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Girdharilal Nanhelal and ors. Vs. State of M.P. and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Petition No. 328 of 1976 connected with M.P. Nos. 325, 326 and 327 of 1976
Judge
Reported in[1979]44STC368(MP)
AppellantGirdharilal Nanhelal and ors.
RespondentState of M.P. and ors.
Appellant AdvocateK.A. Chitale, Adv.
Respondent AdvocateS.K. Nigam, Deputy Government Adv.
DispositionPetition allowed
Cases ReferredShamsuddin Akbar Khan and Co. v. State of Orissa
Excerpt:
..... this, according to the learnedcounsel, clearly indicates that there is no contract of sale of the packingmaterial either express or implied and, in the absence of that, it could notbe said that the packing material also is sold and the assessment made on thatbasis is not justified. 321, and contended that the sale of cotton bales fullypressed implies a contract of sale of pressing material as well. we can, therefore, imply that there is a contract topay for and purchase the packing materials as well. 12. itis therefore clear that in this decision the facts found led to an inferencethat the sale of cotton included the sale of the packing material as well. or (c) for the redress ofany injury by reason of any illegality in any proceedings by or before anyauthority under any provision..........rs. 1,43,84,771.00 and the tax has been levied on the break-up as below:(1) sales of fully pressed cotton bales without c formtaxable at 1 per cent rs. 1,42,45,896.00(2) sales of hessian without c form and hoopstaxable at 10 per cent--tax rs. 13,887.50rs.1,38,875.00rs.1,43,84,771.00the petitioners have by this petition challenged the levy of sales tax on item no. (2) above.4. it is alleged by the petitioners that when the petitioners purchase raw cotton and get it ginned and pressed, they pay the ginning and pressing charges per khandi of cotton but do not pay anything for the bardana, hessian and hoops, which the pressing factory uses for pressing the bales. it is also alleged that the petitioners receive orders for supply of specified number of fully pressed cotton bales and they.....
Judgment:

G.L. Oza, J.

1. This petition and Misc. Petitions Nos. 325, 326 and 327 of 1976 have been filed by the petitioners challenging the assessment orders for the years 1960-61, 1961-62, 1962-63 and 1963-64. The question involved is identical and, therefore, this order will govern the disposal of all the four petitions.

2. It is alleged by the petitioners that they are a partnership firm carrying on business at Burhanpur and petitioners Nos. 2 to 6 are partners in the said firm. The firm deals in cotton, cotton-seed, cotton-seed oil and oilcakes. It is registered under the Madhya Pradesh General Sales Tax Act and the Central Sales Tax Act. According to the petitioners, they buy raw cotton 'kapaas', get it ginned and pressed into bales by others, who own ginning and pressing factories. The petitioners pay ginning and pressing charges to these factories and sell full pressed bales within the State and outside.

3. The petitioner-firm has been assessed to pay sales tax both under the State Act and the Central Act for the period commencing from 18th October, 1963, to 4th November, 1964. For the aforesaid period, respondent No. 4, who is the assessing officer, determined the gross turnover at Rs. 1,43,84,771.00 and the tax has been levied on the break-up as below:

(1) Sales of fully pressed cotton bales without C formtaxable at 1 per cent Rs. 1,42,45,896.00(2) Sales of Hessian without C form and hoopstaxable at 10 per cent--tax Rs. 13,887.50Rs.1,38,875.00Rs.1,43,84,771.00

The petitioners have by this petition challenged the levy of sales tax on item No. (2) above.

4. It is alleged by the petitioners that when the petitioners purchase raw cotton and get it ginned and pressed, they pay the ginning and pressing charges per khandi of cotton but do not pay anything for the bardana, hessian and hoops, which the pressing factory uses for pressing the bales. It is also alleged that the petitioners receive orders for supply of specified number of fully pressed cotton bales and they supply such bales to the buyers. But the price quoted is per khandi of cotton and not per bale and, in determining the price, the bales are weighed and the standard weight of hessian and hoops is deducted from the weight of each bale and, on the basis of the weight of cotton, bills are made, according to the price per khandi of cotton, and no price is charged for hessian and hoops by the petitioners. It is also alleged that, while determining the selling rates of cotton, the price of raw cotton and pressing and ginning charges are also taken into consideration. It is therefore contended in these petitions that, although the agreement was to sell fully pressed cotton bales, there was no specific or implied agreement for sale of the packing material.

5. Respondent No. 2, the Regional Assistant Commissioner of Sales Tax, who was the assessing officer, has estimated the price of hessian and hoops at Rs. 5.50 per bale and as he found that 25,250 bales had been sold, he estimated the price of the packing material and assessed the tax at 10 per cent.

6. Against this order, the petitioners filed a revision petition which was heard and decided by respondent No. 3, who, by his order dated 29th November, 1971, reduced the tax on hoops to 2 per cent, but otherwise dismissed the revision petition. Respondent No. 3 held that hessian and hoops were supplied under the contract of sale of goods.

