1956 (12) TMI 37 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the assessee to pay sales tax on the value of hessian cloth and iron hoops used in the baling process.
2. Definition and interpretation of "dealer," "goods," "sale," and "turnover" under the Madhya Bharat Sales Tax Act, 1950.
3. Nature of the contract between the assessee and his clients - whether it is a contract of sale or a contract of work and labour.
4. Applicability of previous case law and decisions to the present case.

Issue-wise Detailed Analysis:

1. Liability of the Assessee to Pay Sales Tax
The primary issue is whether the owner of a ginning and pressing factory is liable to pay sales tax on the value of hessian cloth and iron hoops used in the baling process when charging a consolidated rate for pressing and packing. The court concluded that the assessee is liable to pay sales tax on the value of the hessian cloth and iron hoops supplied to customers. The court reasoned that the transfer of property in these materials to the customers, for consideration, constitutes a sale under the Sales Tax Act.

2. Definition and Interpretation of Key Terms
The court examined the definitions of "dealer," "goods," "sale," and "turnover" under the Madhya Bharat Sales Tax Act, 1950:
- Dealer: Defined under Section 2(f) as any person or association of persons carrying on the business of selling or supplying goods.
- Goods: Defined under Section 2(g) as all kinds of movable property, including materials, articles, and commodities.
- Sale: Defined under Section 2(o) as any transfer of property in goods for valuable consideration.
- Turnover: Defined under Section 2(q) as the aggregate amount for which goods are sold or supplied.

The court noted that hessian cloth and iron hoops qualify as "goods" and that the assessee, by transferring these goods to customers for consideration, meets the definition of a "dealer."

3. Nature of the Contract
The assessee contended that the contract was one of work and labour, not a sale of goods. However, the court rejected this argument, stating that the inclusive price charged for both labour and materials indicates a sale of the hessian cloth and iron hoops. The court cited previous decisions, including Pandit Banarsi Das v. State of Madhya Pradesh and Babulal v. D.P. Dube, to support the view that when materials are supplied as part of a service, the transaction can still be considered a sale.

4. Applicability of Previous Case Law
The court reviewed several cases to determine the applicability of previous decisions:
- Poppatlal Shah v. The State of Madras: The court found that the definition of "sale" focuses on the transfer of property.
- Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash: The court noted that a liability to sales tax arises only with a completed sale.
- Gannon Dunkerley & Co. Ltd. v. State of Madras: The court distinguished this case, noting that the materials in question did not become inseparably integrated with the final product.

The court also referenced cases like B.V. Hanumantha Rao v. The State of Andhra and A.S. Krishna & Co., Ltd. v. The State of Andhra, which supported the view that the supply of packing materials constitutes a sale.

Conclusion
The court concluded that the owner of a ginning and pressing factory, who charges a consolidated rate for pressing and packing, is liable to pay sales tax on the value of hessian cloth and iron hoops. The court held that these materials are "goods" and their transfer to customers for consideration constitutes a sale. The reference was answered accordingly, with no order as to costs.