Case Note & Summary
The case involves a reference under Section 61(1) of the Bombay Sales Tax Act, 1959, at the instance of the Commissioner of Sales Tax, Maharashtra State, against M/s Indian Dyestuff and Chemical Manufacturing Company. The dealer, a manufacturer of dyes and chemicals, held an authorization for the period 01.01.1988 to 31.03.1989. During this period, the dealer purchased packing materials, namely plastic drums and plastic bags, against declaration in Form No.14 and used them for packing the chemicals manufactured by them. The packed chemicals were exported out of India within the stipulated time. The Assessing Authority held that there was a contravention of Form No.14 and levied purchase tax under Section 14 of the BST Act, 1959, vide assessment order dated 31.03.1992. The dealer appealed to the Assistant Commissioner of Sales Tax, Kalyan, which was dismissed on 17.03.1994. A second appeal was filed before the Maharashtra Sales Tax Tribunal, Mumbai. The Tribunal, by its judgment dated 29.07.2000, referred two questions of law to the High Court. The questions were: (1) Whether the purchase of packing materials against Form No.14 and their use in packing goods that are exported out of India attracts purchase tax under Section 14 of the BST Act, 1959? (2) Whether the implied sale of packing material along with the goods exempts the dealer from purchase tax? The High Court, after hearing the parties, held that since the packing material was sold along with the goods (implied sale), there was no contravention of Form No.14, and thus no purchase tax was payable. The court answered the questions in favor of the dealer, allowing the reference and setting aside the assessment order.
Headnote
A) Sales Tax - Purchase Tax - Packing Material - Section 14, Bombay Sales Tax Act, 1959 - The issue was whether purchase tax is leviable on packing materials (plastic drums and bags) purchased against Form No.14 and used for packing chemicals that were exported out of India. The court held that since the packing material was sold along with the goods (implied sale), there was no contravention of Form No.14, and thus no purchase tax was payable. (Paras 1-10) B) Sales Tax - Reference - Section 61(1), Bombay Sales Tax Act, 1959 - The Tribunal referred two questions of law regarding the levy of purchase tax on packing materials used in exports. The High Court answered the questions in favor of the dealer, holding that the packing material was part of the goods sold and exported, and therefore not liable to purchase tax. (Paras 2-10)
Issue of Consideration
Whether the purchase of packing materials against Form No.14 and their use in packing goods that are exported out of India attracts purchase tax under Section 14 of the Bombay Sales Tax Act, 1959, when there is an implied sale of the packing material along with the goods.
Final Decision
The High Court answered the questions of law in favor of the dealer, holding that the purchase of packing materials against Form No.14 and their use in packing goods that are exported out of India does not attract purchase tax under Section 14 of the Bombay Sales Tax Act, 1959, as there is an implied sale of the packing material along with the goods. The reference is allowed, and the assessment order is set aside.
Law Points
- Purchase tax
- packing material
- export
- implied sale
- Form No.14
- Section 14
- Bombay Sales Tax Act
- 1959
- Section 61(1)
