Dismissed

Shree Durga Rice v. State

Orissa HC19 Apr 2021STREV/80/2006

Case brief

AI extract

What is this about?

In a revision petition, the High Court of Orissa answered a question of law regarding the sales tax on gunny bags supplied with rice to the Food Corporation of India. The Court held that because the bags were separately billed and paid for, they are an independent commodity taxable at 8%, dismissing the petition.

What did the court decide?

The revision petition was dismissed. The Tribunal's conclusion that gunny bags sold with rice to FCI are taxable at 8% was affirmed.

Shree Durga Rice Vs State — GST and Indirect Tax | Orissa HC (2021)

¶1

IN THE HIGH COURT OF ORISSA AT CUTTACK

¶2

STREV No.80 of 2006

¶3

M/s. Shree Durga Rice Mill …. Petitioner Ms. Kajal Sahoo, Advocate

¶4

-versus-

¶5

…. State of Orissa Opposite Party Mr. Sunil Mishra, Additional Standing Counsel

¶6

CORAM: THE CHIEF JUSTICE JUSTICE B. P. ROUTRAY

ORDER

Order No.

19.04.2021

This matter is taken up by video conferencing mode.

¶12

While admitting this revision petition on 5^th February 2007, the following question of law was framed by this Court:

¶13

"Whether in the fact and circumstances of the case, gunny bags sold along with rice to Food Corporation of India is exigible to tax @4% or @8% as held by the Tribunal?

¶14

The background facts are that the Petitioner is a registered dealer under the Orissa Sales Tax Act, 1947 (OST Act). It owns a rice mill and it is carrying on the business of purchasing paddy and converting it into rice. In terms of the Government guidelines, the Petitioner was required to procure paddy at a

¶15

Page 1 of 6

¶16

// 2 //

¶17

specified rate and sell a specified percentage thereof to the Food Corporation of India (FCI) as levy rice. In terms of the contract with the FCI, the Petitioner was required to sell the levy rice with its container i.e. gunny bags. The Petitioner accordingly paid sales tax at the rate prescribed under Section 5 (1) of the OST Act.

¶18

The question that arose for consideration before the Sales Tax Officer (STO) for the assessment year in question i.e. 1990-91 was whether in respect of 24,442 Nos. of “empty new gunny bags” which had been utilized by the dealer while supplying rice to the FCI, sales tax had to be paid at the rate applicable to rice or at the rate applicable to ‘jute products’? Relying on the decision of the Supreme Court in Raj Sheel v. State of Andhra Pradesh [1989] 3 SCR 305 which involved the interpretation of Section 6-C of the Andhra Pradesh General Sales Tax Act, the STO concluded that since the FCI had paid separately towards the price of empty new gunny bags, the sales tax in respect of said sale had to be at the rate applicable to ‘jute product’.

¶19

On this issue, the Petitioner-assessee succeeded in its appeal before the Assistant Commissioner of Sales Tax (ACST), Sambalpur Range, who by an order dated 19^th January 1995, held that the rate at which sales tax had to be levied and

¶20

Page 2 of 6

¶21

// 3 //

¶22

collected on the sale of the aforementioned jute bag could not be separate from that applicable to the sale of rice itself.

¶23

Aggrieved by the above decision of the ACST, the Department went in appeal before the Tribunal which allowed it by the impugned order dated 27^th September, 2006.

¶24

Ms. Kajal Sahoo, learned counsel appearing for the Petitioner, seeks to place reliance on the decisions in State of Orissa v. Habib Rahimtullah & Co [1982] 51 STC 403 (Ori) ; Premium Breweries v. State of Kerala [1998] 108 STC 599 (SC) ; Seven Seas Distillery v. State of Kerala [1991] 82 STC 71 (Ker) and Mcdowel & Co. v. State of Kerala [1995] 97 STC 479 (Ker) to urge that when the goods are sold in containers or sold after being packed in packing materials, the containers and the packing materials will have to be taxed at the same rate as the goods themselves.

¶25

Indeed the ratio of the above decisions supports the contention of learned counsel for the Petitioner. In fact in Premium Breweries v. State of Kerala ( supra ), the Supreme Court did consider its earlier decision in Raj Sheel v. State of Andhra Pradesh ( supra ). Nevertheless, the facts of the case in Premium Breweries v. State of Kerala ( supra ) were such that the ratio of Raj Sheel v. State of Andhra Pradesh ( supra ) was found to be

¶26

Page 3 of 6

¶27

// 4 //

¶28

not applicable. The distinguishing factor, which was noticed by the Supreme Court in Raj Sheel v. State of Andhra Pradesh ( supra ) is whether the packing material has been separately billed and paid for.

¶29

An added feature as far as the present case is concerned is that packing material was in fact sold as "new unused gunny bags" and separately paid for by the FCI. In Raj Sheel v. State of Andhra Pradesh ( supra ), the Supreme Court has observed as under:

¶30

"It is therefore, perfectly plain that the issue as to whether the packing material has been sold or merely transferred without consideration depends on the contract between the parties. The fact that the packing is of insignificant value in relation to the value of the contents may imply that there was no intention to sell the packing but where any packing material is of significant value it may imply an intention to sell the packing materials. In a case where the packing material is an independent commodity and the packing material as well as the contents are sold independently, the packing material is liable to tax on it own footing Whether a transaction for sale of packing material is an independent transaction will depend upon several factors some of them being:

¶31

1. The packing material is commodity having its own identity and is separately classified in the Schedule.

¶32

Page 4 of 6

¶33

// 5 //

¶34

2. There is no change, chemical or physical in the packing either at the time packing or at the time of using the content;

¶35

3. The packing is capable of being reused after the contents have been consumed.

¶36

4. The packing is used for convenience of transport and the quantity of the goods as such is not dependent on packing;

¶37

5. The mere fact that the consideration for the packing is merged with the consideration for the product would not make the sale of packing an integrated part of the sale of the product."

¶38

In the considered view of the Court, in the present case the Tribunal was right in applying the law explained by the Supreme Court in Raj Sheel v. State of Andhra Pradesh ( supra ), and concluding that the question had to be answered against the assessee and in favour of the Department. Factually, since it has been shown by the Department, on perusing the books of account of the Petitioner that the aforementioned new gunny bags were separately sold and paid for by the FCI, the question framed by this Court is required to be answered in favour of the Department by holding that in the facts and circumstances of the case, the gunny bags sold along with the rice to the FCI is exigible to tax @ 8% as held by the Tribunal.

¶39

The revision petition is dismissed accordingly.

¶40

Page 5 of 6

¶41

// 6 //

¶42

As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587, dated 25^th March, 2020 as modified by Court’s Notice No.4798, dated 15^th April, 2021.

¶43

S.K. Guin

¶44

(Dr. S. Muralidhar)
Chief Justice
(B.P. Routray)
Judge

¶45

Page 6 of 6

Shree Durga Rice v. State

Case brief

What is this about?

What did the court decide?

Shree Durga Rice v. State

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Susil Ku.Jena Vs State

Mangalam Timber Vs State

M/S.Pragati Engineer Vs State

State Vs Nalco

M/S.Shiva Cement Ltd. Vs State

Tikina Das Vs State of Odisha