DHARIWAL BOTTLE TRADING COMPANY Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) THESE three references arise out of a common order of the Maharashtra Sales Tax Tribunal ("the Tribunal") passed on appeals under the Bombay Sales Tax Act, 1959 ("the Act" ). The following common question of law has been referred by the Tribunal for our opinion : " Whether, on the facts and circumstances of the case and upon interpretation of the contracts as revealed from the letters issued by the breweries, the Tribunal was justified in upholding the levy of purchase tax under section 13 of the Bombay Sales Tax Act, 1959, on the ground that there was no express or implied contract of sale of gunny bags, in which the empty bottles were sold ?"

(2.) THE material facts, relevant for determination of the controversy in this case, are as follows : THE assessee deals in old bottles which are mostly sold to breweries. It is registered as a dealer under the Bombay Sales Tax Act, 1959. It was assessed by the Sales Tax Officer under section 33 of the Act for the periods April 1, 1977 to March 31, 1978 and April 1, 1978 to March 31, 1979, by his orders of assessment dated November 30, 1980. In these assessments, the Sales Tax Officer did not levy any purchase tax under section 13 of the Act on the purchases of gunny bags made by the assessee from unregistered dealers. Subsequently, the Sales Tax Officer noticed that purchase tax was leviable under section 13 of the Act on the turnover of purchases of gunny bags made by the assessee from unregistered dealers during the above periods, which had escaped assessment. He, therefore, initiated proceedings for reassessment under section 35 of the Act by issuing notice in form 28. By the said notice the assessee was informed that purchase tax was proposed to be levied under section 13 of the Act on the purchases of gunny bags amounting to Rs. 86,375 and Rs. 1,78,284 made by the assessee from unregistered dealers during the periods April 1, 1977 to March 31, 1978 and April 1, 1978 to March 31, 1979, respectively. THE assessee did not respond to the said notice. THE Sales Tax Officer, therefore, reassessed the amount of tax due from the assessee in these periods and levied purchase tax under section 13 of the Act on the turnover of purchases to gunny bags as mentioned in the above notice. THE Sales Tax Officer also assessed the tax due from the assessee for the period April 1, 1979 to March 31, 1980 under section 33 of the Act by his order of assessment dated June 29, 1982. In that order also, the Sales Tax Officer levied purchase tax under section 13 of the Act on the turnover of purchases of gunny bags amounting to Rs. 3,34, 918 purchased by the assessee from unregistered dealers as he found that the gunny bags so purchased were not resold by the assessee. While making the above assessments, the Sales Tax Officer rejected the contention of the assessee that the gunny bags purchased by it from unregistered dealers were resold along with the empty bottles sold by it. Aggrieved by the above order of the Sales Tax Officer, in so far as it relates to the levy of purchase tax under section 13 of the Act on the purchase price of gunny bags, the assessee appealed to the Assistant Commissioner of Sales Tax. THE sole contention of the assessee before the Assistant Commissioner was that the gunny bags had been impliedly resold with the empty bottles and hence not purchase tax was leviable under section 13 on the purchase price thereof. THE Assistant Commissioner did not accept the above contention of the assessee and dismissed the appeal. THE assessee went in second appeal to the Maharashtra Sales Tax Tribunal. Before the Tribunal, the assessee reiterated its contention that the gunny bags in question, which were used for packing of empty bottles, were sold by it along with the bottles and hence section 13 of the Act had not application. A few certificates issued by some of the breweries were also produced in support of its contention that there was a contract of sale of gunny bags along with the bottles. THE contention of the Revenue before the Tribunal was that there was no sale of gunny bags, either implied or express, and hence section 13 of the Act was clearly attracted and purchase tax was leviable on the value thereof. THE Tribunal, after going through the facts of the case and various decisions of the Supreme Court and different High Courts relied upon by the parties, came to the conclusion that there was no express or implied contract of sale of packing material, i. e. , gunny bags. According to the Tribunal, the assessee intended to sell only empty bottles, the bargain was also for sale of empty bottles, and gunny bags were used merely as a convenient and cheap vehicle of transport. THE Tribunal arrived at a finding that the empty bottles could not be put in trucks or wagons without putting them in gunny bags and that the gunny bags were used by the assessee merely as a convenient mode of transport of bottles. THE Tribunal observed that the cost of gunny bags, which were used as packing material, was also not significant, it being about 2 per cent of the value of the contents. Considering the totality of all these factors, the Tribunal came to the conclusion that it was not possible to infer an implied sale of gunny bags. THE Tribunal, therefore, confirmed the levy of purchase tax on the purchase price of gunny bags under section 13 of the Act and dismissed the appeals of the assessee. Hence, this reference at the instance of the assessee.

(3.) IT is clear from the above decision of the Supreme Court that implied sale of packing materials cannot be inferred except in cases where the special facts and circumstances of that case justify such an inference. IT is necessary in most of the cases to pack the goods in some material or container for the purpose of transportation, handling, etc. Take for example, foodgrains, pulses, atta, etc. They are to be packed in some container. The containers ordinarily used for the purpose are gunny bags. Similarly, oils are packed in tins, plastic cans, PVC bags, etc. Various other foods and provisions are also packed in one container or the other, depending upon the nature of the goods packed, quantity packed, risk of deterioration of the quality of the product by atmospheric forces, etc. Medicines are packed in glass or plastic bottles, strips, etc. Mineral water is packed in plastic bottles. Cement, fertilisers, paints, etc. , are all packed in some container. Even stone chips are packed in gunny bags. In all these cases neither the seller intends to sell the containers nor the buyer intends to but the same. These containers are actually used merely as a convenient and cheap vehicle of transport. No sale of packing materials or container is involved in such cases. The fact that the seller had procured these packing materials for a price, or that the value of the containers must have been taken into account while fixing the price of the goods packed therein, or that the used packing material, even as waste product, would have some value howsoever insignificant it might be, is not relevant for deciding whether there is an implied sale of containers or packing materials. Equally irrelevant is the fact that the goods could have been packed in some other material which might be cheaper than the material used, because that is a decision which can be taken only by the manufacturer or the seller, keeping in view the convenience of handling, carriage, preservation, etc. , of the goods packed therein and the relative merits and demerits of the different types of packing materials. No contract of sale of packing material can, therefore, be inferred in the cases referred to above.