1989 (3) TMI 368 - HC - VAT and Sales Tax

Taxable Price Determination for Oil in Sealed Tins: Packing Charges Not Deductible

The Full Bench held that under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, the price of oil in sealed tins is taxable without separate ... - Issues Involved: The issue involves the interpretation of rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959 regarding the deduction of package charges when oil is sold in sealed tin containers.Summary:1. The Division Bench referred the case to a Full Bench due to a disagreement on whether the cost of tins can be deducted from the total turnover as package charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. 2. The Sales Tax Appellate Tribunal accepted the assessee's plea that the cost of tins should be considered as packing charges under rule 6(cc)(i) and granted deduction for the price of the tins separately charged in the bills.3. The State filed revisions against the Tribunal's decision, citing a previous judgment that held the total price of oil in sealed tins is taxable without deduction for the tin containers. The Division Bench found it difficult to agree with this proposition and referred the matter to a Full Bench.4. The Full Bench analyzed rule 6(cc)(i) which allows for deduction of packing charges from the total turnover. The Court agreed with the State's argument that the sale is of 'tin of oil' as a composite good, making the price of the tin of oil taxable without separate taxation for the oil content and tin.5. Referring to a Supreme Court case, the Court emphasized that charges for packing are not deductible when they are integral to the sale price. The Court also cited a Karnataka High Court decision regarding freight and handling charges to support its conclusion that the price of the tin container is not deductible as packing charges.6. The Court disagreed with the previous judgment that advocated separate taxation for the oil and tin, asserting that only the price of the oil in the tin should be taxed as the intention of the sale is for the oil, not the tin container.7. Consequently, the Court set aside the Tribunal's order and reinstated the Appellate Assistant Commissioner's decision, disposing of the references with no costs awarded.