Container tax follows exempt goods: tins sold with exempt oil and not separately charged attracted nil sales tax.

Tins sold with exempt oil and not separately charged were not liable to sales tax under the fourth proviso to Section 5(1) of the Orissa Sales Tax Act, 1947, because the proviso makes container tax follow the tax character of the goods contained. Since the oil was exempt, the tins could not be treated as independently taxable on the basis of an implied separate sale. The proviso nonetheless applied to containers sold with exempt goods, but the applicable rate on the tins was nil, matching the exempt status of the contents. Relief was granted to the assessee and the Tribunal's order was set aside.

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Issues: (i) whether tins used as containers for exempt oil and not separately charged could be subjected to sales tax under the fourth proviso to Section 5(1) of the Orissa Sales Tax Act, 1947; (ii) whether the fourth proviso to Section 5(1) applied to sale of containers sold with exempt goods but not separately charged; (iii) what rate of tax applied to the containers sold with exempt goods.

Issue (i): whether tins used as containers for exempt oil and not separately charged could be subjected to sales tax under the fourth proviso to Section 5(1) of the Orissa Sales Tax Act, 1947.

Analysis: The assessment proceeded on the premise that the tins had been sold along with the exempt oil and that a separate sale price was not shown in the invoices. The fourth proviso, however, taxes containers at the same rate as the goods contained therein only when the containers of taxable goods are sold with such goods and are not separately charged. Since the oil itself was exempt from tax, the container could not be fastened with a tax liability by presuming a separate taxable sale of the tins.

Conclusion: The tins were not exigible to sales tax on this basis and the answer was in the negative, in favour of the assessee.

Issue (ii): whether the fourth proviso to Section 5(1) applied to sale of containers sold with exempt goods but not separately charged.

Analysis: The proviso was held to govern the present case because the containers were sold along with the exempt oil and were not separately charged. The earlier authorities relied on by the assessee supported the position that the taxability of the container follows the tax character of the goods contained therein. The Tribunal had erred in distinguishing those authorities.

Conclusion: The fourth proviso applied to the sale of the tins with exempt oil, in favour of the assessee.

Issue (iii): what rate of tax applied to the containers sold with exempt goods.

Analysis: Once the goods contained were exempt, the statutory command that the container bear the same rate as the goods contained therein meant that the applicable rate could not exceed the rate on the exempt goods. As the oil carried no sales tax, the corresponding rate for the containers was nil.

Conclusion: Nil rate of tax applied to the sale of the tin containers, in favour of the assessee.

Final Conclusion: The revision succeeded and the Tribunal's order was set aside, with the assessee obtaining relief on all referred questions.

Ratio Decidendi: Where containers are sold with exempt goods and are not separately charged, the tax incidence under the proviso to Section 5(1) follows the tax status of the goods contained therein, resulting in nil tax where the contained goods are exempt.

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