2009 (11) TMI 860 - HC - VAT and Sales Tax

Interpretation of turnover tax on sale of packing material by cement manufacturer

The court analyzed the interpretation of a notification regarding turnover tax on the sale of packing material by a cement manufacturer. It determined ... Whether the petitioner herein has to pay the turnover tax on the ale of packing material based on the notification dated March 30, 1994 at the reduced rate of tax of second sale at one per cent. instead of 2.5 per cent? Held that:- If the package material used by the assessee for selling its product, i.e., cement has suffered tax earlier. The same has to be considered as second sale or subsequent sale or whether the package material has suffered tax earlier or not, it can be answered by the assessing officer. In the circumstances, answering the questions of law in favour of the assessee holding that if the package material has suffered tax earlier and it is used for selling its product, in the light of the notification dated March 30, 1994 the turnover tax attracts only one per cent. of the tax considering it as second sale or subsequent sale. In order to ascertain the actual facts in the case, we have set aside the order of the assessing officer and remitted the matter for fresh consideration in accordance with law. Accordingly, this appeal is allowed and matter is remanded to the assessing officer who shall consider the matter afresh and pass an appropriate order within an outer-limit of six months from the date of receipt of the copy of this order. Issues:1. Interpretation of notification dated March 30, 1994 for turnover tax on sale of packing material.2. Application of section 6B and section 5(3-D) of the Karnataka Sales Tax Act, 1957.3. Determination of whether sale of packing material is separate from the sale of cement.Analysis:1. The primary issue in this case revolves around the interpretation of the notification dated March 30, 1994, concerning the turnover tax on the sale of packing material. The petitioner, a cement manufacturer, argued that the notification allows for a reduced tax rate of one per cent instead of 2.5 per cent on the sale of packing material used for cement bags. The contention was based on the notification's language reducing tax on second and subsequent sales or purchases in the State to one per cent.2. The second issue involves the application of section 6B and section 5(3-D) of the Karnataka Sales Tax Act, 1957. The petitioner claimed that the turnover tax should be levied at one per cent based on the notification, while the Government Advocate argued for a 2.5 per cent tax rate as per section 6B. The court had to determine the correct provision applicable for the turnover tax on the sale of packing material.3. Lastly, the court had to decide whether the sale of packing material should be considered separate from the sale of cement. The petitioner contended that the packing material should be treated as a second or subsequent sale, attracting a lower tax rate per the notification. On the other hand, the Government Advocate argued that the petitioner failed to prove that the packing material had suffered tax earlier, which would determine its classification as a subsequent sale.In the judgment, the court analyzed the arguments presented by both parties and examined the notification, statutory provisions, and relevant case law. The court concluded that if the packing material had indeed suffered tax earlier and was used for selling the cement, it should be considered a second or subsequent sale, attracting a one per cent tax rate. However, since the assessing officer did not address this crucial point, the court set aside the previous order and remanded the matter for fresh consideration. The court directed the assessing officer to determine whether the packing material had previously suffered tax and to make a decision within six months from the date of the court's order.