http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8

PETITIONER:

PREMIER BREWERIES ETC.

Vs.

RESPONDENT:

STATE OF KERALA

DATE OF JUDGMENT: 18/12/1997

BENCH:

S.P. BHARUCHA, SUHAS C. SEN

ACT:

HEADNOTE:

JUDGMENT:

THE 18TH DAY OF DECEMBER, 1997

Present:

Hon'ble the Chief Justice

Hon'ble Mr. Justice S.P. Bharucha

Hon'ble Mr.Justice Suhas C.Sen

A.S.Nambiar, Sr. Adv., Sunil Gupta, Ms.A.K. Verma,

C.N.Sreekumar, G.Prakash, Ms. Bina Gupta, P.P. Vineeth,

K.M.K.Nair and Vipin Nair, Advs. with him for the appearing

parties.

J U D G M E N T

The following Judgment of the Court was delivered:

(With C.A. Nos. 4871-74/91, 232/92, 6683-85/95, 6732-36/95

and SLP (C) Nos. 6063-65/91).

Sen, J.

Premier Breweries Limited, the appellant herein, is a

dealer in Indian Made Foreign Liquor. The liquor is sold in

bottles packed in cardboard cartons. The dispute in this

case arose in course of sales tax assessment for the year

1982-83. Before the Assessing Officer the assessee's case

was that the cardboard cartons will have to be taxed at the

rate of 8% under Entry 97 of the First Schedule of the

Kerala General Sales Tax Act, 1963 and not at the rate of

50% applicable to sale of liquor. The appellant's case was

that it had charged its customers separately for the liquor

and the cartons. Thee was no reasons to include the value

of the cartons in the value of the liquor for the purpose of

levy of tax. Initially, the assessee's stand was accepted by

the Assistant Commissioner of Sales Tax and an assessment

order was passed accordingly.

Later on the Deputy Commissioner, Palghat, thought that

an error has been committed in the assessment order and in

exercise of his revisional power under Section 35 of the Act

he set aside the assessment order. The Deputy Commissioner

was of the view that the Assessing Authority had erroneously

levied tax at the rate of 8% on packing material viz.

cardboard cartons. As per Section 5(5) of the Kerala

General Sales Tax Act, where goods sold were contained in

containers or were packed in any packing material, the rate

of tax and the point of levy applicable to such containers

or packing materials, as the case may be, should, whether

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8

the price of the containers or the packing materials was

charged separately or not, be the same as that applicable to

goods contained or packed. In determining turnover of the

goods, the turnover in respect of the containers or packing

materials will have to be included therein.

Thereafter, the assessment was revised in the manner

indicated by the Deputy Commissioner. The view of the

Deputy Commissioner was uphled by the Tribunal and also the

High Court.

According to the appellant, the High Court has

overlooked the fact that the containers were separately

charged on the invoices raised by the appellant and the

customers paid separately for the liquor and the containers.

There is a specific Entry in the First Schedule under which

tax has to be levied at the rate of 8% on the containers.

It was not open to the Assessing Authority to include the

value of the containers in the value of the liquor for the

purpose of calculating the assessee's turnover. Secondly, it

has been contended that the cardboard cartons, in any event,

are secondary containers provided for protection of the

bottles in which the liquor was sold. The bottles were the

primary containers of beer. The cartons were provided to

ensure that the beer bottles were not broken in transit.

Therefore, the turnover of the cartons could not in any way

be included in the turnover of the beer sold by the

appellant. Lastly, a point was taken that under the Kerala

General Sales Tax Act, a single point duty is leviable on

the cardboard cartons. This duty has already been paid on

these cartons by the manufacturers. Further levy on these

cartons at the point of time when was sold will be contrary

to law. A large number of decisions were cited on behalf of

the appellant as well as the respondents in support of their

contentions.

Before examining the decisions, it will be useful to

refer to the relevant provisions of the Kerala General Sales

Tax Act. Tax on sale or purchase of goods has been imposed

by Section Act. Tax on sale or purchase of goods has been

imposed by Section 5 of the act. Sub-sections (5) and (6) of

Section 5 of the Act provide:

"5(5). Notwithstanding anything

contained in sub-section (1) or

Sub-section (2), but subject to

sub-section 6 where goods sold are

contained in containers or are

packed in any packing materials,

the rate of tax and the point of

levy applicable to the containers

or packing materials, as the case

may be, shall, whether the price of

the containers or packing materials

is charged separately or not, be

the same as those applicable to

goods contained or packed, and in

determining turnover of the goods,

the turnover in respect of the

containers or packing materials

shall be included therein.

5(6). Where the sale or purchase

of goods contained in any

containers or packed in any packing

materials in exempt from tax, then

the sale or purchase of such

containers or packing materials

shall also be exempt from tax."

