IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 17TH JUNE 2008 / 27TH JYAISHTA 1930 S.T.Rev..No. 443 of 2005 --------------------------------- ORDER DATED 31.12.2004 TA.772/2002 OF THE KERALA SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH-I, ERNAKULAM .................... PETITIONER/APPELLANT/APPELLANT: ------------------------------------------------------ M/S. MEAT PRODUCTS OF INDIA LIMITED EDAYAR, KOOTHATUKULAM. BY ADV. SRI.A.KUMAR RESPONDENT/RESPONDENT/RESPONDENT: ---------------------------------------------------------------- STATE OF KERALA, REPRESENTED BY FINANCE SECRETARY, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM. BY SR.GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 17/06/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------ S.T.Rev.No.443 of 2005 ------------------------------------------ Dated, this the 17th day of June, 2008 ORDER H.L.Dattu, C.J. One and the only question that arises for our consideration and decision in this revision petition is, what is the rate of tax payable on the sale of frozen meat sold in polythene packets by the assessee? 2. This revision petition pertains to the the assessment year 1992-93. The Entry for the relevant assessment year reads as under: Sl.No. Description of Goods Point of levy Rate of tax -% ------------------------------------------------------------------------------------ 56. Food including vegetative At the point of first 12.5 or animal preparations sold sale in the State by in airtight containers and a dealer who is liable food colours, essence of all to tax under Section 5 kinds and powders or tablets used for making food preparations ------------------------------------------------------------------------------------- (3) The assessee is a Government Company. It is engaged in the manufacture of meat products at its factory in Edayar, Koothattuklulam, Ernakulam District. It is a registered dealer both under the provisions of the Kerala General Sales Tax Act, 1963 ('the KGST act' for short) and the Central Sales Tax Act, 1956 (the 'CST Act' for short) and is borne on the rolls of the Assistant Commissioner (Assessment), Special Circle-III, Ernakulam. S.T.Rev.No.443 of 2005 2 (4) For the assessment year 1992-93, the assessee had declared its total and taxable turnover and in that had claimed that the frozen meats sold (animal preparations) is not in airtight containers and therefore, taxable only under the residuary entry and the rate of tax is at 8%. The assessing authority while rejecting this stand of the assessee has stated as follows: “The contention cannot be accepted. As per Websters Dictionary Airtight means 'not permeable to air or nearly to'. In G.Claridge & Co. Limited Vs. Collector of Central Excise reported in 52 ECT 341 Supreme Court held that container means receptacle in which articles are covered, enclosed and transported. With the advancement of technology its became possible in packing industry that plastic replaced all other conventional materials. When applying the above principles the products sold in sealed plastic containers are liable to tax @ 12.5%”. (5) Being aggrieved by the conclusions reached by the assessing authority, the assessee had carried the matter in appeal before the first appellate authority. On the aforesaid issue the first appellate authority in its order in S.T.A.No.183 of 1998 dated 18.12.2001 has stated as under: “The next contention is that the frozen meat packed and sold in polythene bags is exigible to tax only at 10% in the absence of declaration in C Form. The above contention is rejected as the Polythene bags are S.T.Rev.No.443 of 2005 3 impermiable to air as such are air-tight containers. The levy of 12.5% CST on the Interstate sales turnover of Frozen Meat sold in polythene bags at 12.5% is found in accordance with law and is therefore confirmed.” (6) The assessee had unsuccessfully carried the matter in second appeal before the Tribunal in T.A.No.772 of 2002. The Tribunal has confirmed the findings and conclusion reached by the assessing authority as well as by the first appellate authority. Therefore, the assessee is before us in this tax revision case filed under Section 41 of the KGST Act. (7) Though the assessee has framed several questions of law for our consideration and decision, in our opinion, the only question of law that requires to be considered and decided is, whether the frozen meat sold by the petitioner in polythene bags would fall under Entry 56 of the First Schedule to the KGST Act or it requires to be treated as an unclassified item liable to be taxed at the rate of 8% under the residuary entry. (8) Sri.A.Kumar, learned counsel appearing for the assessee, would submit, that, the animal preparations (frozen meat) sold by the assessee both within the State as well as outside the State in polythene bags are not in sealed containers and therefore Entry 56 of the First Schedule to the KGST Act is not attracted and accordingly, the