Appeal Nos 936 NT 937 2339  2340 of 1988
From the Judgments and Orders dated 1281987 371986 and 2281988 of the Sales Tax Tribunal Punjab in Misc
Reference No 60 of 1986 87 First Appeal No 379 of 1986 and in Appeal Nos 46 and 47 of 1987 88
B VM
Tarkunde RC Misra and Ms Meera Aggarwal for the Appellant
HS Munjral and CM Nayar for the Respondent
c The Judgment of the Court was delivered by AHMADI J
the assessee appellant Ms Mukerian Papers Ltd is a company engaged in the manufacture of paper at Mukerian in the State of Punjab and is a registered dealer under the Punjab General Sales Tax Act 1948  The Act  hereinafter
The assessee despatched some part of the manufactured goods outside the State of Punjab for sale on consignment basis
However the assessee had not paid the taxes on the taxable raw material consumed in the manufacture of such goods
A show cause notice was therefore issued by the Assessing Authority under section 106 of the Act for the assessee s failure to pay the taxes along with the return as required by section 4B of the Act
Interest on the tax amount which the assessee had failed to pay was also claimed under Section 11D of the Act
The assessee disputed its liability to pay penalty and interest on the amount of tax withheld on the plea that there was no wilful or intentional default on the part of the assessee to pay the taxes due under section 4B of the Act as the assesee was under a bona fide belief that no tax was to be paid on the raw material purchased for the manufacture of paper which was ultimately sent outside the State on consignment basis
This impressionbased on the language of the statute stood confirmed by the subsequent decisions of the Punjab  Haryana High Court in the case of Goodyear India Ltd 53 STC 163 and Bata India Ltd 54 STC 226 till those decisions were overruled by the Full Bench decision in Des Raj Pushpak Kumar s case 58 STC 393
The assessee further contended that it had acted on legal advice that it was not liable to pay any purchase tax and therefore in the absence of a clear intention to avoid the payment of tax there could be no question of imposition of penalty and demand for interest
On the other hand it was contended on behalf of the revenue that the two decisions on which the assessee 350 placed reliance were subsequent to the date on which the liability to pay the tax had arisen and hence the assessee could not take shelter under the said two decisions
The submissions made on behalf of the assessee did not find favour with the Revenue
The assessee thereupon sought a reference under section 221 of the Act but the Presiding Officer of the Tribunal by its order dated 12th August 1987 rejected the application as he saw no point of law to make a reference to the High Court
Civil Appeals Nos 936 and 937 of 1988 arise out of the said order of 2th August 1987
In the other two appals Nos 2239 and 2240 of 1988 the appellants have come to this Court directly from the Tribunal s order in appeal without going through the formality of seeking a reference under section 221 of the Act in view of the rejection of a similar request by the impugned order of 12th August 1987
This Court granted special leave to appeal without insisting on the appellant assessee approaching the High Court in view of the Full Bench decision of that Court in Des Raj s case
As the facts are identical and common questions of law arise we have thought it proper to dispose of all the four appeals by this common judgment
Counsel for the assessee appellant contended that the main question of law involved in this case is concluded by the decision of this Court in Ms Goodyear India Ltd vs State of Haryana  which was an appeal arising from the High Court s decision in the case of the same assessee reported in 1983 53 STC 163 to which reference is made hereinabove
He further pointed out that while deciding the true scope of section 9 of the Haryana General Sales Tax Act 1974 which says counsel is in pari materia with section 4B of our Act this Court affirmed the High Court s view expressed in Goodyear India Ltd 53 STC 163 and Bata India Ltd 54 STC 226 and disapproved the Full Bench view in Des Raj s case 58 STC 393
Counsel for the Revenue however placed strong reliance on this Court s decision in State of Tamil Nadu vs MK Kandaswami etc
 19761 1 SCR 38 and submitted that the assessee s case falls within the ratio of the said decision
But counsel for the assessee pointed out that this Court had considered the ratio of Kandaswami s case in the subsequent decision and had pointed out that in that case this Court was not concerned with the actual argument with which it was concerned in the subsequent case and therefore the decision in the former case is not an authority for the question of law involved in the subsequent case
In order to appreciate the rival submissions it would we think be appropriate to examine the language of section 4B of the Act which reads as under 4B Levy of Purchase tax on certain goods 351 Where a dealer who is liable to pay tax under this Act purchases any goods other than those specified in Schedule B from any source and i uses them within the State in the manufacture