The language of sub-section (5) and (6) of Section 5 is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8

clear and unambiguous. These two Sub-sections deal with the

method of valuation of packed goods and the rate of tax

payable thereon. The rules laid down are: (1) Where goods

sold are contained in a container or packed in any packing

material, the rate of tax payable on the containers shall be

the same as that applicable to the goods contained or

packed. (2) This will be the position even if price of the

containers or packing materials is charged separately, (3)

The turnover of the goods will include the turnover in

respect of containers or packing materials in which the

goods are contained or packed. (4) The point of levy of the

tax on the containers or the packing materials will be the

same as applicable to the goods contained or packed. (5) If

the sale or purchase of goods contained in a container or

packed in a packing material is exempted from tax then no

tax shall be payable on the sale or purchase of the

containers or packing materials in which the goods are sold.

The underlying idea behind these rules is that packed

goods are to be taxed as composite units. In calculating

the turnover of the goods, the turnover of the containers

will have to be included. The appropriate rate of tax will

be the rate payable on the goods. It will not make any

difference, if the containers are shown to have been sold

and charged separately. The logical corollary to this

principle is that when the goods are exempted from

tax, no tax s leviable on the containers. This will be the

position even when the goods and the containers are sold and

charged separately.

Various rates of tax have been fixed by the Act of sale

or purchase of various types of goods. If the goods are

sold in packages or containers then for the purpose of

imposition of tax, the turnover of goods will have to be

calculated by the including therein the turnover of the

packages or the containers. The rate of tax applicable to

the turnover so calculated will be the rate payable on the

goods contained in the containers, the tax payable on beer

will be the appropriate rate of tax payable on the turnover

calculated in the manner stated hereinabove. It has not

been found by any of the authorities who heard the case that

the carton were specially provided for protection of the

bottles and bottled beer usually was not delivered in

cartons even in cases of bulk sales. The argument based on

secondary packing is misconceived.

On behalf of the appellants, it has been contended that

sub-sections (5) and (6) of Section 5 are based upon an

inarticulate premise that actual sale of the containers or

packing has been made along with the goods contained

therein. These provisions will not apply if the goods and

the containers are actually sold view of the clear language

f the statute. When packed goods are sold, provisions of

sub-sections (5) and (6) will apply. There will be one rate

of tax and one point of levy for such packed goods. This

rule will apply "whether the price of the containers or

packing is charged separately or not". In view of this,

there is no scope for any assumption that sub-section (5)

was based on an inarticulate premise that the provisions of

that sub-section will not apply if the goods and the

containers are sold and charged separately.

Mr. Sunil Gupta, on behalf of the appellant referred us

to two decisions of this Court in support of his contention

that if the containers were shown to have been sold

separately, then the provisions of sub-section (5) of

Section 5 will not apply. The first case relied upon for

this proposition is the judgment of this Court in the case

raj Steel & Ors. vs. State of A.P. & Ors. 91989) 3 SCC 262

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8

where the question of validity of Section 6-C of the Andhra

Pradesh General Sales Tax Act was examined by this Court.

Section 6-C of the Act provided:

"6-C. Levy to tax on packing

material

Notwithstanding anything in

sections 5 and 6A, where the goods

packed in any materials are sold or

purchased, the materials in which

the goods are so packed shall be

deemed to have been sold or

purchased along with the goods and

the tax shall be leviable on such

sale or purchase f the materials at

the rate of tax, if any, as

applicable to the sale or, as the

case may be, purchase of goods

themselves."

That was also a case where bottled beer was sold in

cartons and cement was sold in gunny bags. R.S.Pathak, C.J.

Pointed out in that case that there could be three types of

cases :

"It is commonly accepted that a

transaction of sale may consist of

a sale of the product and a

separate sale of the container

housing the product with respective

sale considerations for the product

and the container separately; or it

may consist of a sale of the

product and a sale of the container

but both sales being conceived of

as integrated components of a

single sale transaction; or, what

may yet be a third case, it may

consist of a sale of the product

with the transfer of the container

without any sale consideration

therefor."

Dealing with the deeming provision of Section 6-C,

Pathak, C.J. observed :

"Turning to Section 6-C of the Act,

it seems to envisage a case where

it is the goods which are sold and

there is not actual sale of the

packing material. The section

provides by legal fiction that the

packing material shall be deemed to

have been sold along with the

goods. In other words, although

there is no sale of the packing

material, it will be deemed that

there is such a sale. In that

event, the section declares, the

tax will be leviable on such deemed

sale of the packing material at the

rate of tax applicable to the sale

of the goods themselves. It is

difficult to comprehend the need

for such a provision. It can at

best be regarded as a provision by

way of clarification of an existing

legal situation."

