The Bombay High Court has ruled that resale of High-Density Polyethylene (HDPE) bags used for packaging cement constitutes a separate and independent sale transaction, thus allowing exemption under resale provisions of the Bombay Sales Tax Act, 1959.
The core issue was whether the sale of HDPE bags used to pack cement was an integrated part of the cement sale or a distinct transaction.
The bench of Justice M.S. Sonak and Justice Jitendra Jain affirmed the Tribunal’s conclusion that there was an independent and express contract for the sale of the HDPE bags in which cement was packed. This distinction has critical implications for eligibility to claim resale exemption on the packing material.
The matter arose when the sales tax authorities initially disallowed the claim for resale on HDPE bags, contending that no separate sale had occurred and the bags formed part of the overall sale of cement. However, the Sales Tax Tribunal reversed the revenue’s decision, holding that the transaction for sale of HDPE bags was contractually and commercially distinct.
Upon reference, the High Court examined whether there was a genuine independent sale of packing material. The Court referred extensively to the Supreme Court’s decision in Raj Sheel v. State of Andhra Pradesh, which held that a separate sale of containers or packaging can be recognized if supported by evidence and commercial intent. The Court emphasized that determining the nature of such transactions must be rooted in factual examination rather than presumptions.
The Tribunal had found that the company charged separately for cement and HDPE bags, and these prices were determined and communicated independently on a regular basis. Furthermore, no resale claims were made for jute or paper bags, only for HDPE bags. Evidence showed that stockists were aware of and agreed to pay separate consideration for the bags. Records, including sale invoices, trial balances, certificates from chartered accountants, and customer confirmations, supported the resale claim.
The High Court observed that the packaging material used in this case was a distinct commodity, reusable, and separately accounted for, meeting the criteria laid down by the Supreme Court. The Tribunal’s findings were held to be based on material evidence and were not vitiated by perversity or legal error. The department, the Court noted, failed to discharge its burden to prove otherwise.
Given the Court’s finding that there was an independent sale of packing material, it declined to rule on the secondary issue raised regarding the interpretation of Section 15A of the Bombay Sales Tax Act, deeming it unnecessary in the present circumstances.
Accordingly, the Court upheld the Tribunal’s decision and answered the reference against the Revenue. The two other references, involving similar facts and issues for different assessment years, were disposed of on the same terms.
Case Details
Case Title: The Commissioner of Sales Tax Versus M/s. Associated Cement Company Limited
Case No.: Sales Tax Reference No. 20 Of 2010 In Reference Application No. 02 Of 2003
Date: 05 August 2025
Counsel For Petitioner: Jyoti Chavan
Counsel For Respondent: P. C. Joshi
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