The cost of tins used for packaging oil sold in sealed containers is not deductible as packing charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959.

Headnote:
TAMIL NADU GENERAL SALES TAX RULES, 1959 - RULE 6(CC)(I) - INTERPRETATION - SALE OF OIL IN SEALED TIN CONTAINERS - DEDUCTION OF COST OF TINS AS PACKAGE CHARGES - NOT PERMISSIBLE.
Fact of the Case:

The assessee, a dealer in gingelly oil and oil-cake, purchased oil in barrels, polythene cases, and 16 kg sealed tins. The assessee sold the 16 kg tins to customers, charging separately for the oil contents and the tin container. The assessing authority taxed the total turnover, rejecting the assessee's plea for deduction of the price of the tins as packing charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. The Sales Tax Appellate Tribunal accepted the assessee's plea, holding that the assessee's claim was covered by rule 6(cc)(i) and granted a deduction for the price of the tins charged separately in the bills.
Finding of the Court:

The court held that the price of the tin container is not deductible as packing charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959, when oil is sold in sealed tins. The court reasoned that the goods sold is "tin of oil", and the price of the goods is taxable. The court further held that there is no question of taxing separately for the price of oil and price of tin at different rates.
Issues: Whether the cost of tins can be deducted from the total turnover as package charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959, when oil is sold in sealed tin containers.
Ratio Decidendi: The court interpreted rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959, and held that the rule allows for the deduction of packing charges only when the packing is done subsequent to the sale of the goods. In the present case, the oil was sold in sealed tins, and the court held that there was no question of packing of oil by the dealer. Therefore, the court held that the assessee was not entitled to deduct the cost of tins as packing charges.
Final Decision: The court set aside the order of the Appellate Tribunal and restored the order passed by the Appellate Assistant Commissioner, which had denied the assessee's claim for deduction of the cost of tins as packing charges.

Judgment :-

BELLIE, J.

These two references to a Full Bench are by a Division Bench. The references occasioned because the Division Bench found it difficult to agree with the point of law decided by an earlier Division Bench in K. Natarajan and Sons v. State of Tamil Nadu 1977 (39) STC 443, 1977 (6) CTR 324 (Mad.). The point involved is whether when oil is sold in sealed tin containers the cost of tins can be deducted from the total turnover as package charges under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. In the two references the assessee V. V. Vanniaperumal and Co., is a dealer in gingelly oil and oil-cake and purchases oil, as seen from the records, in barrels and in various sizes of polythene cases and also in 16 kg. sealed this. We are now concerned with the oil purchased in tins. The company in turn sells the said 16 kg. tins to its customers but it charges in the bill separate price for the oil contents and separate price for the tin container.

2. The assessing authority taxed on the total turnover rejecting the assessee's plea that the price for the tin shall be taken as packing charges as it is provided under rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. But on appeal the Sales Tax Appellate Tribunal accepted the plea of the assessee holding that the assessee's claim is squarely covered by rule 6(cc)(i) and it granted deduction for the price of the tins charged separately in the bills.

3. As against this order revisions were preferred by the State which came before the Division Bench consisting of Balasubramanyan, J., and Padmanabhan, J. During arguments the State relied on the abovesaid Division Bench decision in K. Natarajan and Sons v. State of Tamil Nadu 1977 (39) STC 443, 1977 (6) CTR 324 (Mad.). In that decision Ismail, J., as he then was and Sethuraman, J., had held that when oil is sold in sealed tins and even if oil contents is separately priced and the tin container is separately priced the total price is exigible to tax and no deduction arises for the price charged for the tin containers. They further held that the question of deduction for packing charges arises when the packing is done only subsequent to the sale of oil. However they further held that the sale price of the oil shall be separately taxed and the sale price of the tin container shall be separately taxed at the rates individually applicable to them.

4. In the reference cases Balasubramanyan, J., and Padmanabhan, J., found it very difficult to agree with the proposition of law laid down by the earlier Bench that no deduction as package charges can be made for the tin container and deduction arises only when package is made subsequent to the sale of the oil, and therefore they thought it proper to refer the matter to a Full Bench.

5. Rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959, is this :

"6. The tax or taxes under sections 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer :-

(a) ................

(cc) all amounts falling under the head, charges for packing, that is to say, cost of packing materials and cost of labour,

(i) when charged for by the dealer separately without including such amounts in the price of the goods sold, in respect of the goods liable to tax at the hands of the assessee; ..........." *

The rule appears to be in plain words that in determining the taxable turnover the charges for packing shall be deducted from the total turnover. Mr. J. Kanakaraj, learned Additional Government Pleader, argues that the dealer-company purchases the oil in sealed tin containers and it sells the same, as it is, to its customers and, therefore, no question of packing of oil by the dealer arises at all and hence there are no charges of packing as contemplated in rule 6 and thus no question of deduction of

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