of goods specified in Schedule B or B ii uses them within the State in the manufactureof any goods other than those specified in Schedule Band sends the goods so manufactured outside the State in any manner other than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India or iii uses such goods for a purpose other than that of resale within the State or sale in the course of inter State trade or commerce or in the course of export out of the territory of India or D iv sends them outside the State other than by way of sale in the course of inter State trade or commerce or in the course of export out of the territory of India and no tax is payable on the purchase of such goods under any other provision of this Act there shall be levied a tax on the purchase of such goods at such rate not exceeding the rate specified under sub section 1 of section 5 as the State Government may direct
We may first read the plain language of the section bearing in mind the contextual setting and the objective of the law
The section seeks to provide for the levy of purchase tax on certain goods specified in to levy a tax on the purchase of goods other than those Schedule B which are used in the manufacture of goods specified in Schedule B or in the manufacture of goods other than those specified in Schedule B and sent outside the State in any manner other than by way of sale in the course of inter State trade or commerce or in the course of export out of Indian territory provided of course no tax is payable on the purchase of such goods under any provision of the Act
Where a dealer purchases raw material other than the goods referred to in Schedule B and uses the said raw material within the State in the manufacture of goods specified in Schedule B he becomes liable to purchase tax at the rate specified by the State Government not exceed 352 ing the maximum fixed under section 51 provided no tax is paid on such goods under any other provision of the Act
However when the raw material is used within the State in the manufacture of goods under than the one specified in Schedule B and the manufacturer sends  the goods so manufactured outside the State in any manner other than by way of sale in the course of inter State trade or commerce or in the course of export out of India he becomes liable to pay purchase tax at the rate specified
To attract this provision the revenue must show that i the manufacturer is a dealer liable to pay tax under the Act ii he has purchased goods other than those specified in Schedule B from any source iii he has used the said goods within the State in the manufacture of any goods other than those specified in Schedule B and iv he has sent the goods so manufactured outside the State in any manner other than the one excepted
Before this provision can be invoked the above requirements must be strictly proved
The first requirement identifies the tax payer the second and the third requirements identify the goods liable to tax in the event the fourth requirement of the goods so manufactured being sent outside the State takes place
Thus the liability to pay purchase tax does not accrue on the purchase of the raw material within the State or its use in the manufacture of goods other than those specified in Schedule B but falls on the dealer when the goods so manufactured are sent outside the State
To avoid a duplication of the levy the charging clause provides that the purchase tax will be leviable under Section 4B provided it is not leviable on the said goods under any other provision of the Act
Although the purchase tax is levied on the raw material purchased by the manufacturer the actual levy is postponed till after the said raw material is consumed in the manufacture of another commercially distinct commodity having its own separate identity and character and is actually sent outside the State
The relevant date is the date on which the goods are sent outside the State
The taxable event takes place when the taxable goods are sent outside the State and not before that date notwithstanding the fact that the raw material was purchased and converted into a new commodity long before that date
In the present case since it is not disputed that the demand of purchase tax is based on the fact that the goods manufactured within the State from raw material purchased earlier had been sent outside the State of sale on consignment basis we are concerned only with clause ii of Section 4B whereunder the tax liability accrues on the date the goods are sent outside the State
Under Section 4B of the Act the tax becomes exigible not on the purchase of the raw material or on the use thereof in the manufacture 353 of a new and distinct commodity but only after the goods so manufactured are despatched to a place outside the State
