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The Commissioner, Trade Tax, U.P. Lucknow v. S/S Parul Paper Products, 38/17, Gilis Bazar, Kanpur - SALES/TRADE TAX REVISION No. 708 of 1997  RD-AH 6462 (25 November 2005)
TRADE TAX REVISION NO.708 OF 1997
The Commissioner, Trade Tax, U.P. Lucknow. ....Applicant
S/S Parul Paper Products, Kanpur. ....Opp. Party
Hon'ble Rajes Kumar, J.
Present revision under section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") is directed against the order of Tribunal dated 03.03.1997 for the assessment year 1990-91.
During the year under consideration dealer opposite party (hereinafter referred to as "Dealer") had sold corrugated boxes for Rs.2,59,999/- to the units, which was certified and recognised by U.P. Khadi and village Industries Board and claimed exemption on the turn over of corrugated boxes. The assessing authority had disallowed exemption on the ground that corrugated box was packing material and not connected with the manufacturing. The view of the assessing authority has been upheld in first appeal. Tribunal however, allowed the appeal and granted the exemption. Tribunal held that the corrugated boxes is goods connected with the manufacture and therefore, as per notification no.ST-II-/X(23)/83-U.P. Act XV/48-Order-85, dated 31.01.1985 unit was entitled for exemption on the purchases and accordingly, sale made by the selling dealer is exempted.
Heard learned counsel for the parties.
Learned Standing Counsel submitted that corrugated boxes is not an item which is connected with the manufacture. He submitted that corrugated boxes was required for the packing of the manufactured goods for the convenient delivery of the goods and not connected with the manufacturing and, therefore, purchasing unit was not entitled for the exemption under the aforesaid notification and accordingly, selling dealer was also not entitled for the exemption. Learned counsel for the dealer submitted that packing of soap in corrugated boxes is essential to sell the product, therefore, it is the goods connected with the manufacture and the unit was entitled for exemption. He further submitted that the present dealer had claimed exemption on the strength of 12 certificates furnished by the unit certified and recognized by U.P. Khadi and Village Industries Board in which they have declared that corrugated boxes was the item connected with their manufacturing. He submitted that in case if wrong declaration had been given by the purchaser, the necessary action can be taken only against the purchaser and the exemption can not be denied to the present dealer.
I have perused the order of Tribunal and the authorities below.
Notification no.ST-II-/X(23)/83-U.P. Act XV/48-Order-85, dated 31.01.1985 reads as follows:
In exercise of the powers under clause (b) of section 4 of the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No.XV of 1948), read with section 21 of the Uttar Pradesh General Clauses Act, 1904 (U.P. Act No.1 of 1904), and in supersession of all previous notifications issued under the aforesaid clause, the Governor is pleased to exempt, with effect from February 1, 1985, the sale or purchase of the goods mentioned in Column 2 of the Schedule hereunder by the persons or the class of persons mentioned therein, from tax under the said Act of 1948, subject to the conditions, if any, specified in Column 3 thereof.
S.No. Description of goods/persons/class of persons Conditions, if any.
3. Institution in U.P. certified by the All India Khadi & Village Industries Commission or the U.P. Khadi & Village Industries Board.-(a) on the sale of products of Village Industries specified below; andon the purchases of any goods connected with the manufacture of products of Village Industries or purchase of products of Village Industries specified below:- On condition that the dealer selling such goods to the said institution furnishes a certificate from the said institution, duly countersigned by the District Village Industries Officer of the Uttar Pradesh Khadi & Village Industries Board, to the effect that the goods purchased by it are connected with the manufacture of products of the aforesaid Village Industries or are products of such Village Industries.
Under the aforesaid notification unit certified and recognized by U.P. Khadi & Village Industries Board entitled for exemption both on the sale of product and also on the purchases of any goods connected with the manufacture of product. Only those goods can be said to be connected with the manufacture which are required to produce desired finished goods. In my view, all the goods which are required to bring the commodity marketable are the goods connected with the manufacturing. Therefore, rapping paper which is used for initial packing and essential to bring soap in a marketable stage can be said to be the goods connected with the manufacture but a packing which is secondary in nature and is required for the convenient delivery/transportation of the manufactured goods and relates to the sale can not be said to be a goods connected with the manufacture. Corrugated boxes are required for the packing of the manufactured goods for the convenient delivery/transportation of the manufactured goods. This packing is in the nature of secondary packing and can not be said to be connected with the manufacture of the product. Thus, the view of the Tribunal that corrugated boxes is connected with the manufacturing is erroneous and is liable to be set aside. However, I find substance in the argument of learned Counsel for the dealer that the exemption has been claimed on the strength of the certificates given by units certified and recognized by U.P. Khadi & Village Industries Board and if a wrong declaration has been given by the unit, necessary action can be taken against the unit and not against the present dealer. Since this aspect of the matter has not been considered by the Tribunal, matter is remanded back to the Tribunal to decide the appeal afresh in the light of the observations made above. Tribunal may examine the certificate, nature of declaration and decide the issue in accordance to the law.
In the result, revision is allowed in part. Order of the Tribunal is set aside and the matter is remanded back to the Tribunal to decide the appeal afresh in the light of the observations made above.
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