Pathak, C.J. ultimately concluded:

"We find it difficult to accept the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8

contention of the appellants that a

rate applicable to the packing

material in the Schedule should be

applied to the sale of such packing

material in a case under Section 6-

C, when in fact there was no such

Section 6-C, when in fact there was

no such sale of packing material

and it is only by legal fiction,

and for a limited purpose, that

such sale can be contemplated. In

the circumstances, no question

arises of Section 6-C being

constitutionally discriminatory,

and therefore invalid."

It has to be borne in mind that a deeming clause may be

used in a statute for very many purposes. It was observed

by Lord Radcliffe in St.Aubyn (L.M.) vs. A.G. (No.2) (1952)

AC 15.

"The word 'deemed' is used a great

deal in modern legislation.

Sometimes it is used to impose for

the purposes of a statute an

artificial construction of a word

or phrase that would not otherwise

prevail. Sometimes it is used to

put beyond doubt a particular

construction that might otherwise

be uncertain. Sometimes it is used

to give a comprehensive description

that includes what is obvious, what

is uncertain and what is, in the

ordinary sense, impossible."

Pathak, C.J. was of the view that in Section 6-C the

deeming clause should be given a restricted meaning and at

best, should be regarded as a provision by way of

clarification of an existing legal situation. In other

words, the deeming clause merely restated what was otherwise

obvious.

Pathak, C.J. by giving a restricted meaning to the

deeming clause ruled out the possibility of taxing the

packing material or the containers in cases where only the

goods were sold but the packing material or the containers

were not actually sold.

This observation of Pathak, C.J. does not help Mr.

Gupta's case in any way in the facts of this case. In the

case before us, not only the beer but also the cardboard

cartons wee actually sold. In fact, the assessee was

willing to pay tax on the containers at the rate of 8%. The

grievance of the assessee was that he was called upon by the

Deputy Commissioner to pay tax at 50% which is the rate of

tax payable on the beer itself. As we have noted earlier,

the provisions of sub-section (5) of Section 5 of the Kerala

General Sales Tax Act are quire clear in this regard and the

Deputy Commissioner's decision was in accordance with the

law.

The next contention of Mr. Gupta was that Pathak. C.J.

was also of the view that if the containers or the packing

materials were shown to have been sold separately, two

separate transactions may have taken place. In such a case

the containers or the packing materials may not be taxed

along with the goods contained or packed without further

investigation into the facts to decide whether the two

transactions were really one integrated transaction.

This difficulty arising out of the restricted meaning

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8

given to the deeming clause in Section 6-C of the Andhra Act

has been obviated by specific provisions of Section 5(5) of

the Kerala Act by providing that the turnover of the goods

will include the turnover in respect of the packing

materials or the containers. The containers or the packing

materials will be taxed at the same point and at the same

rate at which the goods are to be taxed. This rule will

apply "whether the price of the containers or the packing

materials is charged separately or not." Therefore, even in

case where the containers are separately sold, the turnover

of the goods will include the turnover of the containers and

the appropriate rate of tax on such turnover will be the

rate of tax payable on the goods.

Mr. Gupta next drew our attention to the case of

Vasavadatta Cements vs. State of Karnataka & Anr. (1996) 2

SCC 88, where another Bench of this Court has followed the

principle laid down by Pathak, C.J. in the Raj Steel's case.

In that case a Bench of two Judges of this Court dealt with

Section 5(3-D) of the Karnataka General Sales Tax Act, 1957.

The provisions of Section 5(3-D) of the Karnataka General

Sales Tax Act and the Provisions of Section 5(5) of the

Kerala General Sales Tax Act are similar. The provisions of

the Karnataka General Sales Tax Act were as under:

"5 Levy of tax on sale or purchase

of goods

(3D). Notwithstanding anything

contained in the Act where goods

sold or purchased are contained in

containers or are packed in any

packing materials liable to tax

under this Act, the rate of tax and

the point of levy applicable to

turn over of such containers or

packing materials, as the case may

be, shall whether the containers or

the packing materials have already

been subjected to tax under this

Act or not or whether the price of

the containers or of the packing

materials is charged separately or

not, be the same as those

applicable to goods contained or

packed.

Provided that no tax under this

sub-section shall be leviable if

the sale or purchase of goods

contained in such containers or

packed in such a packing materials

is exempt from tax under this Act."

The Karnataka General Sales Tax Act takes notice of the

fact that where the goods are sold in containers or packing

materials such packing materials may have already been

subjected to tax under the Act. But the provisions of

Section 5(3-D) will apply even (1) when the containers or

packing materials have already borne tax; and (2)

containers or packing materials were charged separately.