sale of frozen meat effected by the petitioner requires to be taxed only as an item falling under S.T.Rev.No.443 of 2005 4 the residuary clause and taxable at the rate of 8% alone. (9) Sri.Muhammed Rafiq, learned Senior Government Pleader appearing for the Revenue, sought to justify the orders passed by the assessing authority and the Tribunal. (10) The specific case of the assessee before the assessing authority was that frozen meat sold by it both intra and interstate sales was not in airtight containers and therefore, Entry 56 of the First Schedule to the KGST Act is not applicable and therefore, the commodity in question requires to be taxed only as a residuary item at the rate of 8%. The assessing authority while completing the assessment has not adverted to this specific contention of the petitioner/assessee. A reading of the order passed by the assessing authority would only show, that, he has glossed over the matter and has observed that the product sold by the assessee must be in airtight containers and it requires to be taxed at 12.5%. This opinion of the assessing authority is merely based on the assumptions and presumptions without even seeing the product sold by the assessee. (11) The meaning of the word 'sealed container' had come up for interpretation before the apex Court in the case of Balakrishna Hatcheries v. Clarification & Advance Ruling Authority [(2006) 148 STC 137]. In the said decision, the apex Court has observed as under: “14. From a reading of the aforesaid decisions it S.T.Rev.No.443 of 2005 5 appears that the law is well settled that the container is considered to be a sealed container if it is closed in a manner that it is not possible to access the contents or remove the contents without breaking either the container or the fastening if it is closed. 15. The Karnataka High Court in para 9 of the impugned judgment has observed: “'Breaking' the container or 'breaking the fastening' does not necessarily mean cutting or breaking the container or the fastening to pieces. 'Breaking' refers to parting, dividing, tearing, rupturing or severing, either wholly or partially, by applying a strain or force. For example, a staple which is the 'fastening' on the container is 'broken' not only when it is severed or cut into pieces, but even when the two closed ends are 'opened' or 'parted' and it is pulled out. Similarly if a crimped bag is closed by twisting an aluminium wire or by putting an elastic band over the crimped portion, the removal of such fastening would amount to breaking the fastening. Anything done to the fastening which has the effect of undoing the fastening will be 'breaking the fastening.” We regret we are unable to agree with the view taken by the High Court. In our opinion, undoing cannot amount to breaking. When a staple is applied, the wire can be removed by straightening the two bent ends without breaking the wire or tearing the paper. Hence, we cannot agree that undoing the fastening amounts to breaking the S.T.Rev.No.443 of 2005 6 fastening. If the view of the Karnataka High Court is accepted then logically it will have to be accepted that every container will be a sealed container if it is closed in any manner. Such a view obviously cannot be countenanced. In our opinion in cases of both stapling and crimping, the staples and pins can be removed by the customer without breaking anything. Hence, in view of the decision of this court in Commissioner of Sales Tax, U.P. v. G.G.Industries (1968) 21 STC 63, it has to be held that the chicken in question is not sold in sealed containers. We, therefore, agree with the decision taken by the Delhi High Court in Commissioner of Sales Tax, Delhi v. Pop Corn (1982) 49 STC 36.” (12) In our opinion, since the issue that was canvassed by the assessee is not specifically answered either by the assessing authority or by the other fact finding authorities, the matter requires to be remitted back to the assessing authority to redo the matter in accordance with law keeping in view the observations made by the apex Court in Balakrishna Hatcheries case also. If for any reason the assessing authority comes to the conclusion that the frozen meat sold by the petitioner is not in air tight containers and since there is no other entry, the sales made by the assessee S.T.Rev.No.443 of 2005 7 requires to be taxed only as a residuary item taxable at the rate of 8%. 12. Accordingly, we pass the following: Order i) The order passed by the assessing authority is set aside. ii) The order passed by the first appellate authority in STA No.183 of 1998 as also the order passed by the Tribunal in T.A.No.772 of 2002 are also set aside. iii) The matter is remitted back to the assessing authority to redo the matter in accordance with law and in the light of the observations made by us in the course of our order after affording an opportunity of hearing to the petitioner. Ordered accordingly. (H.L. DATTU) CHIEF JUSTICE (A.K. BASHEER) JUDGE vns/dk.