Bombay high court saves the bouquet from tax brickbat

That bouquet you wanted to present your lover on Valentine’s Day, but could not for want of a few rupees more, will now be within your reach for future occasions, if you discount inflation.

The Bombay high court (HC) has ruled that sales tax cannot be levied on fresh flowers and arrangements of fresh flowers; that a bouquet is not a product commercially different from its constituents.

A division bench of justices VC Daga and SJ Kathawalla was hearing a reference application filed by In Bloom, florists and decorators at Hotel Leela Kempinski, Sahar, against an order of the sales tax tribunal, which had upheld an order of the sales tax commissioner to charge 13% tax.

The judges observed that if a bouquet is an arrangement of cut flowers, such an arrangement by itself would not convert the flowers into a different commodity. Neither will it amount to “manufacture”.

In Bloom had sold a bouquet to a customer for Rs250 in January 1996. To determine the tax on the bouquet, the florists made an application to the sales tax commissioner, who ruled that a bouquet is not the same as fresh flowers. While fresh flowers are exempt from sales tax, a bouquet would have to be accounted for under a separate provision of the Bombay Sales Tax (BST) Act, 1959. The provision is called residuary entry (which includes items not listed under schedule A or C of the act). In Bloom was charged 13% tax.

The tribunal upheld the commissioner’s ruling, following which In Bloom approached the HC. Petitioners’ counsel PV Surte argued that a bouquet is merely a bunch of flowers tied together and cannot be termed as having undergone any manufacturing process.

Therefore, a bouquet should not be taxed.

The sales tax commissioner’s counsel argued that the preparation of a bouquet certainly amounts to a manufacturing activity. He pointed out that the definition of the term ‘manufacture’ under section 2(17) of the BST Act includes all expressions such as producing, making, extracting, altering, ornamenting and finishing.

He tendered a list of definitions of different bouquets such as flower bouquet, fruit bouquet, candy bouquet and kitchen bouquet, arguing that the definition of flower bouquet is: ‘An arrangement of cut flowers.’

He argued that the making of a bouquet requires not only fresh flowers, but also decorative items such as earthen pots or baskets, silver foil and glitter.

“Also, concepts of fresh flowers and bouquets are different for the common man. A person will never use a bouquet for pooja,” he said. “Considering the common usage for both terms, it is clear that bouquet-making is a manufacturing activity and liable to be taxed, being a residuary entry.”

The HC has directed the sales tax tribunal to decide the case in accordance with its (HC’s) observations.