1971 (10) TMI 98 - HC - VAT and Sales Tax

Issues Involved:

1. Implied contract of sale of packing materials.
2. Rate applicable to packing materials.
3. Sales tax on packing materials purchased from registered dealers and sold inter-State.
4. Classification of hessian as "cloth" under the State Act.
5. Casual sales of packing materials.
6. Completion of sale and applicable tax rate for 1,300 cotton bales.

Issue-wise Detailed Analysis:

1. Implied Contract of Sale of Packing Materials:

The Tribunal held that there was an implied contract for the sale of packing materials (bardana and patti) along with the sale of cotton bales. The Board of Revenue found that it was obligatory for the assessee to deliver the cotton fully pressed with packing materials, and the purchaser would not have paid the full price without the packing. This implied that the price of the packing materials could be assessed to tax. The court referenced previous cases, including *Nimar Cotton Press v. Sales Tax Officer* and *Government of Andhra Pradesh v. Guntur Tobaccos Ltd.*, which supported the notion that an implied contract for the sale of packing materials can be inferred based on the circumstances of each case. The court concluded that the Tribunal was justified in inferring an implied contract of sale for the packing materials.

2. Rate Applicable to Packing Materials:

The Tribunal determined that the packing materials should be charged at the rate applicable to those materials, not at the rate applicable to the baled cotton. The court supported this finding, stating that when different articles are transferred under a composite contract, they must be charged at their respective rates. Thus, the Tribunal was correct in holding that the packing materials were chargeable at their specific rates.

3. Sales Tax on Packing Materials Purchased from Registered Dealers and Sold Inter-State:

The Board of Revenue found no material on record to support the assessee's contention regarding this issue. Consequently, the question was not pressed before the court, and no answer was recorded.

4. Classification of Hessian as "Cloth" Under the State Act:

The court decided against the assessee, referencing the decision in *Commissioner of Sales Tax, M.P. v. Bharat Kala Bhandar*. It was held that hessian is not covered by the term "cloth" in entry No. 6, Schedule I, of the State Act, and thus, it is not exempt from sales tax. The Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1971, explicitly excluded hessian cloth from that entry with retrospective effect. Therefore, the hessian used in packing materials did not fall under the category of "cloth" for the purposes of the State Act.

5. Casual Sales of Packing Materials:

The court observed that selling cotton bales was not a casual business for the assessee, and the sale of packing materials along with the bales could not be considered casual. The Tribunal rightly held that the sales of packing materials were not casual and that the assessee was a dealer in packing materials as well.

6. Completion of Sale and Applicable Tax Rate for 1,300 Cotton Bales:

The Tribunal found that the contract required the assessee to deliver the goods at the destination, meaning the sale was completed upon delivery at the destination. Therefore, the rate in force after 16th January 1965 was applicable. The court rejected the assessee's argument that the tax should be based on the date of movement of goods, clarifying that the tax is levied on the sale of goods, not on their movement. The sale was completed when the goods were delivered at the destination, making the rate in force after 16th January 1965 applicable.

Summary of Answers:

1. The Tribunal was right in holding that there was an implied contract of sale of packing materials along with the sale of cotton bales.
2. The Tribunal was right in holding that the packing material was chargeable at the rate applicable to the said material and not at the rate applicable to baled cotton.
3. No answer to this question is called for as it was not pressed before the court and there is no material on record to support it.
4. Hessian used in packing material did not fall in the category of "cloth" for purposes of entry No. 6, Schedule I, to the State Act.
5. The sales of packing material were not casual sales, and the assessee was a dealer in packing material as well.
6. The sale of 1,300 cotton bales was completed only after the goods reached the destination, and the rate in force after 16th January 1965 was applicable.

References answered accordingly.

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