1988 (8) TMI 369 - SC - VAT and Sales Tax

Whether the sales tax could be charged from the assessee in respect of packing charges received by the assessee from the purchaser? Held that - Appeal allowed. The fact that here, packing in the gunny bags was done by the dealer in respect of the goods at the time of or before the delivery, in our opinion, the High Court was in error in the view it took. There was a contract for packing the silica in sound gunny bags, the cost of packing materials had been realised, we are clearly of the opinion that the High Court was in error.

Summary

Issues:
1. Whether packing charges received by the assessee are liable for sales tax under the Central Sales Tax Act, 1956.

Analysis:
The Supreme Court heard an appeal from the High Court of Allahabad regarding the liability of an assessee to pay sales tax on packing charges received from purchasers in the assessment year 1974-75. The assessee was engaged in mining and sale of silica sand, and the issue revolved around whether sales tax could be charged on the packing charges. The Tribunal and sales tax authorities held the assessee liable for sales tax on the packing charges received. The Tribunal found that the packing was done at the request of the buyer and was a convenient mode of delivery, leading to the conclusion that these charges were part of the sale price under Section 2(h) of the Central Sales Tax Act, 1956.

The High Court, however, disagreed with the Tribunal's findings, stating that there was no implied agreement to sell the gunny bags by the assessee to its customers, and since the price of goods and packing charges were separately charged, the packing charges could not be included in the sale price. The Supreme Court, after analyzing the facts and the legal provisions, held that the High Court erred in its interpretation. The Court noted that the Tribunal's findings were conclusive and in line with Section 2(h) of the Act, allowing for the inclusion of packing charges in the sale price when they are integral to putting the goods in a deliverable state.

The Supreme Court referred to previous decisions to support its conclusion, emphasizing that the determination of whether there is an implied agreement to sell packing material along with the goods is a question of fact. The Court highlighted that in the present case, the packing of silica sand in gunny bags was done by the dealer to put the goods in a deliverable state, making the packing charges a legitimate part of the sale price. Therefore, the Court set aside the High Court's judgment, restored the Tribunal's order, and allowed the appeal, with no order as to costs.