Sub-section (3-D) lays down that where the goods were sold

or purchased in containers or packing materials liable to

tax under that Act, the rate of tax and the point of levy

applicable to turnover of such containers or packing

materials, as the case many be, shall be the same as

applicable to the goods contained or packed. These

provisions are very similar to the provisions of sub-section

(5) of Section 5 of the Kerala Act. There is also a proviso

to the Karnataka Act which is very similar to sub-section

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8

(6) of Section 5 of the Kerala Act. It lays down that no

tax shall be leviable if the sale or purchase of goods

contained in the containers or packed in the packing

materials was exempt from tax under the Act. In other

words, when the goods contained in the containers were

exempt from tax, then no tax can be levied on the containers

under sub-section (3-D) of Section 5 of the Karnataka Act.

Section 6-C of the Andhra Act does not contain any such

specific provisions.

Mr. Gupta contended that in spite of these specific

provisions of the Karnataka Act, this Court had no

difficulty in Vasavadatta's case in applying the principles

laid down by Pathak, C.J. in the case of Raj Steel.

Therefore, this present case, which is to be decided on

similar provisions of the Kerala Act, must be decided on the

same basis.

We are of the view that in Vasavadatta's case, this

Court overlooked the marked dissimilarity between Section 6-

C of the Andhra Act and Section 5(3-D) of the Karnataka

General Sales Tax Act. We are also of the view that sub-

sections (5) and (6) of the Kerala General Sales Tax Act

will have to be construed uninfluenced by the decision of

the Court in Raj Steel's case where Pathak, C.J. construed

the deeming provisions in Section 6-C of the Andhra Act in a

narrow sense. Section 6-C did not contain any specific

provisions for including the turnover of the goods. There

were also no specific provisions in the Andhra Act to levy

tax on the packing materials and the containers at the rate

applicable to the goods even in a case where the price of

the containers or the packing materials were charged

separately. We are also of the view that the mere fact that

the containers and the goods were sold separately or charged

separately will not make any difference in the matter of

computation of the turnover of the goods and determination

of tax or the rate of the tax and the point at which the tax

will be levied under Section 5(5) of the Kerala Act.

Section 5(3-D) of the Karnataka Act, if anything, is

more specific than Section 5(5) of the Kerala Act which

deals with cases where the goods sold or purchased are

contained in containers or are packed in any packing

material. It specifically provides that the rate of tax and

the point of levy applicable to turnover of such containers

or packing materials will be the same as those applicable to

the goods contained or packed. This rule will apply even in

a case where the containers or the packing materials had

already been subjected to tax under the Act, It also

provides that the rule will apply "whether the price of the

containers or the packing materials is charged separately or

not". In view of these clear provisions of Section 5(3-D)

of the Karnataka Act and the corresponding provisions of

Section 5(5) of the Kerala Act there is no basis for the

argument that if the price of the goods and the price of the

containers or packing materials are separately charged, the

provisions of the aforesaid two sections will not be applied

at all. In the context of these provisions, there was no

scope for invoking the principle laid down in Raj Steel's

case for making any inquiry as to whether the containers or

packing materials were sold along with the goods or separate

bills were made in respect of them or whether they were

separately charged. The law is quite clear that when the

goods contained in containers or packed in packing materials

are sold the containers and the packing materials will have

to be taxed at the same rate at which the goos are liable to

be taxed. It will not make any difference if the price

payable for the containers or packing materials are shown

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8

separately in the bills raised by the seller.

We shall now deal with another point urged on behalf of

the appellant. It has been contended that the cardboard

cartons have already borne tax under the Entry "paper, other

than the newsprint, cardboard and their products" in the

First Schedule of the Act. It is a single point tax. The

cardboard cartons cannot be taxed once again when sold along

with the beer.

There are two answers to this contention. Sub-section

(5) of Section 5 specifically provides that the rate tax and

point of levy applicable to the goods sold. Therefore, even

if the cartons have already been subjected to tax by virtue

of specific provisions of Section 5(5) they will be liable

to tax at the same point and at the same rate as the goods

contained therein.

Moreover, the packing materials as such are not being

taxed under sub-section (5) of Section 5 of the Act. The

subject-matter of tax are the goods packed in the

containers. In calculating the turnover of the goods,

packing materials will have to be taken into account. The

packing materials will be taxed at the same rate and at the

same point as the goods contained in the packing material.

This is because the goods are sold packed in containers and

are charged accordingly. This is a rule of computation of

the turnover of the goods. If no tax is ultimately found

leviable on the goods then no tax can be levied on the

containers in which the goods are contained.

In view of the above, the appeals are dismissed.

There will be no order as to costs.

(C.A.Nos. 4871-74/91, 232/92, 6683-95, 6732-36/95 and SLP

(C) Nos. 6063-65/91)

In view of the above decision in Civil Appeal No. 4870

of 1991, these appeals and special leave petitions are also

dismissed