ANNAPURNA INSECTICIDES INDUSTRIES Vs. COMMISSIONER OF COMMERCIAL TAXES
LAWS(APH)-1992-2-21
HIGH COURT OF ANDHRA PRADESH
Decided on February 21,1992

ANNAPURNA INSECTICIDES INDUSTRIES Appellant
VERSUS
COMMISSIONER OF COMMERCIAL TAXES Respondents





Cited Judgements :-

ANDHRA CEMENTS COMPANY LIMITED VS. THE COMMISSIONER OF COMMERCIAL TAXES [LAWS(APH)-2015-4-106] [REFERRED TO]


JUDGEMENT

S.PARVATHA RAO, J. - (1.)THE vexed question in the special appeal under section 23 of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act") against the order of the Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad dated January 26, 1985, made in exercise of his powers under section 20 (1) of the Act, is whether there was any implied agreement to sell the containers, i. e. , hessian polythene alkathene bags in which the appellant-assessee sold insecticides manufactured by it during the assessment year 1978-79.
(2.)BEFORE the assessing authority, i. e. , the Commercial Tax Officer-II, Nellore, the appellant claimed exemption in respect of turnover of Rs. 1,81,177. 87 towards second sales of hessain polythene alkathene (H. P. A.) bags in which B. H. C. 10 per cent dust - insecticides manufactured by the appellant was sold, contending that the sale price was inclusive of the cost of the containers. The assessing authority did not dispute the purchase of the said bags by the appellant within the State and the payment of tax thereon by the first sellers who sold them to the appellant but denied the exemption because "nowhere in the sale bills they (the appellant) indicated that the sale price of B. H. C. 10 per cent was inclusive of the value of the containers", and went on to observe that "even if it were taken into consideration that there was implied contract between them and the purchasers, the value of gunny bags is insignificant when compared to the value of B. H. C. 10 per cent". Consequently, the appellant was assessed to tax on a net turnover of Rs. 22,06,147. 62 which includes the disputed turnover of Rs. 1,81,177. 87. The appellant preferred an appeal before the Assistant Commissioner (C. T.), Appeals, Guntur, who by his order dated January 29, 1981, allowed the appeal with the following short discussion :
" Naturally sale value of insecticides is inclusive of containers purchased from other registered dealers in the State. As per the ratio fixed by the Tribunal in T. A. Nos. 270 and 271/75 dated August 23, 1975 in the case of K. C. P. Ltd. , wherein it is decided that no tax was leviable on the sales of packing material of the appellant as a second dealer in packing material and T. A. No. 387/75 dated April 21, 1976, wherein it is decided that gunnies are not taxable in the absence of implicit or express contract of sales of packing material, the appellant is not liable to tax on the disputed turnover. The assessment made is therefore set aside and the appeal is allowed. "

The Commissioner of Commercial Taxes, Hyderabad, revised the said order of the Assistant Commissioner in exercise of his powers under sub-section (1) of section 20 of the Act by his order dated January 26, 1985 and held that the exemption granted by the Assistant Commissioner (C. T.) Appeals, Guntur, was irregular and set aside the same. In his order which is impugned in the present special appeal, the Commissioner referred to the decision of the Supreme Court in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624 and held that it was not an authority to say that where a product was taxable one could claim exemption on the packing material separately, and adverting to the facts of the present case, held as follows :

" It is therefore not correct to look at the transaction as two transactions, i. e. , one for the product and another for packing material. Just as several ingredients go into making of a product each of which may have suffered tax at an earlier stage but when made into a single product and sold in containers becomes a different product, so also the packing material. When goods are sold in packed condition, it loses its separate identity and becomes part of the product for sale price. It is therefore not correct to split up the consideration into two - one for the goods and the other for packing material. Hence the exemption granted by the Appellate Assistant Commissioner is irregular and needs to be set aside. "

(3.)THERE is no other discussion in his order in respect of the actual facts of the case. In the memorandum of appeal, the appellant has stated several facts pertaining to the container used, i. e. , H. P. A. gunnies. Though the expression "gunny" is used, it is not clear whether any jute material is used in the making of the said containers. It is stated that they are waterproof containers and the cost of each bag is higher than that of jute gunny. It is also stated that the H. P. A. container in which the B. H. C. 10 per cent dust was sold will retain its physical or commercial identity after the removal of the said insecticide and that it will have a longer life than an ordinary gunny bag and that there will be no wastage or dust pollution either in transit or in loading and unloading and that customers prefer H. P. A. containers in view of their long life and multi-purpose uses. The appellant states that even though the sale price of B. H. C. 10 per cent dust was inclusive of the value of the containers the cost of the container was not insignificant when compared with the cost of B. H. C. 10 per cent dust and that the customer was conscious of the transaction that the containers were of substantial value. On this basis, the appellant contends that there was an implied contract for the sale and purchase of the containers. The appellant further states that in its reply to the notice issued by the Commissioner proposing to revise the order of the Assistant Commissioner (C. T.), Appeals, all these facts were stated and the correspondence with various dealers which go to show that there was contract for sale of containers was also filed, and that the entire correspondence was also filed before the Assistant Commissioner (C. T.), Appeals, Guntur. It is also stated that the value of the container is about 10 per cent of the value of the goods and that the correspondence with M/s. Shaw Wallace Co. Ltd. , which was already filed would go to show that there was a contract for the sale of the container. However, we find that the said correspondence is not filed before us and the Commissioner did not make any reference to it, not to speak of discussing the same. Reply dated January 21, 1985, of the appellant is in the file of the Commissioner and therein it is stated as follows :
" The value of H. P. A. containers is about 10 per cent of the cost of the B. H. C. 10 per cent dust. Since the H. P. A. gunny retains its physical or commercial identity even after the removal of B. H. C. 10 per cent dust and having high resale value and charging of higher price by us for the customers when they require B. H. C. 10 per cent dust in 25 kgs. containers and the correspondence with M/s. Shaw Wallace Co. Ltd. , besides our correspondence and offers to the various dealers undoubtedly go to show that there is a contract of sale of gunny. We have filed the entire correspondence before the Appellate Assistant Commissioner in connection with the appeal. "

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