[Tamil Nadu General Sales Tax] Purchase Tax Leviable On Purchase Turnover Of Empty Bottles Purchased In Course Of Beer/IMFL Manufacture Business: SC [Read Judgment]

The Supreme Court has held that, under Section 7-A of the he Tamil Nadu General Sales Tax, 1959, purchase tax is leviable on the purchase turnover of empty bottles purchased by the assessee in the course of its business of manufacture and sale of Beer and IMFL.

The Madras High Court, in this case, had held that, though the purchase turnover, with respect to the purchase of empty bottles from unregistered dealers under bought note, is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax, 1959 but, the assessee is entitled for the benefit of Clarifications dated 09.11.1989 and 27.12.2000 issued by the revenue till the same were withdrawn prospectively by the Clarification dated 28.01.2002. Therefore, it was held that the revenue is not entitled to levy purchase tax for the said turnover of purchase of empty bottles for the assessment year 1996-97. Aggrieved by this judgment, both revenue and assessee filed appeal before the Apex Court.

In the judgment delivered by the bench comprising of Justices AM Khanwilkar and Dinesh Maheshwari, the issue whether purchase tax is leviable on the purchase turnover of empty bottles purchased by the assessee in the course of its business of manufacture and sale of Beer and Indian Made Foreign Liquor, has been discussed in quite detail. The bench has summarised the discussion as follows:

"The goods in question (empty bottles) have not been consumed in the manufacture of other goods for sale nor they have been consumed otherwise because of having retained their identity. They have also not been used in the manufacture of other goods for sale because manufacture of Beer/IMFL was complete without their use. However, they have been used for bottling and when bottling remains an integral part of the business activity of the assessee, i.e., of manufacturing the liquor by the process of brewing/distillation and then, selling the manufactured liquor by putting the same in bottles, they have been "used otherwise". That being the position, use of the goods in question for bottling takes the turnover of their purchase within the net of Section 7-A of the Act…
...To put it more simply, if we read clause (a) of sub-section (1) of Section 7-A of the Act sliced down to the elements "uses in manufacture or otherwise", it is clear that the goods in question (empty bottles) have been 82 used for bottling, which use, even if not for manufacture, had been a use otherwise which has been closely connected with the business of the assessee and whereby the bottles in question did not remain available for sale in the form in which they were purchased."

Allowing the appeal filed by revenue, the bench held that the purchase turnover of the empty bottles purchased by the assessee from the unregistered dealers under bought note is exigible to purchase tax under Section 7-A of the Tamil Nadu Act; and the assessee cannot escape such liability on the strength of the Clarifications/Circulars dated 09.11.1989 and 27.12.2000.  

Case no.: CIVIL APPEAL NO. 7164 OF 2013

Case name: THE COMMERCIAL TAX OFFICER vs. MOHAN BREWARIES AND DISTRILLERIES LIMITED 

Coram: Justices AM Khanwilkar and Dinesh Maheshwari

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