Case: Assistant Commissioner, Commercial Taxes, Rajasthan Vs. M.B. &amp; Company

3. The respondent assessee is aIt manufactures tiles and sells the same to various persons. The goods manufactured by it are covered by "the Sales Tax Incentive Scheme for Industries, 1987" announced by the State Government vide Notification No. F.4(35) FD Cr.IV/87 datedThe said Scheme is framed under(2) of Section 4 of the Rajasthan Sales Tax Act, 1954 (for short "the Act"). The said Incentive Scheme exempts the industrial units from payment of tax on the sale of goods manufactured by them within the State in the manner and to the extent and for the period covered by the notification. Clause (4) of the said Incentive Scheme provides, inter alia, that an industrial unit, which is granted eligibility certificate under the notification, shall be exempted from payment of tax on sales made within the State of the goods manufactured by it. The quantum of sales tax exemption and the period of eligibility of exemption are specified in Annexure C thereto.4. We have also perused the Notification, bearing No. F.4(66) FD7, which was issued under SectionIn the instant case, it appears that on the total turnover of the assessee, the assessing authority worked out the exemption limit on the basis of taxable turnover of tiles and packing material. However, onthe assessing authority passed the assessment order for Assessment Yearinter alia, holding that only granite tiles sold by the assessee are exempted under the said Incentive Scheme and not the packing material used for selling the granite tiles, which is exigible to tax as the sale of packing material is an implied sale under the proviso to Section 5(1) of the Act. The assessing authority, therefore, imposed tax of ?2407 along with interest of ?817 on the packing material used.7. The order of assessment was challenged before the Deputy Commissioner (Appeals) who allowed the appeal of the assessee onAggrieved by the said order, the Revenue filed an appeal before the Rajasthan Tax Board, which took the view that there was no separate sale of packing material and, thus, affirmed the order of the Deputy Commissioner (Appeals). Having unsuccessfully pursued the matter in sales tax revision petition before the High Court, the Revenue is in appeal before this Court. The respondent in this appeal has been served but no one has put in an appearance.

Court's reasoning:
11. In the instant case, as would appear from the facts narrated above that the respondent assessee is the manufacturer of goods which were sold along with packing material and it is, therefore, the first seller. It follows that the proviso is not attracted.12.The learned counsel next has invited our attention to the fifth proviso to Section 5 of the Act and submitted that in view of that proviso, the packing material is exigible to tax. The said provision, insofar as it is relevant for our purpose, reads ase of tax.The tax payable by a dealer under this Act shall be at such single point in the series of sales by successive dealers as may be prescribed and shall be levied at such rate not exceeding fifty per cent on the taxable turnover, as may be notified by the State Government in the Official Gazette:Provisos* * *Provided also that when any goods are sold, packed in any material, the tax shall be leviable on the sale of such packing material, whether charged separately or not, at the same rate as is applicable to the sale of the goods themselves; and if the goods are exempted from tax under Section 4 or have already been subjected to tax under the Act, then at the rate notified for such packing material from time to5 deals with rate of tax payable by a dealer. A plain reading of the fifth proviso shows that it is in two parts. The first part applies when goods are sold, packed in any material; in such a case, the tax would be leviable on the sale of such packing material, whether charged separately or not, at the same rate as is applicable to the sale of the goods themselves. For purposes of the proviso, there must be sale of packing material. Whether there is such a sale or not is a question of fact. The second part is in effect an explanation to the first part and says that if the goods are exempted from such tax under Section 4 or have already been subject to tax under this Act, tax would be levied at the rate notified for such packing material from time to time.Admittedly, no notification is placed on record. The contention that the first part and not the second part will apply as the Scheme postulates exemption of dealers and not the goods, even if accepted, will not advance the case of the Revenue because as a fact it was found that there was no sale of packing material. As observed above, this proviso is relevant for the purposes of determining the rate of tax payable by a dealer. It is neither a charging section nor can it be read into clause (5) of Sectiondefinition of "taxableas to enlarge the meaning of "taxable turnover". If this be so, the first part of the fifth proviso is of no assistance to the Revenue. In this view of the matter, we consider it unnecessary to delve further on the question as to whether the first part of the proviso or the second part of the proviso would govern the case here.