Once the goods are sent outside the State the purchaser is made liable to pay the tax at the rate prescribed on the purchase of such goods provided no tax is payable on the purchase thereof under any other provision of the Act
It is therefore obvious that the tax though described as purchase tax is in effect a tax on consignment since it becomes effective on the happening of an event which has nothing to do with the actual purchase
Even if the raw material is used in the manufacture of any taxable goods the purchaser does not become liable to pay tax on the raw material until the manufactured item is sent out of the State
And between the manufacture of the goods out of the purchased raw material and their actual despatch outside the State there may be a long time gap
There is therefore
no room for doubt that the liability of tax falls only after despatch of the manufactured goods outside the State and that event may have no relation to the actual purchase or manufacture
That being so the conclusion is inescapable that the tax though described as a purchase tax is actually a tax on the consignment of the manufactured goods
Therefore even though the language of section 4B of the Act is not identical with the relevant part of section 9 1 of the Haryana Act it is in substance similar in certain respectsparticularly in respect of the point of time when the liability to pay tax arises
Under that provision as here the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch Of the goods outside the State
We are therefore of the opinion that the ratio of the said decision of this Court in Goodyear India Ltd supra applies on all fours to the main question at issue in this case
In the case of Goodyear India Ltd supra this Court was concerned with the interpretation of section 91 and section 243 of the Haryana Act
The facts revealed that the assessee company which was engaged in the manufacture of automobile tyres and tubes at its factory at Ballabgarh in Haryana had purchased raw materials from within and outside the State for the manufacture of the said products
After manufacturing the same the assessee company despatched some part of the manufactured products to its depots outside the State The revenue sought to recover purchase tax on the raw material purchased in the State and consumed in the manufacture of such goods under section 91 of the Haryana Act
The action of the revenue was challenged in the High Court of Punjab  Haryana
The High Court held that both on principle and on precedent a mere despatch of goods to various depots of the assessee company outside the State did 354 not fall within the ambit of the phrase disposes of the manufactured goods in any manner otherwise than by way of sale employed in section 9laii of the Haryana Act
The High Court also held that the decision of this Court in Kandaswami supra was not an authority for the proposition that a mere despatch of goods outside the State fell within the ambit of the said provision
This Court while upholding the final order passed by the High Court came to the conclusion that as the tax levied was a tax on consignment of goods the provisions imposing the said tax were beyond the competence of the State Legislature as the power to impose such tax vested in Parliament by virtue of clause h of Article 2691 of the Constitution read with Entry 92B in Schedule 7
List I inserted by the 46th Amendment to the Constitution
This Court also clarified that even before the amendments introduced by the 46th Amendment came into effect Entry 54 in List 11 of the 7th Schedule read with Article 2463 of the Constitution conferred power on the State Legislature to impose a tax on sale or purchase of goods and not on the mere consignment of goods since consignment of goods simpliciter is neither a sale nor purchase or disposal of goods
Holding that in substance the levy was sought on the consignment of goods this Court held that it was not liable to tax since the State s power to tax did not extend that far
Counsel for the revenue placed reliance on an earlier decision of this Court reported in the case of Kandaswami supra which dealt with Section 7A of the Tamil Nadu Act which though not identical was similar to Section 91 of the Haryana Act
The decision in Kandaswami though rendered in the context of an analogous provision was distinguished by this Court in Goodyear India Ltd on the ground that it did not touch the core of the question at issue in the latter case
This aspect of the matter is elaborately dealt with in paragraphs 31 to 34 at page 796 of the Report
We need not dilate on this any more since the correctness of the judgment in Goodyear India Ltd is not canvassed before us
This Court therefore affirmed the High court s view in Goodyear India Ltd 53 STC 163 and Bata India Ltd 54 STC 226 and disapproved of the Full Bench decision in the case of Des Raj 58 STC 393
Once it is found that the revenue was not entitled to levy the tax which it purported to levy as purchase tax on the raw material there can be no question of imposition of penalty or interest on the unpaid amount of tax
