Balkrishna Hatcheries vs Clarification & Advance Ruling ...

The appellant is engaged in poultry farming. It sells dressed chicken. The term "dressed" with reference to chicken means chicken which is bled, scalded, feathered, boned and freezed. The dressed chicken is sold by the appellant in polythene bags. The polythene bags are closed either by stapling or by crimping and fastening. Stapling is done by using ordinary stapler. Crimping and fastening (by twisting an aluminium wire around the crimped portion) is done by using a crimping machine. The name and address of the appellant and the description of the contents are printed on the polythene bag.

Entry 22 of the Fifth Schedule to the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act") exempts from tax "eggs and meat including flesh of poultry except when sold in sealed containers." Correspondingly, Entry 8(viii) of Part-F of Second Schedule subjects "meat and dressed chicken sold in sealed containers" to tax under Section 5(3)(a) of the Act, at 9% from 1.6.2003.

Since the Department was expressing a view that the sale by appellant attracted sales tax, the appellant made an application to the Authority for Clarification and Advance Ruling under Section 4 of the Act. The said Authority after hearing, passed an order dated 22.9.2003 holding that sale of `dressed chicken' in polythene bags closed by either stapling/crimping is covered under Entry 8(viii) of Part-F of Second Schedule as it is `sale of dressed chicken in sealed containers.' The aforesaid order of the Authority was challenged in the appeal under Section 24(1) before the Karnataka High Court on which the impugned judgment was given.

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 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.

For the reasons given above, this appeal is allowed. Impugned judgment of the Karnataka High Court as well as the order of the Authority for Clarification and Advance Ruling dated 22.9.2003 under Section 4 of the Act are set aside and it is held that the `dressed chicken' in question are exempt from Sales Tax as they are not sold in sealed containers. No costs.

The facts of this case are similar to the facts in C.A. No. 7623/2005 which we have allowed hereinabove. The only difference is that in the present case, the `dressed chicken' in polythene bags is closed by a rubber band, whereas, `dressed chicken' in polythene bags in CA No. 7623/2005 was closed by stapling or crimping.

For the reasons given in C.A. No. 7623/2005, this appeal is allowed. The impugned judgment of the Karnataka High Court dated 7.1.2005 as well as the order of the Authority for Clarification & Advance Ruling dated 5.3.2004 are set aside and it is held that the `dressed chicken' in question are exempt from sales tax as they are not sold in sealed containers. No costs.