Purchase Tax is leviable on Purchase Turnover of Empty Bottles for Manufacture and Sale of Beer and IMFL: SC [Read Judgment]

The Supreme Court while upholding the decision of the High Court, held that the purchase turnover of the empty bottles purchased by the assessee from the unregistered dealers under the 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.

The assessee, Mohan Breweries and Distributaries Ltd. are a company engaged in the business of manufacture of Beer and IMFL products on the strength of license issued under the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 in its factory.

For the purpose of the business of manufacture of Beer and IMFL, purchased empty bottles from unregistered dealers situated outside the State as well as from non-dealers for the bottling of Beer and IMFL.

The issue raised in the case was 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 Liquor2 and as to the operation and effect of the Clarifications dated November 09, 1989, issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai and dated December 27, 2000, issued by the Principal Commissioner and Commissioner of Commercial Taxes, Chennai.

The AO held the assessee liable for purchase tax against the purchase of empty bottles from unregistered dealers and also levied penalty on various scores like turnover relating to excise duty and vendor fees as also the turnover relating to purchase tax.

After the respective orders passed by the Appellate Authority, the matters ultimately traveled to the Tribunal in cross-appeals preferred by the assessee and by the State.

The Tribunal, while relying on the decision of the High Court in Appollo Saline Pharmaceuticals ruled that the assessee was liable for purchase tax under Section 7-A of the Act.

The High Court held that with respect to the purchase of empty bottles from unregistered dealers under the bought note, is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax, 1959 but, the assessee is entitled to the benefit of Clarifications issued by the revenue till the same was withdrawn prospectively by the Clarification dated January 28, 2002.

The division bench of Justice A.M. Khanwilkar and Justice Dinesh Maheshwari, while upholding the decision of the High Court, held that the purchase turnover of the empty bottles purchased by the assessee from the unregistered dealers under the 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.