Commissioner of Sales Tax Vs Associated Cement Company Limited (Bombay High Court)
Conclusion: Once it was held that there was an independent and separate sale of the HDPE bags in which the cement was sold, there was no question of levying any sales tax at the same rate as that levied on cement.
Held: Assessee was a manufacturer of cement. AO held that assessee (ACCL) had not affected the separate activity of reselling of packing material but had used the entire packing material in the process of manufacture of cement. On this ground, AO disallowed the assessees claim of resales. Assessee appealed against the order to the Deputy Commissioner of Sales Tax (Appeals), Mumbai. Appeal was allowed, and ACCL was granted refund on account of the claim of resale of the HDPE bags in which the manufactured cement was sold. Department argued that cement could not be sold without appropriate packing material. No separate charge was made for the HDPE bags, which are the packing material. There was no separate sale, either expressed or implied, of the packing material. Assessee submitted that Tribunal had correctly concluded that there was an express and independent contract for the sale of HDPE bags in which ACCL sold the cement. It was held that the material on record evaluated by Tribunal showed that HDPE bags used to pack the cement were a distinct commodity with its own identity and were classified separately; there was no chemical or physical change in the packing either at the time of packing or at the time of use of the contents; the packing was capable of being reused after the contents had been consumed; there was evidence of reuse or resale, which was not challenged by Revenue. The HDPE bags were used to pack the cement for ease of transportation and convenience. A range of packing products was available, out of which the ACCL chose the HDPE bags. The Hon’ble Supreme Court has held that the mere fact that the consideration for the packing was merged with the consideration for the product did not make the sale of packing an integral part of the sale of the product. The Hon’ble Supreme Court also held that the burden rests on the Revenue to prove that a turnover was subject to tax. Therefore, after examining the material on record and considering the factors highlighted, there was no reason to overturn the findings of fact or the conclusion reached by the Tribunal in these cases.
