JUDGMENT
Badar Durrez Ahmed, J.
1. At the instance of the Revenue, the following two questions have been referred to us by the Sales Tax Appellate Tribunal, Delhi for our opinion:-
“1) Whether on the facts and circumstances of the case the Tribunal was right in holding that the 2nd Proviso to Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 did not come into play regarding the goods purchased tax free on the strength of certificate of registration under that Act and which were used as packing material for packing of snuff manufactured and sold by the respondent and which was a tax free item?
2) Whether on the facts and circumstances of the case the Tribunal was justified in holding that there was sale of the goods in question viz. containers & bardana etc.?”
2. This Reference pertains to the year 1972-73. The assessed’ M/s KhetuRam Bishambar Dass was in the business of manufacture and sale of “snuff” which was a tax free item (being a tobacco product) by virtue of entry No. 46 of Schedule II of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, (hereinafter referred to as the ‘said Act’). The assessed was a registered dealer both, under local (viz. the Said Act) and Central Sales Tax Act. The assessed, in its application seeking registration under both these enactment the assessed had mentioned tin containers, wrapping paper, waste paper, labels, wooden cases, patti, nails, bardanaa, carton boxes etc. as meant for packing of the snuff manufactured and sold by it. It is pertinent to note that in the certificate issued under the Central Act these items were duly specified under the head “for use in the packing of goods for sale/resale”. In the certificate under the said Act they were, however, entered in the column “for re-sale”. This difference in treatment is of material importance. According to the assessed, it had been shown under the column “for re-sale” in the registration certificate under the Local Act (i.e. the Said Act) because there was no separate column printed in the certificate for packing material although the provisions permitted the same.
3. In fact, these items were not sold by the assessed as such but were merely used as packing material for the sale of snuff which the assessed had manufactured. The assessed had purchased these packing materials free of tax on the basis of the Local Registration Certificate and the extent of the purchase was Rs 6,25,619.59. The Sales Tax Officer at the stage of assessment was of the view that since terms of the Local Registration Certificate these items were shown for re-sale but in point of fact they were not re-sold but used as packing material for sale of snuff, therefore, the value of these materials which were indicated for re-sale, having not being so utilized, in view of the provisions of the Second Proviso to Section 5(2)(a)(ii) of the said Act, were liable to be added the taxable turnover of the assessed. Accordingly, the Sales Tax Officer added that the purchases of packing material amounting to Rs 6,25,619.59 to the taxable turnover of the assessed and a tax demand of Rs 31,149/- was therefore, raised. This view was upheld in an appeal by the Additional Commissioner., Being aggrieved of these two decisions, the assessed preferred an appeal before the Tribunal which held that the same could not be so added and that the Second Proviso of Section 5(2)(a)(ii) did not come into play. The relevant portion of Section 5 of the said Act as applicable at the relevant time read as follows:-
“(2) In this Act the expression “taxable turnover” means that part of a dealer’s gross turnover during any period which remains after deducting there from-
(a) his turnover during that period on –
(i) …
(ii) sales to a registered dealer of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for re-sale by him, or, and [for use by him as raw materials in the manufacture in the union territory of Delhi (hereinafter in this sub-clause referred to as Delhi), of goods (other than goods declared tax-free under section 6)-
A) for sale in Delhi; or
B) for sale in the course of inter-state trade or commerce, being a sale occasioning, or effected by transfer of documents of title to such goods during the movement of such goods from Delhi; or
(C) for sale in the course of export outside India being a sale occasioning the movement of such goods from Delhi, or a sale effected by transfer of documents of title of such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the customs frontiers of India; and]
of containers or other materials for the packing of goods of the class or classes so specified for sale.
Provided that in the case of such sales a declaration duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed from obtainable from the prescribed authority is furnished in the prescribed manner by the dealer who sells the goods;
Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for re-sale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilized by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer.
It is pertinent to note that the Delhi Sales Tax Act, 1975 (hereinafter referred to as “the new Act”) came into force upon the repeal of the said Act insofar as its applicability to Delhi was concerned and the new Act also contained provisions similar to the said Section 5(2)(a)(ii). The said Provisions as it was applicable then reads as under:-
(2) For the purposes of this Act, “taxable turnover” means that part of a dealer’s turnover during the prescribed period in any year which remains after deducting there from:-
(a) his turnover during that period on-
(i) …
(ii) …
(iii) …
(iv) …
(v) Sale of registered dealer-
(A) of goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by him as raw materials in manufacture in Delhi of any goods, other than specified in the Third Schedule or news papers,-
(1) for sale by him inside Delhi; or
(2) for sale by him in the course of inter-State trade or commerce being a sale occasioning, or effected by transfer of documents of title of such goods during the movement of such goods from Delhi; or
(3) for sale by him in the course of export outside India being a sale occasioning the movements of such goods from Delhi, or a sale affected by transfer of documents of title to such goods effected during the movement of such goods from Delhi, to a place outside India and after the goods have crossed the outside India and after the goods have crossed the customs frontiers of India; or
(B) of goods of the class or classes specified in the certificate of the registration of such dealer as being intended for resale by trade or commerce or in the course of export outside India in the manner specified in sub-item (2) or sub-item (3) (A), as the case may be; and
(C) of containers or other materials, used for the packing of goods, of the class or classes specified in the certificate of registration of such dealer, other than goods specified in the Third Schedule, intended for sale or resale;
Section 5(2) of the said Act defines the taxable turn-over as that part of the dealer’s gross turnover during any period which remains after deducting inter-alia sales to a registered dealer of containers or other material for the packing of goods of the class or classes so specified for sale. The Second Proviso to this provides that where any goods specified in the certificate of registration are purchased by a registered dealer as being intended for re-sale by him or for use by him as raw materials in the manufacture of goods for sale, but are utilized by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer. In other words, sales to a registered dealer of containers or other materials for the packing of goods of the class or classes was specified for sale would required to be deducted from the gross turnover of such dealer to arrive at his taxable turnover. At the same time if the certificate of registration under which the goods are purchased and are shown therein to be intended inter alia for re-sale by him but are not so utilized then insofar as this dealer i.e. the purchasing dealer is concerned, the said amount shall be included in his taxable turnover.
