materials may not be taxed along with
the goods contained or packed without further investigation into the facts to
decide whether the two transactions were really one integrated transaction.
This
difficulty arising out of the restricted meaning given to the deeming clause in
Section 6-C of the Andhra Act has been obviated by specific provisions of
Section 5(5) of the Kerala Act by providing that the turnover of the goods will
include the turnover in respect of the packing materials or the containers. The
containers or the packing materials will be taxed at the same point and at the
same rate at which the goods are to be taxed. This rule will apply
"whether the price of the containers or the packing materials is charged
separately or not." Therefore, even in case where the containers are
separately sold, the turnover of the goods will include the turnover of the
containers and the appropriate rate of tax on such turnover will be the rate of
tax payable on the goods.
Mr.
Gupta next drew our attention to the case of Vasavadatta Cements vs. State of
Karnataka & Anr. (1996) 2 SCC 88, where another Bench of this Court has
followed the principle laid down by Pathak, C.J. in the Raj Steel's case.
In
that case a Bench of two Judges of this Court dealt with Section 5(3-D) of the
Karnataka General Sales Tax Act, 1957.
The
provisions of Section 5(3-D) of the Karnataka General Sales Tax Act and the
Provisions of Section 5(5) of the Kerala General Sales Tax Act are similar. The
provisions of the Karnataka General Sales Tax Act were as under:
"5
Levy of tax on sale or purchase of goods (3D). Notwithstanding anything
contained in the Act where goods sold or purchased are contained in containers
or are packed in any packing materials liable to tax under this Act, the rate
of tax and the point of levy applicable to turn over of such containers or
packing materials, as the case may be, shall whether the containers or the
packing materials have already been subjected to tax under this Act or not or
whether the price of the containers or of the packing materials is charged
separately or not, be the same as those applicable to goods contained or packed.
Provided
that no tax under this sub-section shall be leviable if the sale or purchase of
goods contained in such containers or packed in such a packing materials is
exempt from tax under this Act." The Karnataka General Sales Tax Act takes
notice of the fact that where the goods are sold in containers or packing
materials such packing materials may have already been subjected to tax under
the Act. But the provisions of Section 5(3-D) will apply even (1) when the
containers or packing materials have already borne tax; and (2) containers or
packing materials were charged separately.
Sub-section
(3-D) lays down that where the goods were sold or purchased in containers or
packing materials liable to tax under that Act, the rate of tax and the point
of levy applicable to turnover of such containers or packing materials, as the
case many be, shall be the same as applicable to the goods contained or packed.
These provisions are very similar to the provisions of sub-section (5) of
Section 5 of the Kerala Act. There is also a proviso to the Karnataka Act which
is very similar to sub-section (6) of Section 5 of the Kerala Act. It lays down
that no tax shall be leviable if the sale or purchase of goods contained in the
containers or packed in the packing materials was exempt from tax under the
Act. In other words, when the goods contained in the containers were exempt
from tax, then no tax can be levied on the containers under sub-section (3-D)
of Section 5 of the Karnataka Act.
Section
6-C of the Andhra Act does not contain any such specific provisions.
Mr.
Gupta contended that in spite of these specific provisions of the Karnataka
Act, this Court had no difficulty in Vasavadatta's case in applying the
principles laid down by Pathak, C.J. in the case of Raj Steel.
Therefore,
this present case, which is to be decided on similar provisions of the Kerala
Act, must be decided on the same basis.
We are
of the view that in Vasavadatta's case, this Court overlooked the marked
dissimilarity between Section 6- C of the Andhra Act and Section 5(3-D) of the
Karnataka General Sales Tax Act. We are also of the view that sub- sections (5)
and (6) of the Kerala General Sales Tax Act will have to be construed
uninfluenced by the decision of the Court in Raj Steel's case where Pathak,
C.J. construed the deeming provisions in Section 6-C of the Andhra Act in a
narrow sense. Section 6-C did not contain any specific provisions for including
the turnover of the goods. There were also no specific provisions in the Andhra
Act to levy tax on the packing materials and the containers at the rate
applicable to the goods even in a case where the price of the containers or the
packing materials were charged separately. We are also of the view that the
mere fact that the containers and the goods were sold separately or charged
separately will not make any difference in the matter of computation of the
turnover of the goods and determination of tax or the rate of the tax and the
point at which the tax will be levied under Section 5(5) of the Kerala Act.
Section
5(3-D) of the Karnataka Act, if anything, is more specific than Section 5(5) of
the Kerala Act which deals with cases where the goods sold or purchased are
contained in containers or are packed in any packing material. It specifically
provides that the rate of tax and the point of levy applicable to turnover of
such containers or packing materials will be the same as those applicable to
the goods contained or packed. This rule will apply even in a case where the
containers or the packing materials had already been subjected to tax under the
Act, It also provides that the rule will apply "whether the price of the
containers or the packing materials is charged separately or not". In view
of these clear provisions of Section 5(3-D) of the Karnataka Act and the
corresponding provisions of Section 5(5) of the Kerala Act there is no basis
for the argument that if the price of the goods and the price of the containers
or packing materials are separately charged, the provisions of the aforesaid
two sections will not be applied at all. In the context of these provisions,
there was no scope for invoking the principle laid down in Raj Steel's case for
making any inquiry as to whether the containers or packing materials were sold
along with the goods or separate bills were made in respect of them or whether
they were separately charged. The law is quite clear that when the goods
contained in containers or packed in packing materials are sold the containers
and the packing materials will have to be taxed at the same rate at which the goos
are liable to be taxed. It will not make any difference if the price payable
for the containers or packing materials are shown separately in the bills
raised by the seller.
We
shall now deal with another point urged on behalf of the appellant. It has been
contended that the cardboard cartons have already borne tax under the Entry
"paper, other than the newsprint, cardboard and their products" in
the First Schedule of the Act. It is a single point tax. The cardboard cartons
cannot be taxed once again when sold along with the beer.
There
are two answers to this contention. Sub-section (5) of Section 5 specifically
provides that the rate tax and point of levy applicable to the goods sold.
Therefore, even if the cartons have already been subjected to tax by virtue of
specific provisions of Section 5(5) they will be liable to tax at the same
point and at the same rate as the goods contained therein.
Moreover,
the packing materials as such are not being taxed under sub-section (5) of Section
5 of the Act. The subject-matter of tax are the goods packed in the containers.
In calculating the turnover of the goods, packing materials will have to be
taken into account. The packing materials will be taxed at the same rate and at
the same point as the goods contained in the packing material.
This
is because the goods are sold packed in containers and are charged accordingly.
This is a rule of computation of the turnover of the goods. If no tax is
ultimately found leviable on the goods then no tax can be levied on the
containers in which the goods are contained.
In
view of the above, the appeals are dismissed.
There
will be no order as to costs.
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