VALLABH GLASS WORKS LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) AT the instance of the assessee, the following seven questions have been referred to us under section 69 (1) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the Gujarat Act"), for our advice : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was an implied agreement to deliver the goods at the destination of purchasing dealers; and therefore, the property in the goods would not have passed unless the packing charges were paid by the purchasers ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that packing charges charged for in the white bills were part of the turnover of sale price under the Gujarat Sales Tax Act, 1969 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that packing charges, handling charges, loading and unloading charges and delivery charges at destination, charges for iron strapping and lafa charges shown in the yellow bills were part of sale price under the Gujarat Sales Tax Act, 1969 ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that packing charges charged in the white bills were part of the turnover of sale price under the Central Sales Tax Act, 1956 ? (5) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that charges for packing, handling, iron strapping, binding and lafa charges charged in the yellow bills form a part of sale price under the Central Sales Tax Act, 1956 ? (6) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the breach of declarations in form 19 was properly worked out by applying the proportion of total sales to consignment sales to the total purchases against form 19 and treating the breach of such declarations to the extent of proportion of consignment sales ? (7) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that there was a breach of declarations in form 19 in respect of purchases made for manufacturing therefrom all the packing materials and that timber were not the goods that were used in the manufacture of taxable goods for sale or on the ground that timber cannot be said to be materials used as consumable stores in the manufacture of sheet-glass ?"

(2.) THE necessary facts which have led to this reference are as under : THE assessee-company is a public limited company engaged in the business of manufacture and sale of sheet-glass. It has its branches all over India. THE sales of the assessee-company are within the State of Gujarat as well as in the course of inter-State trade and commerce. Certain goods are also sent to its branches outside the State of Gujarat for sale on consignment basis. It is claimed by the assessee-company that glass being a very delicate commodity, the assessee-company agreed and undertook by a separate agreement with its stockists the job of delivering glass in special packing at its customers' places within and outside the State of Gujarat for which they had charged certain amounts described as charges for "after sale services". THEse charges included the charges for packing - ordinary as well as special - loading, unloading, providing for iron strapping, binding and also providing wooden frames which are popularly known as lafa charges for the protection of glass during the transit and handling of the goods at the factory site as well as at the destination. THEse charges have been recovered under the bills of regular sales (shortly referred to hereinafter as "white bills") as well as by independent debit notes prepared for such charges (hereinafter called "yellow bills" ). It should be noted at this stage that the charges recovered under the white bills are described at the end of the bills as : "extra charges", for D. P. and T. P. packing at the specific request of buyer. THE charges recovered under yellow bills were on account of handling outside the factory, loading, unloading, delivery at the destination, iron strapping, binding and lafa charges. It should be further noted that so far as the charges recovered under white bills were concerned, the assessee had collected tax on such charges at the appropriate rates applicable and payable on sale of glass under the Gujarat Act. So far as the charges recovered under the yellow bills were concerned, the assessee did not collect any amount of tax or had not paid over to the Government on the ground that these charges were not part and parcel of the sale price. In the assessment period from 1st April, 1972, to 31st March, 1973, the assessee recovered an aggregate amount of Rs. 31,51,497 and Rs. 7,87,324 as the so-called after sale service charges under white bills and yellow bills respectively. It further appears that the assessee-company had purchased certain materials without payment of tax on giving declarations in form 19 under the Gujarat Act that the materials were required for the use in manufacture of taxable goods for sale in the sense that the sales were to be effected locally or in the course of inter-State trade and commerce. A part of the goods so manufactured was, however, sent on consignment basis by the assessee-company to its branches outside the State of Gujarat and the amounts of such purchases effected on the declarations in form 19 used in the manufacture of goods consigned outside the State admittedly amounted to Rs. 95,925. THE assessee-company had also purchased timber on the strength of similar declarations in form 19 for the purposes of preparing wooden boxes or creates which were used for packing the glass. In the course of assessment for the aforesaid assessment period, the Sales Tax Officer held that the after sale service charges recovered through white bills and yellow bills form part of sale price, and therefore, were liable to tax. THE Sales Tax Officer further held that the assessee-company was not entitled to purchase goods on the strength of declarations in form 19 to the extent to which the goods manufactured out of such materials were consigned outside the State of Gujarat, and therefore, the purchases were unauthorised to that extent, that is, to the extent of Rs. 95,925 and were liable to be subjected to purchase tax under section 16 of the Gujarat Act. It was further held by the Sales Tax Officer that the purchase of timber meant for use as packing materials was not permissible, and therefore, the assessee-company could not have purchased on the strength of declarations in form 19, and therefore, the purchases amounting to Rs. 7,470 of the timber were also liable to be subjected to purchase tax under section 16 of the Gujarat Act. THE Sales Tax Officer also levied penalty of Rs. 10,000 under section 45 (1) and penalty of Rs. 45,592 under section 45 (6) of the Gujarat Act as the difference between the amount of tax paid and assessed was exceeding the prescribed limit of 20 per cent, and therefore, the assessee was liable to pay penalty.

(3.) AT the instance of the assessee, therefore, the questions set out above have been referred to us for our opinion.