JUDGMENT Prakash Krishna, J.
1. The above revision has been filed by the Commissioner of Trade Tax against the order passed by the Trade Tax Tribunal, Muzaffarnagar in Second Appeal No. 194 of 1993.
2. The dealer/opposite party is carrying on the business of manufacture and sale of sugar, molasses and country liquor. The dispute in the present revision relates to the assessment year 1989-90, under the U.P. Sales Tax Act. In the memo of revision the following four points of law have been framed for determination
(i)Whether the Sales Tax Tribunal was legally justified to hold that no tax is payable on sale of filter cloth used and poly propylene cloth despite the fact that the aforesaid commodities are taxable vide notification no. ST-II-5785 dt. 7-9-81 as old, discarded unserviceable or obsolete machinery, stores or vehicles including waste products except cinder, coal ash and such items as are including in any other notification issued under the Act @ 8% ?
(ii) Whether the Sales Tax Tribunal was legally justified to set aside the tax imposed on pouching charges despite the fact Section 2(h) of the U.P. Sales Tax Act indicates ?
(iii) Whether the Sales Tax Tribunal was legally justified to declare non taxable, sale of gunny bags despite the fact that principles laid down by Hon'ble Allahabad High Court in Chhatta Sugar Company Limited v. CST (1991 UPTC-341) provides for tax on gunny bags as there was implied sale of aforesaid commodity?
(iv) Whether the Sales Tax Tribunal was legally justified to hold that rice husk and paddy husk are two different commodities despite the fact that the Hon'ble High Court Allahabad has held otherwise in the case of Commissioner, Sales Tax v. Navin Traders Etawah (1973 UPTC- 215) ?
Heard learned counsel for the parties and perused the record.
3. So far as question Nos. 3 and 4 are concerned, they stand concluded by various judgment of this Court. Question No. 3 relates to the taxability of packing material i.e gunny bags. The dealer/opposite party is manufacturer of sugar, which is exempt item from payment of tax under the U.P. Trade Tax Act. The said sugar has been packed and sold in gunny bags. It has not been found even by the assessing authority that any price has been charged by the dealer/opposite party for the gunny bags. A Division Bench of this Court in CTT v. L.S. Sugar Factory Ltd 2001 UPTC 107 has held that in view of Section 3 AB of the Act the packing material is liable to be taxed at the rate at which the goods which are packed in such material, is taxable. The sugar is exempted item under the Act and, therefore, the gunny bags which have been used as a packing material of sugar is also exempted. To the same effect there are other judgments such as Bajpur Cooperative Sugar Factory Ltd. v. CTT (2001) 31 STR 66, Chhata Sugar Company v. CST (2001) 34 STR 484. In view of these decisions it is held that the Tribunal was legally justified to hold that the sales of gunny bags are non taxable. Question No. 3 is decided accordingly.
4. So far as question No. 4 is concerned, it is concluded by a decision of this Court in the case of CST v. Straw Agro Products Ltd. Moradabad 2004 UPTC 1125. It has been held by a learned Single Judge of this Court that rice husk and paddy husk are two different commodities. The paddy husk can not be considered as rice husk. Purchase of rice husk is not taxable in the hands of dealer as a first purchaser. In the case in hand the dealer/opposite party has purchased as rice/paddy husk. The assessing authority on consideration of the material on record reached to the conclusion that the said commodity is taxable at the point of first purchase under Section 3-D of the Act. He reached to the conclusion that the dealer/opposite party has purchased rice husk and exemption is being claimed treating it as paddy husk. However, the Tribunal without setting aside this finding of fact has proceeded to decide the controversy treating the commodity as paddy husk/de-oiled rice husk. It was expected from the Tribunal that before treating the commodity as rice husk it should have taken into consideration such facts and circumstances of the case which were taken into account by the assessing authority as well as by the first appellate authority. As question No. 4 is limited one and, therefore, it is not necessary for this Court to deal with the matter further. In view of the above discussion it is held that the Sales Tax Tribunal was legally justified in holding that rice husk and paddy husk are two different commodities.
5. So far as question No. 1, relating to taxability of sale of filter cloth used and poly propylene cloth is concerned, it is necessary to notice the relevant facts. The case of the dealer/opposite party is that it has purchased the cloth which is exempted from payment of tax in view of notification issued under Section 4 of the Act. The said cloth has been used in the plant as filter to filter the sugarcane juice. It was purchased as cloth within the State of U.P. on which the additional excise duty has been paid and it is used to filter the sugarcane juice in the manufacturing process of sugar. Such cloth is used only once and thereafter it is sold. The assessing authority taxed the sale of such cloth treating it as old, discarded unserviceable or obsolete machinery under the notification dated 7.9.1981. The Tribunal has found that since these clothes were usable, therefore, this can not be treated as old or discarded machinery. No contrary evidence or material could be placed by the department before the Tribunal. This is basically a question of fact based upon the appreciation of evidence. The Tribunal in the absence of any contrary material has rightly come to the conclusion that these clothes can be reused after sale by the dealer/opposite party. If that is so I find no legal infirmity in the order of Tribunal in its finding that the same is not liable to be taxed. The Tribunal has rightly set aside the orders of the authorities below taxing the said cloth treating it as old discarded, inserviceable or obsolete machinery. Therefore, the Tribunal has rightly held that no tax is payable on the sale of used filter cloth and propylene cloth under notification dated 7.9.1981.
6. The second question is with regard to the taxability of pouching charges under Section 2 (h) of the Act. The dealer/opposite party is manufacturer of country liquor also. Country liquor is exempted item in view of notification No. 7037, dated 31st January, 1986 issued under Section 4 of the Act. The country liquor was sold in pouches of 100 ml, 200 ml. The dealer/opposite party purchased the poly film sheet. At the time of filtering the country liquor, the poly film sheets were converted through automatic machine in pouches. These pouches were manufactured by the dealer/opposite party and it has charged 45 paisa and 60 paisa on 100 ml and 200 ml per pouch respectively. The sale of these pouches were taxed by the assessing authority. The Tribunal has set aside the levy of tax on pouches mainly on the ground that the sale of country liquor is exempt and, therefore, its container, namely, pouches is also exempt. The learned counsel for the dealer/opposite party has relied upon a circular, dated 12th August, 1999, issued by the Commissioner of Trade Tax in consultation with the Law Department of State Government. The Law Department opined that in view of addition of Section 3-AB in the Act, it is clear that the packing material could be liable to be taxed at the rate at which the goods packed therein is taxable.
7. In view of the circular issued by the Commissioner of Trade Tax, which is in accordance with the Law Department, it is not open to the department to contend that the pouches are liable to be taxed under the Act. Besides the circular, I find sufficient force in the argument of the learned counsel for the dealer/opposite party that the pouches are not liable to be taxed in view of Section 3 AB of the Act. Although Section 3 AB of the Act has been added subsequently in the statute book, but it has been held by this Court to be clarificatory in nature and has retrospective operation. In the totality of the facts and circumstances of the case, I find that the order of the Tribunal deleting the levy of tax on pouches is in accordance with law and there is no legal infirmity on this point in the order of the Tribunal.
8. In view of above discussion, there is no merit in the revision. The revision is dismissed. No order as to costs.