1979 (5) TMI 138 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the use of packing materials (hessian cloth and iron hoops) in the pressing and baling of cotton and wool constitutes a sale liable to sales tax under the Rajasthan Sales Tax Act, 1954.
2. Whether the company should have pursued an alternative remedy before approaching the High Court.

Detailed Analysis:

1. Whether the use of packing materials constitutes a sale liable to sales tax:
The primary issue in these writ petitions was whether the packing materials used by the company in the pressing and baling of cotton and wool were liable to sales tax. The assessing authority had charged sales tax on the estimated price of the packing materials, considering them as part of the goods sold. This decision was initially overturned by the Deputy Commissioner, Commercial Taxes (Appeals), who held that the transfer of packing materials did not constitute a sale but was an integral part of the contract for work. However, the Board of Revenue reinstated the assessing authority's decision, leading the company to file writ petitions.

The court analyzed several precedents, including:
- Nenu Ram v. State of Rajasthan: Held that the contract for supplying and fixing wooden windows and doors did not constitute a sale of goods as the property in the goods would not pass to the buyer until they were fixed.
- State of Rajasthan v. Nenu Ram: Affirmed that the contract was indivisible and not liable to sales tax.
- Mahalaxmi Cotton Ginning and Pressing Factory: Held that packing materials were an integral part of the pressing work and not subject to sales tax.
- Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji: Emphasized that mere transfer of property in goods used in a contract does not constitute a sale unless there is an agreement for the sale of goods and completion of such agreement by passing of the title.
- Ram Singh and Sons Engineering Works v. Commissioner of Sales Tax, Uttar Pradesh: Differentiated between a contract for sale and a contract for work and labor, emphasizing that the primary object of the contract determines its nature.
- State of Madras v. Gannon Dunkerley & Company (Madras) Limited: Defined "sale of goods" as requiring an agreement for transferring title, supported by money consideration, and the actual passing of property in the goods.

Applying these principles, the court concluded that there was no sale of the packing materials. The contract was for the service of pressing and baling, and the use of packing materials was incidental and necessary to this service. There was no express or implied contract for the sale of the packing materials, and thus, the company was not liable to pay sales tax on them.

2. Whether the company should have pursued an alternative remedy:
The State argued that the company should have sought a reference from the Board of Revenue rather than filing writ petitions directly. However, the court noted that the issue had already been settled by previous decisions, particularly in the Mahalaxmi Cotton Ginning and Pressing Factory case, which held that the use of packing materials was integral to the pressing process and not subject to sales tax.

The court also cited several precedents supporting the view that the existence of an alternative remedy does not bar the High Court from entertaining a writ petition, especially when fundamental rights are alleged to be infringed or when the inferior tribunal lacks jurisdiction. Cases referenced include:
- Karam Chand Thappar v. Sales Tax Officer, Jaipur: Stated that the existence of an alternative remedy does not bar a writ petition when fundamental rights are at stake.
- L. Hirday Narain v. Income-tax Officer, Bareilly: Held that the High Court should not reject a writ petition on the ground of alternative remedy after having entertained it and heard it on merits.
- State of West Bengal v. North Adjai Coal Co.: Similar stance on not rejecting a writ petition on the ground of alternative remedy after a hearing on merits.

Given these considerations, the court decided to hear the case on its merits and not dismiss it on procedural grounds.

Conclusion:
The court held that the packing materials used by the company for pressing and baling cotton or wool were not subject to sales tax under the Rajasthan Sales Tax Act, 1954, as there was no sale involved. Consequently, the court allowed the writ petitions, quashing the assessment orders and subsequent orders by the Board of Revenue. The parties were directed to bear their own costs.

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