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