Therefore the action taken in exercise of power under section 106 and section 11D of the Act cannot be allowed to stand and must be set aside
355 In the result these appeals succeed
We allow all these appeals and set aside the decision of the Sales Tax Tribunal Punjab in each case
Any recovery made under the impugned orders will be refunded within a period of three months from today
Having regard to the facts and circumstances of the case we make no order as to costs
B G N Appeals allowed


Summary:
The appellant was a manufacturer of egg trays and other similar items
Before the introduction of new Tariff effective from 131986 Central Excise and Salt Act 1944 old Tariff was applicable to the relevant products
The appellant classifying its product under Item 68 of the old Tariff was paying duty accordingly
By Notification dated February 28 1982 issued under Rule 81 of the Central Excise Rules 1944 the Central Government exempted articles of paper and paper board falling under Item 174 of the old Tariff
The appellant filed a revised classification list for its products seeking classification under item 174
The Asstt
Collector Central Excise held the products classifiable as articles of pulp  under Item 68 of the old Tariff and the appellant was required to pay excise duty accordingly
On appeal the Collector Appeals reversed the order of the Asstt
Collector and held that the products were made out of waste paper and were classifiable under Item 174 as articles of paper and paper board 
The Revenue filed appeals before the Customs Excise and Gold Control Appellate Tribunal
On introduction of the new Tariff the appellant classified the relevant products as containers  under sub heading 481819 and claimed exemption
The Asstt
Collector held that the products were not containers  but were articles of pulp  falling under sub heading 481990 and accordingly chargeable to duty
Setting aside the order in 318 appeal the Collector held that the products were packing containers  and classifiable under sub heading 481819
The Revenue appealed before the Appellate Tribunal which allowed all the appeals by a common judgment but remanded the matter to the Collector Appeals with regard to the recovery for a certain period
In the assessee s appeal to this Court it was contended that the egg trays  manufactured by the appellant were containers  under Item 17 and Heading 4818 of the respective Tariffs that merely because the egg tray was described as a tray does not mean that it was not a container and that it was not required that a container should be closed from all sides
On the question whether egg trays and other similar products manufactured by the appellant are containers  falling under Item No 174 or 173 of the First Schedule to the and Heading 4818 of the 
Dismissing the appeals this Court HELD 1 1 Egg trays  being receptacles which are not covered or enclosed cannot be used for transportation of articles and cannot be regarded as containers  under Item 17 of the First Schedule to Central Excise and Salt Act 1944 and Heading 4818 of the Schedule to 
326B 12 Moulded pulp egg trays containing the eggs are put in a standard case for the purpose of transport
The case in which the egg trays are put are containers  and not the egg trays  itself
326E F 13 The expression container  is used in three different senses in a broad sense it means a receptacle which contains in a narrower sense it means a receptacle in which articles are covered or enclosed and transported and in a more limited sense it means enclosures used in shipping or railway for transport of goods
If used in a broad sense container  would include a tray because it is a receptacle which contains articles and therefore an egg tray would be a container 
But an egg tray would not be a container  in a narrower sense because articles placed in it are not covered or enclosed and they cannot be transported as such
325D F 319 14 In item 17 of the First Schedule to the word containers  is preceded by the words boxes cartons bags and other packing  and in Heading 4818 of the Schedule to  the word containers  is preceded by the words cartons boxes  and is followed by the words and cases 
Considering the expression containers  in the context in which it is used in the relevant tariff items the said expression has to be construed to mean packing containers  which are analogous to boxes and cartons that is an enclosed receptacle which can be used for storage and transportation of articles
325G 326A B Webster s New Collegiate Dictionary 1975 Chambers  20th Century Dictionary Indian Standard Glossary of Terms Glossary of Packaging Terms USA Glossary of Packaging Terms Australia New Encyclopedia Britannica referred to 2
It is a well accepted canon of statutory construction that when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense
It is based on the principle that words take as it were their colour from each other that is more general is restricted to a sense analogous to a less general
325G H 326A Dr Devendra M Surti vs State of Gujarat   relied on