Packing materials used in sales are not taxable if they do not constitute a separate sale, especially when the primary product is exempt from tax.

ORDER :

(Pulla Karthik, J.)

This Tax Revision Case is preferred against the order dated 17.08.2001 passed by the Sales Tax Appellate Tribunal, Andhra Pradesh, (for brevity, ‘Tribunal’) in T.A.No.623 of 1997, wherein and whereby the order dated 14.08.1997 passed by the Deputy Commissioner (CT), Nizamabad Division, in R.R. No.6/97-98 has been partly set aside.

2. Facts of the case, that are necessary for the purpose of disposal of the present case, are that petitioner herein is a Company registered under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the ‘Act’), engaged in the business of manufacture and sale of beedis. It purchase beedi leaves, get them manufactured into beedis and sell the resultant beedis. The beedis are first rolled and tied to a small string. 25 of such beedis are packed into ‘katta’. 20 of such ‘kattas’ are packed into ‘pudas’. 40 ‘pudas’ are packed in a cardboard box which is wrapped with waterproof sheet and such cardboard boxes are in turn packed in gunnies and sold in the market. While so, during the year 1993-94, the petitioner’s final assessment was completed by the Commercial Tax Officer-III, Nizamabad, levying the tax only on the last purchase of beedi leaves and certain miscellaneous sales, vide order, dated 18.02.1997. Thereafter, the Deputy Commissioner (CT), Nizamabad Division, (for short, ‘DC’) issued show-cause notice, dated 06.05.1997, proposing to levy tax on value of new gunnies, new corrugated boxes, old cartons, label paper and other adhesive materials purchased by the petitioner, by adding 20% profit thereon, involving addition of estimated turnovers which are as follows:

a) First sales of gunnies – Rs.1,64,83,233/-

b) First sales of corrugated boxes – Rs.1,90,12,366/-

c) First sales of label paper – Rs.68,32,262/-

d) Water proof rolls – Rs.5,21,109/-

To the said show cause notice, the petitioner submitted detailed objections, dated 22.07.1997. The DC vide order dated 14.08.1997 rejected all the contentions urged by the petitioner and confirmed the proposed revision on modified turnovers after reducing closing stock. The turnovers, finally, added by the DC are as follows:

a) Gunnies - Rs.1,32,10,500/- @ 7.7% - Rs.10,17,208/-

b) Corrugated boxes - Rs.1,54,56,720/- @ 7.7% - Rs.11,90,167/-

c) Label Paper - Rs. 53,75,905/- @ 9.9% - Rs. 5,32,215/-

d) Water proof rolls - Rs. 3,31,950/- @ 8.8% - Rs. 29,211/-

Aggrieved by the order of the DC, the petitioner filed an appeal before the Tribunal vide T.A.No.623 of 1997 and the same was partly allowed by allowing the claim of the petitioner to the extent of water proof rolls and partly dismissed by dismissing the claim of the petitioner in respect of other packing material viz., Gunnies, Corrugated boxes, Label Paper, vide order dated 17.08.2001. Questioning the same, the petitioner is before this Court.

3) Heard Sri Karthik Ramana Puttamreddy, learned counsel, representing Sri S.Dwaraknath, learned counsel for the petitioner, and Sri K.Raji Reddy, learned Special Government Pleader for Commercial Taxes, for the respondents.

4) Learned counsel for the petitioner has contended that the provision of packing material is integrated with sale of beedis which is exempt from tax and there is no express or implied sale of packing material. Learned counsel has also contended that the value of packing material used by the petitioner during the year is about Rs.2.68 crores as against total sale of beedis worth Rs.110.71 crores. Thus, the value of the packing material is mere 2.16% of the turnover of beedis. As per Section 6-