Judgment:
ORDER
K.L. Manjunath, J.
1. The substantial question of law arises in this appeal is whether the petitioner herein has to pay the turnover tax on the sale of packing material based on the notification dated 30-3-1994 at the reduced rate of tax of second sale at 1% in stead of 2.5%.
2. The facts leading to this case are as hereunder:
The assessee is a manufacturer of cement which sells the cement in bags and the bags for selling the cement is purchased as packing material by the assessee which according to the assessee had suffered sales tax at the time of purchase of MT bags. For the assessment year 1-4-1994 to 31-3-1995, the assessee filed returns under the provisions of the Karnataka Sales Tax Act. The contention of the assessee before the Assessing Officer was that in view of the notification dated 30-3-1994 in respect of the bags used as package material is liable to pay at 1% and not at 2.5%. The contention of the assessee has been rejected by the Assessing Officer and he has been called upon to pay tax at 2.5% only. Aggrieved by the order of the Assessing Officer dated 19-2-1999 an appeal preferred before the Joint Commissioner of Commercial Taxes (Appeals) under Section 20(5) of the KST Act, 1957 which appeal came to be dismissed. Being aggrieved by the same the assessee filed second appeal before the Appellate Tribunal, Bangalore, STA 140/2004 and other connected appeals. The appeal preferred by the assessee came to be dismissed by the Tribunal by its order dated 31-5-2006. Challenging the concurrent findings of the authorities below the present revision petition has been filed raising the following questions of law:
a). Whether the provisions of Section 6B read with the Notification No. FD 190 CSL 93 (IV) (supra), is independent of the provision contained in Section 5 of the Act?
b). Whether the provision contained in Section 5(3-D) of the act would determine the point of levy of packing material for the purposes of levy of turnover tax under Section 6B?
c) Whether under the facts and circumstances of the case, it can be said that sale of packing material is a separate sale and is not dependent upon sale of cement?
3. The learned Counsel for the assessee relying upon the Division Bench decision of this Court of the assessee's case only reported in 2004(57) KLJ 1 (H.C) dated 13-4-2004 contends that the assessee is not liable to pay the turnover tax at 2.5% in respect of the material used for packing the cement and entitled to pay turnover tax at 1% only. He further contends that in view of the notification dated 30-3-1994 the petitioner is liable to pay 1% only. Trie notification reads as hereunder:
No.FD 190 CSL 93(IV), Bangalore, dated 30th March, 1994
Karnataka Gazette (Extraordinary), dated 31st March, 1994
(Cancelled w.e.f. 1-4-2002, by Notification No. FD 54 CSL 2002(1), dated 30-3-2002 (Sl. No. 893)
In exercise of the powers conferred by Section 8-A of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957), the Government of Karnataka hereby reduces with effect from the First day of April, 1994, the tax payable by a dealer under Section 6-B of the said Act on the turnovers relating to second and subsequent sales or purchases in the State to one per cent.
Therefore he contends that the packing material has to be considered as second or subsequent sales or purchase in the State and the assessee has to pay turnover tax at 1% in respect of packing material.
4. Per contra the learned Government Advocate submits that in view of Section 6B of the Karnataka Sales Tax Act, the turn over tax has to be paid at 2.5% even in respect of the package material. Therefore she requests the Court to dismiss the appeal.
5. Having heard the Counsel for the parties this Court has to consider whether the package material used by the assessee for selling the cement manufactured by it has to be considered as second sale or subsequent sale. If it is so at what rate the turn over tax has to be paid by the assessee on the package material. Prior to notification the assessee was required to pay the turnover tax at the rate of 2.5%. There was no liability on the assessee to pay turnover tax but in view of the notification the assessee is required to pay the turnover tax. There mere is no dispute with regard to sale of cement which attracts the turnover tax at 2.5% but the actual dispute in the revision petition is whether the package material used by the assessee has to be considered as second sale or a subsequent sale.
6. After hearing the learned Counsel for both the parties we are of the view admittedly the assessee is not manufacturing the package material. If the assessee is purchasing the package material from any other dealer if the same has suffered tax and the same package material is used by the assessee for selling its product, the package material has to be considered as subsequent Stile only. In such an event it attracts only 1% as per the notification dated 30-3-1994 which had been gazetted on 31-3-1994. But the learned Government Advocate contends that the assessee has not placed any material to show that the package material had been purchased by it to sell its cement and has not produced any material to show that the package material has suffered tax at earlier point of time. Therefore she contends the case of the assessee can be considered by the State provided the package material has to be considered second sale or subsequent sale and it has suffered tax at the time of purchase of the material by the assessee.
7. We have seen the assessment order which does not deal with the point now raised by the learned Government Advocate. From the records we are not in a position to say whether the package material used by the assessee for the sale of its product has suffered tax on an earlier point of time which can be disputed question of fact which can be ascertained by the Assessing Officer on production of proper documents by the assessee. Considering the notification and arguments advanced by the learned Counsel for both the parties, we are of the opinion that if the package material used by the assessee for selling its product i.e, cement has suffered tax earlier. The same has to be considered as second sale or subsequent sale or whether the package material has suffered tax earlier or not, it can be answered by the Assessing Officer. In the circumstances, answering the questions of law in favour of the assessee holding that if the package material has suffered tax earlier and it is used for selling its product, in the light of the notification dated 30-3-1994 the turn over tax attracts only 1% of the tax considering it as second sale or subsequent sale. In order to ascertain the actual facts in the case, we have set aside the order of the Assessing Officer and remitted the matter for fresh consideration in accordance with law. Accordingly, this appeal is allowed and matter is remanded to the Assessing Officer who shall consider the matter afresh and pass an appropriate order within an outer limit of six months from the date of receipt of the copy of this order.