1995 (7) TMI 391 - HC - VAT and Sales Tax

Court overturns Tribunal decision, upholds tax on gunny bags in oil-cake sales under Sales Tax Act.

State of Tamil Nadu Versus Sri Narayana Oil Mills

State of Tamil Nadu Versus Sri Narayana Oil Mills - [1996] 100 STC 358 (Mad) Issues:Whether purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act can be levied on the value of gunny bags purchased from unregistered dealers and used as containers for selling oil-cake outside the State.Analysis:1. The Tribunal overturned the assessing officer's decision and the Appellate Assistant Commissioner's order, stating that there was no basis to levy tax under section 7-A on the purchase value of gunny bags alone as the sale of gunnies cannot be separated from the sale of oil-cake.2. The learned counsel for the Revenue argued that the Tribunal erred in law by making a blanket statement that the sale of gunnies cannot be separated from the sale of oil-cake without considering the specific facts of the case. The counsel emphasized the importance of evidence and material to determine whether the sale of gunnies can be segregated from the sale of oil-cake.3. The counsel pointed out that the assessee did not provide any evidence to show that the value of gunny bags was included in the sale price of oil-cake. As a substantial amount was spent on purchasing gunny bags, it was argued that there was an implied agreement to sell the gunny bags along with the oil-cake outside the State, justifying the levy of purchase tax on the gunny bags.4. The Court acknowledged the substantial value of the gunny bags compared to the oil-cake and noted that nearly half of the value of the contents was attributed to the container. It was emphasized that the burden of proof lies with the assessee to demonstrate that the value of gunny bags was included in the sale price of oil-cake, failing which an implied sale of gunny bags could be inferred.5. Ultimately, the Court held that the Tribunal's decision lacked evidence to support its conclusion that the sale of gunnies could not be separated from the sale of oil-cake. Therefore, the Court set aside the Tribunal's order regarding the turnover related to the gunny bags and upheld the assessing officer and the Appellate Assistant Commissioner's decision. No costs were awarded in the case.In conclusion, the judgment clarified the criteria for levying purchase tax on gunny bags used as containers for goods sold outside the State, emphasizing the need for evidence and factual analysis to determine the taxability of such transactions under the relevant tax laws.