7. In the return filed by the respondents, the facts mentioned in paragraphs 1 and 2 of the petition are admitted; but, in reply to paragraph 3, it is alleged that, when the pressing factories charge the pressing charges, they include the price of the packing material. It is further contended in the return that, as the contract for sale of fully pressed cotton bales is entered into, the packing material used by the pressing factory also is sold along with the bales. It is also alleged that the selling rate of cotton bales includes the pressing charges and, therefore, also includes the price of the packing material. It is not denied in the return that the price quoted or settled is per khandi of cotton and, while determining the price, the petitioner-assessee deducted the standard weight of the packing material from the weight of the bale and, on the balance, the price of cotton was determined with regard to the rate of cotton per khandi.

8. Looking to the petition and the return, it is clear that it is not the case of either party that the price of cotton bales fully pressed was quoted as price per bale and it was not determined on the basis of the weight of cotton but determined only on the number of bales or the weight of bales as they were.

9. It was contended on behalf of the petitioners that, in view of thesefacts which emerge from the petition and the return, it is not disputed thatthe price quoted in the contracts is the price of cotton per khandi and,while determining the price, the standard weight of packing material isdeducted from the weight of each bale, and it is only on that basis that theprice of cotton sold is calculated. This, according to the LearnedCounsel, clearly indicates that there is no contract of sale of the packingmaterial either express or implied and, in the absence of that, it could notbe said that the packing material also is sold and the assessment made on thatbasis is not justified. The Learned Counsel for the petitioner in support ofhis contention placed reliance on the decision reported in Binod Mills Co.Ltd. v. Commissioner of Sales Tax, M.P. [1972] 29 S.T.C. 413 In thealternative, it was also contended that under Section 14(ii) of the Central Sales Tax Act, 1956, 'cotton' has been defined to mean cotton, whether ginnedor unginned, baled, pressed or otherwise; and, therefore, even if it is heldthat it is a transaction of sale of cotton bales as such, that would fallwithin the ambit of the definition of Clause (ii) of Section 14 and it couldonly be taxed at the rate provided for cotton; and hessian and hoops could notbe separately assessed.

10. The Learned Counsel for the respondentsplaced reliance on the decisions reported in Vimalchand v. Commissioner ofSales Tax, M.P. [1968] 22 S.T.C. 22, Nimar Cotton Press v. Sales Tax Officer,Nimar Circle [1961] 12 S.T.C. 313 (F.B) and M.S. Chidambara Nadar v. State ofMadras [1960] 11 S.T.C. 321, and contended that the sale of cotton bales fullypressed implies a contract of sale of pressing material as well. He alsoplaced reliance on the decisions reported in Hyderabad Deccan CigaretteFactory v. State of Andhra Pradesh [1966] 17 S.T.C. 624 (S.C.) and Bhagwandasv. Commissioner of Sales Tax, M.P. [1978] 41 S.T.C. 387 (Misc. Civil Case No.147 of 1972 D/Jabalpur decided on 8th January, 1976). As regards the secondcontention, the Learned Counsel contended that 'cotton' as defined in Section14(ii) would only mean cotton and not hessian and hoops although the cottonmay be fully pressed.

11. In Hyderabad Deccan Cigarette Factory v.State of Andhra Pradesh [1966] 17 S.T.C. 624 (S.C.), their Lordships ofthe Supreme Court were considering the taxability of the packing materialand it was observed:

We have, therefore, no option but to remand thecase to the High Court to consider the question whether, having regard to thefacts of the case and the observations made by us, there was an agreement,express or implied, between the assessee and its customers to sell the packingmaterials or whether the packing materials, which were comparatively ofinsignificant value, were used only as a convenient vehicle to put thepurchasers in possession of the cigarettes sold.

It is this principlewhich has been applied in all the cases cited by either party. In M.S.Chidambara Nadar v. State of Madras [1960] 11 S.T.C. 321, on which reliancehas been placed by the Learned Counsel for the respondents, it wasobserved:

It cannot be disputed having regard to the findingsarrived at by the Tribunal that the last three conditions have been satisfiedin the present case. The question then is, whether there has been an agreementbetween the parties for the purpose of transferring title in the packingmaterials. When there is an agreement to purchase cotton to be delivered bythe seller to the buyers, it is implicit in the contract that the goods shouldbe delivered as packed. We can, therefore, imply that there is a contract topay for and purchase the packing materials as well.

