1972 (11) TMI 68 - SC - VAT and Sales Tax

Whether the producers who supplied the cement to the State Trading Corporation or its agents in gunny bags in pursuance of the directions given by the Government are liable to pay sales tax on the turnover relating to the price of the gunny bags? Held that - Appeal dismissed.

Summary

Issues:
1. Liability of producers supplying cement in gunny bags to pay sales tax on the turnover relating to the price of the gunny bags.
2. Interpretation of rule 6(f) of the Rules under the Madras General Sales Tax Act, 1959 regarding charges for packing materials.

Analysis:
1. The Supreme Court addressed the issue of whether producers supplying cement in gunny bags to the State Trading Corporation were liable to pay sales tax on the price of the gunny bags. The court noted that the supply of cement itself was not considered a "sale" due to the Cement Control Order, 1958. The key question was whether the gunny bags were sold. The court referred to previous decisions and the relevant assessment years to determine if the price of the gunny bags was controlled by the government. The Central Government had indeed fixed the price of the gunny bags, and the court held that the contention that the supply of gunny bags constituted "sales" was to be rejected. The court emphasized that the Central Government's right to fix the price had not been disputed earlier.

2. Another issue involved the interpretation of rule 6(f) of the Rules under the Madras General Sales Tax Act, 1959, specifically regarding charges for packing materials. The rule underwent changes over time, and the court analyzed the evolution of the rule up to September 1963 and subsequent recastings. The court examined whether the price of packing materials was exempt under the rule. The court referred to past decisions and concluded that the charges for packing included both the price of the packing material and labor charges. The court disagreed with a previous decision that held otherwise. Additionally, a new contention was sought to be raised during the hearing regarding the exemption for packing material not applying to cases under the Central Sales Tax Act due to retrospective amendments. However, the court did not allow this new contention as it was not raised earlier, and the appeals were ultimately dismissed with costs.

In conclusion, the Supreme Court's judgment clarified the liability of producers supplying cement in gunny bags for sales tax and provided an in-depth analysis of the interpretation of rule 6(f) regarding charges for packing materials under the Madras General Sales Tax Act, 1959.