A Bench led by justices AM Khanwilkar and Dinesh Maheshwari, in a batch of cross-appeals led by Commercial Tax Officer vs Mohan Brewaries and Distilleries, upheld the Madras High Court order on the case.
The Supreme Court has held that manufacturers are liable to pay purchase tax on empty bottles bought from unregistered dealers for packaging or refilling products such as beer and juices. This levy is in addition to the sales tax payable on the final product, thus resulting in a huge setback to manufacturers.
A Bench led by justices AM Khanwilkar and Dinesh Maheshwari, in a batch of cross-appeals led by Commercial Tax Officer vs Mohan Brewaries and Distilleries, upheld the Madras High Court order on the case. The apex court held that the purchase turnover, with respect to the purchase of empty bottles for the manufacture and sale of beer and Indian-made foreign liquor (IMFL) from unregistered dealers under a bought note, is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act.
Terming the judgment as extremely important in several respects, senior SC advocate Tarun Gulati said that “first it holds that empty bottles cannot be said to be “used” or “consumed” in the manufacture of beer but are used “otherwise” and, therefore, purchase tax was payable. Although, on the peculiar language of the TN Act where the words “or otherwise” were used, the judgment went against the assessee but the principles laid down can be used in favour of the assessees in other cases.”
He further said that the judgment will have significant ramifications in entry tax cases where the concept of manufacture, sale or use is relevant.