5. After the introduction of the new Act, which was after the period in consideration in the present Reference, the amendment introduced was that the containers of materials used for packing of goods of the class or classes specified “in the certificate of registration” of such dealer, other than the goods specified in the third schedule, intended for sale or re-sale were liable to be deducted from the gross turnover to arrive at the dealer’s taxable turnover. Undoubtedly, under the New Act, the present assessed would not have been entitled to any deduction as containers and packing materials used in the sale of snuff.
6 What is to be examined by us is whether the Second Proviso of Section 5(2)(a)(ii) of the said Act would come into play and, therefore, the price of the packing material would be liable to be added to the taxable turnover of the assessed. Mr Batra, the learned counsel who appeared for the Revenue submitted that the registration certificate issued under the said Act clearly indicated these materials under the column “for re-sale”. According to him, these items were, in point of fact, not re-sold and, therefore, it meant that they were put to some other use. Therefore, the Second Proviso to Section 5(2)(a)(ii) got attracted and the price of such material would have to be added to the taxable turnover of the assessed. On the other hand, Mr Chawla, who appeared for the assessed submitted that these items were actually not for re-sale but as the form or the certificate of registration under the Local Act, did not contain any column for packing materials the same were written under the heading “for re-sale”. He pointed out that the fact that they were not actually meant for re-sale but for packing becomes apparent inasmuch as the very same Officer while giving the certificate under the Central Act has included these items under the head “for use in the packing of goods for sale/re-sale.”
7. Having considered the arguments advanced by the counsel, we are of the opinion that the Second Proviso to Section 5(2)(a)(ii) of the said Act is not attracted in the present case. First of all, we note that sales to registered dealers of containers and other materials for the packing of goods of the class or classes so specified for sale, are deductable from the gross turnover and, contrary to what Mr Batra argued, the same constitutes an independent category as held in Palam Potteries v. Commissioner of Sales Tax, New Delhi and Anr., 38 STC 62 by learned single Judge of this Court. Secondly, when the said containers and other materials were an independent category and were to be deducted from the gross turnover, then there should have been a column providing for the same under the Local Registration Certificate. We are in agreement with the submission made by Mr Chawla that these items have been entered under the head “for re-sale” in the Local Registration Certificate not because they were meant for re-sale but because the appropriate authority did not provide for a column in the registration certificate. This, however, would not enable us to detract from the position that the assessed had claimed deduction on account of containers and other materials for packing of goods and the same ought to have been shown in the certificate as such. That being the case, these goods were not entered for re-sale and, therefore, it could not be argued that because they were not re-sold, therefore, the Second Proviso came into play. The position was altered in 1975 but that would not apply for the period under consideration. Accordingly, our answer to Question No. 1 would be that in the facts and circumstances of the present case, the Tribunal was right in holding that the Second Proviso to Section 5(2)(a)(ii) did not come into play. The second question raised before us is based on the additional/alternative finding given by the Tribunal. In respect of the second question the Tribunal’s view was as under:-
“16. Even otherwise as per findings of the learned Addl. Commissions the assessed must have charged some price for packing in the overall price fixed while selling snuff. These containers and packing materials were impliedly sold as well. The assessed thus complied with the declarations which it gave as registered dealer under section 5(2)(a)(ii) of the Bengal Act while effecting purchases. The second proviso thus could not be treated to have come into play. See in this respect the decision of the Allahabad High Court in the case of Commissioner of Sales Tax, U.P. v. Vanaspati Trading Co. (S.T.I. (1979) Allahabad H.C. 136.”
8. From the above it is apparent that the Tribunal was of the view that if these goods were taken to be for re-sale and not for the purposes of utilization as containers and packing materials, even then the Second Proviso would not be attracted inasmuch as the snuff sold by the assessed was sold in a packed condition and the overall price charged for the snuff which was sold would have, implicit in it the price of the containers as well. Therefore, it could yet be considered to be a sale of the containers also meaning thereby that the condition of re-sale would also not have been violated. It has, however, been held in the alternative and on the assumption that the said items were earmarked for re-sale. We have already found that they were not so earmarked. Therefore, this issue does not at all arise and question No. 2 does not need any answer.
9. In this view of the matter, the Reference stands answered accordingly.