M. Seetharama Murti, J. - (1.) THIS appeal under Section 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 ('the Act' for short) read with Rule 41 of the Rules under the said Act by the appellant/assessee is directed against the orders dated 05.05.2001 of the Commissioner, Commercial Taxes in CCT's. Ref. L.V(2)/2103/98 -2.
(2.) WE have heard the submissions of the learned Senior Counsel for the appellant/assessee ('the appellant' for brevity) and the learned Special Government Pleader for Taxes representing the Commissioner/respondent ('the respondent' for short). We have perused the material record. The facts, which are necessary for consideration, in brief, are as follows: - - "The appellant is a registered dealer on the rolls of the Commercial Tax Officer, Seetharampuram, Vijayawada. The appellant is engaged in the business of manufacture and sale of cement. Cement is taxable under item 18 of first schedule; and, HDPE bags are taxable under the then relevant item 188 of first schedule to the said Act. The appellant was finally assessed for the assessment year 1991 -92 under the APGST Act by the Commercial Tax Officer concerned ('the CTO' for short) and the CTO had passed final orders dated 17.03.1996 levying tax at the rate of 14.05% on the turnover of Rs. 4,80,86,526/ - representing the amount received by the dealer towards the sales of packing material i.e., HDPE bags/gunnies in which the cement was packed and sold. The CTO had thus levied tax at a higher rate i.e., on a rate on par with the rate of tax that was applicable to the sale of cement in that assessment year by invoking the provision of Section 6 -C of the Act. Aggrieved of the said orders of the CTO, the appellant had preferred an appeal before the Appellate Deputy Commissioner (CT) ('the ADC' for short) by inter alia contending that the sale of packing material is separate from the sale of cement and that the sale of packing material and cement is not an integrated sale. The appellant had further contended before the ADC that the turnover of packing material shall be subjected to tax at the rate applicable to the packing material/HDPE bags and that exemption shall be allowed on the sale of the said packing material to the extent purchased from other local registered dealers and sold along with the cement. The ADC had accepted the contentions of the appellant and had allowed the appeal by his orders dated 22.03.1997. Pursuant to the orders of the ADC, the CTO had given effect to the orders of the ADC and had passed consequential orders dated 22.04.1999. The respondent, having examined the CTO's original order and the ADC's order, was of the view that the order of the ADC is not in accordance with law. He had, therefore, entertained a revision suo motu in exercise of the powers vested in him under Section 20(1) of the Act and had issued a show cause notice proposing to revise the order of the ADC in regard to the turnover of Rs. 4,80,86,526/ -. After giving an opportunity to the appellant to file objections and make submissions, the respondent had passed the impugned orders confirming the proposal in the show cause notice. The respondent had finally held that the appellant had failed to prove that there is a separate sale of packing material and that therefore, there is only one integrated sale i.e., sale of cement with bags and hence, the entire amount collected by the appellant company in its invoice is to be taxed at the rate applicable to the cement. Accordingly, the respondent had set aside the orders of the ADC and had restored the original order of the CTO. Therefore, the aggrieved appellant is before this Court."
(3.) IN this factual milieu, the learned senior counsel while narrating the facts, which lead to the filing of this appeal, which are not in dispute, had contended as follows: - - "The sale of cement and the packing material, in which the cement was packed and sold, are two independent and distinct sales and, therefore, the said two commodities should be taxed independently at the relevant rates applicable as per the relevant entries in the schedule to the Act. Packing material, which is purchased from other local registered dealers, should be granted exemption in the hands of the appellant as second or subsequent sale. The sale invoice is itself a contract between the appellant and its buyer. The buyers had consciously paid for cement and packing material on independent terms. There is an express/implied sale of packing material. The appellant had separately charged for cement and packing material in the invoice. The payments were made accordingly. The HDPE bags are specifically taxable under the then relevant item 188 of first schedule. There will not be any chemical or physical change in the bag after emptying the cement. The same are durable and re -usable. The packing material is used for convenience of transport; and, the quantity of goods as such is not dependant upon packing. The cement was sold in quantities of metric tonnes as is evident from the invoice. The rate of cement and the cost of packing material are separately shown in the invoice. The facts of the case and the documents produced clearly established that there is a separate sale of packing material and there is no integrated sale of cement with HDPE bags/packing material. The appellant has not provided the bag free of cost considering the significant cost of the bag. The respondent did not properly appreciate the facts, the legal position and the ratios in the precedents and had, therefore, erroneously held against the appellant both on facts and on law. The appellant's specific case is that as per the ratio in the decision of the Hon'ble Supreme Court in the case of Raj Sheel & Others v. State of A.P. and others [ : 1989 74 STC page 379], the packing material has to be taxed on its own footing if there is an express or implied sale of packing material. It is the case of the appellant that there is a separate sale of HDPE bags/packing material. Hence, the second sale of packing material has to be exempted and the first sale of packing material has to be taxed at the rate of tax applicable to the packing material (gunnies)/HDPE bags. However, the tax was levied on first and second sales of packing materials on the rate applicable to the contents i.e., cement. The ADC had rightly allowed the appeal by correctly appreciating the facts and following the correct principles of law. In appellant's own cases for earlier assessment years, the Sales Tax Appellate Tribunal had upheld the contentions of the appellant on similar issues based on similar facts and had remanded the matters to the CTO; and, after such remand, the CTO had granted relief to the appellant and the said orders have become final. The respondent did not grant set off of tax paid on HDPE bags as per the terms of G.O. Mos. No. 374 dated 26.04.1987. The recitals in the sale invoices are evidence of nature of transaction. Hence, packing material is not liable to tax at the rate of the content i.e., cement. It is pertinent to note that there is an amendment to entry 18 of Schedule I with effect from 01.08.1996. Though the said amendment is operative from 01.08.1996 the legislature itself recognizes that there can be separate sale of packing material and cement. Therefore, the order of the respondent is liable to be set aside and the order of the ADC and the consequential order of the CTO are to be restored.";