12. Itis therefore clear that in this decision the facts found led to an inferencethat the sale of cotton included the sale of the packing material as well.The decisions of this Court reported in Nimar Cotton Press v. Sales TaxOfficer [1961] 12 S.T.C. 313 (F.B.) and Vimalchand v. Commissionerof Sales Tax, M.P. [1968] 22 S.T.C. 22, and the decision in Bhagwandas v.Commissioner of Sales Tax, M.P. [1978] 41 S.T.C. 387 (Misc. Civil Case No. 147of 1972), referred to above, are cases where an inference has been drawn of animplied contract of sale of the packing material and, in none of these cases,it was found as a fact that the price of cotton was quoted per khandi and,while determining the price of cotton, the standard weight of the packingmaterial was deducted and the price of cotton was determined on the basis ofthe balance of the weight. It could not be doubted that, in the absence ofthese specific facts alleged in the present petition and not disputed by therespondents in the case of sale of cotton bales, it could be inferred thatwhatever is included in the bale including the packing material also is soldand an implied contract could be inferred; and it was, in fact, in all thosecases relied upon by the respondents, inferred.

13. In Binod MillsCo. v. Commissioner of Sales Tax, M.P. [1972] 29 S.T.C. 413, a similarsituation has been considered. In that case, it was alleged that, althoughpressed bales of cloth were sold, but, while determining the price, thequantity of cloth was determined and, on the basis of the length of cloth, theprice was calculated. And, in that context, it was held that there was noimplied contract of sale of the packing material. The cases on whichreliance has been placed by the Learned Counsel for the respondents before mewere also relied upon in that case and, after referring to Hyderabad DeccanCigarette Factory v. State of Andhra Pradesh [1966] 17 S.T.C. 624 (S.C.),their Lordships observed:

Now, the facts in the instant caseare that the sale of cloth in large quantities, as was made by the dealer,could only be made in bales. Bardana and iron hoops formed convenient andcheap packing material for transporting the goods to the customers. Noseparate price was charged for the packing material. The price was charged forthe cloth either on the basis of meterage or on the basis of weight of thecloth. The price charged for the cloth bore no relation to the value of thepacking material. A sample receipt, enclosed along with the order ofreference, showed that the price of one bale of cloth roughly came to Rs.1,500. Compared to that, the value of the packing material of Rs. 4 per bale,as fixed by the assessing authority, was so insignificant that it was notpossible to draw any inference that the dealer intended to sell the packingmaterial to the customers. The burden lay upon the department to prove thatthere was an implied sale of the packing material liable to tax. On thematerial on record and on the facts found by the Tribunal, it cannot be heldthat the department succeeded in discharging that burden. Reference in thisconnection may be made to Shamsuddin Akbar Khan and Co. v. State of Orissa[1970] 26 S.T.C. 280, where the Orissa High Court took similar view inrelation to the containers used for transporting tax-free gudaku. Similar viewwas expressed by the Allahabad High Court in Burhwal Sugar Mills Co. Ltd. v.Sales Tax Officer [1969] 23 S.T.C. 241, where the question related to gunnybags in which sugar was sold.

It was on these special factsof that case, their Lordships held that there was no implied sale of thepacking material.

14. It is thus clear that, on the facts thatemerge in this petition, no inference could be drawn of an implied contract ofsale of the packing material. Admittedly, there is no express contract of saleof the packing material and, therefore, the assessment made, in item No. (2)quoted above, on the sale of the packing material could not be justified.

15. The alternative contention advanced by the Learned Counsel for thepetitioner, in our opinion, is not material for the decision of the presentcase. That question may arise when, admittedly, the cotton is sold in balesand the price is determined on the basis of the number of bales only; and, inthat context, it could be contended that 'cotton' means that as defined inClause (ii) of Section 14 of the Act. But, in the facts of this case, asit is the petitioner's own case that although cotton was sold in fully pressedbales, but the price quoted and charged was on the basis of the weight ofcotton after deducting the weight of the packing material and thus what wassold was cotton alone. On these facts, in our opinion, it is not necessary forus to decide the alternative contention pressed by the Learned Counsel for thepetitioner.

16. It was also contended by the Learned Counsel forthe respondents that this is a petition under Article 226 of the Constitutionand it could not be entertained in view of the amended Article 226, as itstands today. This article reads:

226. (1)Notwithstanding anything in Article 32 but subject to the provisions ofArticle 131A and Article 226A, every High Court shall have power . . . toissue to any person or authority . . . directions, orders or writs, . . .

(a) . . .

(b) for the redress of any injury of a substantial natureby reason of the contravention of any other provision of this Constitution orany provision of any enactment or Ordinance or any order, rule, regulation,bye-law or other instrument made thereunder; or

(c) for the redress ofany injury by reason of any illegality in any proceedings by or before anyauthority under any provision referred to in Sub-clause (b) where suchillegality has resulted in substantial failure of justice. . . .

Apparently, what is taxable under the Act is tax on salesand, if there is any tax levied which does not fall within the ambit of sale,it will be in contravention of the provisions of the Act. It could not bedisputed that this has resulted in an injury to the petitioner. Thus, thepetition squarely falls within the ambit of Article 226(1)(b) of theConstitution.

17. In the light of the discussion above, therefore, thepetition is allowed and the assessment with regard to item No. (2) quotedabove is set aside. The petitioners shall be entitled to the costs of thispetition; counsel's fee Rs. 200 (two hundred), if certified. Security amountbe refunded to the petitioners after verification.


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