Summary
Empty bottles bought from unregistered dealers and used to bottle beer and IMFL attracted purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act. Although the bottles were neither consumed nor used in manufacturing the liquor, they were used otherwise in the connected bottling and sale activity. Sales tax on the bottled product did not exclude purchase tax. Contrary departmental clarifications could not override the statute as judicially interpreted. The revenue appeal was partly allowed, preserving exclusion of cash discounts from turnover; the assessee’s appeals were dismissed.
Issues
- Whether bottling liquor in purchased empty bottles attracted purchase tax.
- Whether sales tax on the bottled product or departmental clarifications excluded that liability.
- Whether cash discounts formed part of taxable turnover.
Provisions considered
- Section 7-A(1)(a), Tamil Nadu General Sales Tax Act, 1959The applicable provision covered consumption or use in manufacture or otherwise, subject to cumulative satisfaction of its other ingredients. (¶¶ 17.2.2, 31, 34, 34.1, 49, 50, 53)
- Section 3(7) and Explanation, Tamil Nadu General Sales Tax Act, 1959Sales tax on containers included with liquor did not exclude purchase tax under section 7-A. (¶¶ 17.1, 52, 52.1, 52.3, 52.4)
- Section 28-A, Tamil Nadu General Sales Tax Act, 1959Even assuming the clarifications were authorised by this provision, they could not prevail over judicial interpretation of section 7-A. (¶¶ 55, 58, 61, 62)
- Section 2(r), Explanation 2(iii), Tamil Nadu General Sales Tax Act, 1959Cash discounts allowed on sales were excluded from turnover. (¶¶ 65, 65.1, 65.2)
Held
- The words or otherwise qualified manufacture. The provision covered goods consumed in manufacture, consumed otherwise, used in manufacture, or used otherwise; the necessary purchase-related ingredients also had to be satisfied cumulatively. The later insertion of or for was inapplicable to the principal assessment year. (¶¶ 31, 33, 34, 34.1, 39.4.2)
- Bottles retained their identity and were not consumed. Bottling followed completed brewing or distillation, so they were not used in manufacture. They were nevertheless used otherwise in an integral part of the business of manufacturing and selling liquor, and were no longer available for sale in their purchased form. Purchase tax therefore applied. (¶¶ 43, 44, 45, 49.1, 49.2, 49.3, 49.4, 50, 50.1, 53)
- Sales tax on the bottles as containers of the marketed liquor arose under section 3(7). Section 7-A contained no exception excluding purchase tax because the goods would subsequently bear sales tax. (¶¶ 51, 52, 52.1, 52.3, 52.4)
- Departmental clarifications bind statutory authorities but cannot displace the law declared by courts. The clarifications of 9 November 1989 and 27 December 2000 contradicted the applicable statutory interpretation and could not protect the assessee against purchase tax; their precise status under section 28-A need not be determined. (¶¶ 57.4, 58, 61, 62, 63, 64)
- The High Court correctly excluded cash discounts from turnover under Explanation 2(iii) to section 2(r). Its decision on this issue required no interference. (¶¶ 65, 65.1, 65.2)
- The same purchase-tax reasoning applied to the assessee’s connected appeals concerning assessment years 1986-87 to 1989-90. No interference with the High Court’s confirmation of purchase-tax liability was warranted. (¶¶ 67, 69, 70, 71)
Result
Revenue Civil Appeal 7164 of 2013 partly allowed on purchase tax and departmental clarifications; cash-discount ruling preserved. Assessee Civil Appeal 7165 of 2013 and Civil Appeals 4416-4419 of 2014 dismissed.