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1988 Supreme(Ori) 69
K.P. Mohapatra, R.C. Patnaik, JJ.
ORISSA CARD BOARD BOX INDUSTRIES
Versus
STATE OF ORISSA
S.J.C. No. 48 of 1979
Decided On: Decided On : 05-05-1988
R. B. Roy, for the petitioner.
The Standing Counsel (S.T.), for the opposite party.
The selling dealer is entitled to rely on the representations made by the purchasing dealer and is not required to satisfy himself about the application of the goods for the purpose for which it was represented that the goods were entitled to be used.
Headnote:
SALES TAX - Exemption - Sale of wrappers, cartons and labels - Whether entitled to exemption under section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act - Printing charges - Whether includible in taxable turnover.
Fact of the Case:
The petitioner, a manufacturer of cardboard boxes and dealer in wax papers and wrappers, claimed exemption of sales tax on the sale of wrappers, cartons, and labels to various manufacturers on the ground that the purchasers were entitled to purchase the same as raw materials for the purpose of manufacture of finished goods inside the State. The petitioner also claimed exemption of sales tax on a turnover representing labor charges for printing on the ground that the contracts were divisible.
Finding of the Court:
The court held that the Sales Tax Tribunal erred in rejecting the petitioner's claim for exemption of sales tax on the sale of wrappers, cartons, and labels without examining the registration certificates of the purchasing dealers to ascertain if they were entitled to purchase the same as raw materials for the purpose of manufacture of finished goods inside the State. The court also held that the printing charges received by the petitioner were rightly treated as sale price and could be included in the taxable turnover of the petitioner since the petitioner failed to produce agreements or work orders of the customers, if any, as well as the books of accounts showing the divisibility of the contracts for sale of materials, as well as the printing and labor charges.
Issues: 1. Whether the petitioner was entitled to exemption of sales tax on the sale of wrappers, cartons, and labels to various manufacturers under section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act. 2. Whether the printing charges received by the petitioner were rightly treated as sale price and could be included in the taxable turnover of the petitioner.
Ratio Decidendi: 1. The court held that the Sales Tax Tribunal erred in rejecting the petitioner's claim for exemption of sales tax on the sale of wrappers, cartons, and labels without examining the registration certificates of the purchasing dealers to ascertain if they were entitled to purchase the same as raw materials for the purpose of manufacture of finished goods inside the State. The court relied on the principles laid down in State of Madras v. Radio and Electricals Ltd. and Commissioner of Sales Tax, Madhya Pradesh v. Samaj Paper Mart, Ranipura, Indore, which held that the selling dealer is entitled to rely on the representations made by the purchasing dealer and is not required to satisfy himself about the application of the goods for the purpose for which it was represented that the goods were entitled to be used. 2. The court held that the printing charges received by the petitioner were rightly treated as sale price and could be included in the taxable turnover of the petitioner since the petitioner failed to produce agreements or work orders of the customers, if any, as well as the books of accounts showing the divisibility of the contracts for sale of materials, as well as the printing and labor charges. The court relied on its earlier decision in State of Orissa v. Sri D. N. Joshi, which held that if the agreements are composite in character and the contracts are indivisible, the dealer is liable to pay sales tax on the entire sum.
Final Decision: The court answered the first question in the manner that the Sales Tax Tribunal shall examine the question as to whether the purchasing dealers were entitled to purchase wrappers and cartons for manufacture of finished goods inside the State of Orissa and grant declarations in form D to the selling dealer. The court answered the second question in the affirmative.
JUDGMENT
K. P. MOHAPATRA, J. - The following questions have been referred by the Sales Tax Tribunal under section 24(3) of the Orissa Sales Tax Act (hereinafter referred to as the "Act") :
"(1) Whether, on the facts and in the circumstances of the case, the learned Member, Sales Tax Tribunal, was justified in rejecting the claim for exemption of tax by the petitioner in respect of sale of wrappers, cartons and labels, etc., to M/s. Sajitha Bakery, Chilika Pharmaceutical Laboratories, Priyadarsini Chemicals, Khosala Lamp Industries and Konark Television ?
(2) Whether, on the facts and in the circumstances of the case, the printing charges received by the petitioner have been rightly treated as sale price can be included in the taxable turnover of the petitioner ?"
2. It appears from the statement of facts submitted by the Sales Tax Tribunal that the petitioner-firm, a registered dealer under the Act (hereinafter referred to as the "dealer"), is a manufacturer of cardboard boxes, deals in wax papers and wrappers and also undertakes printing work on the above materials. In the assessment year 1975-76, the dealer sold goods to other dealers as described below :
---------------------------------------------------------------------------- Name of the manu- Products Amount Form facturers to whom sold obtained petitioner sold --------------------------------------------------------------------------- Rs.
Sajitha Bakery Wrappers 78,254.16 Form D
Chilika Pharmaceutical Laboratories Cartons 2,618.76 do.
Priyadarsini Chemicals Wrappers 3,201.57 do.
Khosala Lamp Industries Labels 846.70 do.
Konark Televisions Cartons 5,312.00 do. -------------- 90,233.19 Republic Store (Trader) 8,774.00 -------------- 99,007.19 Form XXXIV
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On account of existence of declarations in form D and form XXXIV the dealer claimed exemption of sales tax under section 5(2)(A)(a)(ii) of the Act. Further, the dealer claimed exemption of sales tax on a turnover of Rs. 32,615.25 on the ground that it represented labour charges for printing. The Sales Tax Officer, the Assistant Commissioner of Sales Tax, being the first appellate authority and the Member, Additional Sales Tax Tribunal concurrently held that the dealer was not entitled to exemption of sales tax on a turnover of Rs. 99,007.19, because the registration certificates of the purchasing dealers were verified and it was found that they were not entitled to purchase packing materials, such as cartons, wrappers and labels as raw materials for the purpose of manufacture of finished goods inside the State for resale. They further concurrently disallowed exemption of sales tax on the turnover claimed as labour charges for printing on the ground that the dealer had supplied paper and other materials from its own stock, got the printing work done in its own press and thus the contracts were composite ones which could not be bifurcated. Accordingly, sales tax on the aforesaid turnover was demanded.
3. In order to answer the first question, it is necessary to quote section 5(2)(A)(a)(ii) of the Act :
"5. Rate of tax. -
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(2)(A) In this Act, the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom :-
(a) his turnover during that period on -
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(ii) sales to a registered dealer of goods specified in the purchasing dealer's certificate of regist
