10. Whether supply of labels and stickers to the exporter of mango and guava pulp would form an integral part of export contract and can it be said there is an implied sale of packing material ?

Held : Yes

The appellant is dealing in the activity of manufacturing and selling of packing material such as labels and stickers. It supplied labels and stickers to the exporter of mango and Guava pulp against Form H. The labels and stickers are printed and supplied as per specific order of the foreign buyer. The printed material was of that nature that no one else but the exporter could have used it. Even the design and art work of the label was supplied by the customer. The submission of the appellant was that the sale of stickers and labels are not only the integral part of the contract, but also implied one as it is covered by packing material for the purpose of export of the goods. Reliance was placed on the decision of the Bombay High Court in Malik Traders vs. The State of Maharashtra (77 STC 411), wherein the Hon'ble High Court has held that where there is no formal contract of sale of packing materials, the contract of sale will be implied provided that the packing material used is not of routine type and is also not of insignificant value. The Tribunal observed that in the present case the stickers and labels were to be pasted on the cartons of guava and mango pulp and the contract in question implied that such material was to be provided along with the commodity which was to be exported. Hence it is indispensable and inseparable part of packing material so it has to be treated as packing material.

The appellant also relied on the decision of the Madras High Court in Kusum Laminating & Packing Industries vs. The State of Tamil Nadu (101 STC 476) in which the view of the High Court was that the packing material being essential for export, on taking into account the nature of goods exported, it should be exempted from tax under section 5(3) of the Central Act. By identifying the decision the Tribunal observed the labels and stickers purchased from the appellant were used by exporter by pasting the same on the cartons and according to it the printing material used by the exporter was implied part of the contract and it constituted part and parcel of packing material.

The appellant then referred to the decision of the Hon'ble Tribunal in Parksons Printers Ltd. (S.A.918 of 1999 dated 30-11-2000, in which the claim was disallowed by the lower authorities on the ground there was no specific agreement between the foreign buyer and appellant-vendor for supply of cartons. The Tribunal allowed the appeal and held that the contract with the foreign buyer providing that the tea should be packed as per "standard export packing" would indicate that the packing may be different from the standard packing. Relying on the said decision also, the Tribunal held that the use of labels and stickers is not only integral part of the contract, but also implied nature of the contract.

Safe Print & Pack vs. The Stateof Maharashtra (Second Appeal No. 84 of 2001 dated 9-3-2007). The Judgment of the Tribunal was delivered at Third Bench of the Tribunal by Hon. Member S.G.Tambe). The appellant was represented by Mrs. N.R.Badheka, Advocate.

11. Whether the appellant is entitled for full set off under Rule 42L on the purchases when a part of it are gifted away on account of Scheme discount?

Held : Yes.

The appellant is a reseller cum distributor of Indian made foreign liquor. The appellant purchases IMFL from the manufacturers on payment of tax @ 20%. Thereafter he resells the IMFL on which he charges tax @ 20% and he claims set off under Rule 42L. Assessment order was challenged in appeal. The appellate authority reduced the set off under Rule 42 L on account of free discount which was shown separately in the sale invoice. The method of the scheme is when a buyer purchased 12 bottles of wine the appellant has given 2 bottles free. The price of these two bottles is shown in the total sale price in the bill but the same has been immediately deducted therefrom calling it "free discount". On the net price the tax has been collected and paid. On these facts, according to the revenue, no sale can be said to have taken place so far as these two bottles are concerned and hence no set off would be admissible thereon.

The Tribunal held that the said issue has already been decided by the Tribunal’s decision in Arvind Mills Ltd. (S.A. No. 771 of 1991 decided on 31-7-1993) in which it has been held that in such set of circumstances, though the items in question are ostensibly shown in the relevant sale bills to have been given by way of gifts, in real effect they do not amount to "gift" because the total net sale price charged in the bills is determined after taking into consideration the price of these gifted items also. Showing certain items as having gifted away is another way of giving trade discount for the purpose of promotion of sales. In the case of trade discount all items are held to have been sold and no set off is disallowed on that count. If that is so, according to the Tribunal there is no reason for reduction of set off.

Wine Enterprises vs.. The State of Maharashtra (Second Appeal No. 2043 of 2003 dated 2-3-2007). The Judgment of the Tribunal was delivered at Second Bench of the Tribunal by Hon'ble Member S.N. Jamode). The appellant was represented by Mr. B.D. Advani, Advocate.

12. Whether paint purchased for upkeep of the machinery can be equated with the machinery or its components, parts and accessories of machinery so as to grant full set off under Rule 41D?

Held Yes.

The appellant runs a sugar mill manufacturing taxable and non-taxable goods. At the time of assessment assessing authority did not allow full set off on the purchases of paint which are used for maintenance of the machinery. Before the Tribunal the appellant submitted that the paint which has been used for maintenance and upkeep of the machinery is to be considered as machinery itself so as to grant set off under Rule 41D of the Bombay Sales Tax Rules. Reliance was placed on the decision of the Tribunal in Vasant Sahakari Sakhar Karkhana Ltd. (S.A. 888 to 892 of 1993 dated 31-8-1995 and Bhima Sahakari Sakhar Kharkhana Limited (S.A.1046 of 1994 dated 2-11-1996). The Revenue contended that for grant of full set off under Rule 41D, it must be shown that the purchases in respect of which set off is claimed pertains to plant and machinery and parts, components and accessories of plant and machinery. Reliance was placed on Mehra Brothers vs. Joint Commercial Tax Officer (80 STC 233) to contend that paint cannot be said to be accessory of machinery. The Tribunal relied on the judgment in the case of Manganga Sahakari Sakhar Karkhana Limited and held that the point raised by the revenue is made clear in the said judgment. The Tribunal reproduced the observations:

"…….Now the question before us is that whether the piaint used for coating the open surface of machinery could be bifurcated that some part of paint was used in the production of taxable goods and some parts are used in the production of non-taxable goods. According to us, no such bifurcation of paints applied on the machinery is possible. Moreover, it can be very well said that as the paint applied on the machinery increased the life of the machinery, it could very well be said to be an accessory and thus liable for full set off. Thus, the appellant is entitled for full set of under Rule 41D of the Bombay Rules on the purchases of paints."

The Tribunal allowed full set off.

Sahakar Maharshi Shankarrao Mohite Patil Sahakari Sakhar Karkhana Ltd. vs. The State of Maharashtra (Second Appeal No. 2171 of 2003 dated 23rd March, 2007). The Judgment of the Tribunal was delivered at First Bench of the Tribunal by Hon’ble President Shri G.D. Parekh. The appellant was represented by Mr. A.B.Ghanekar, Sales Tax Practitioner and K.S.Nagar, Advocate.