1979 (1) TMI 217 - HC - VAT and Sales Tax

Summary

Issues:
Assessment under Central Sales Tax Act and Tamil Nadu General Sales Tax Act for printing question papers with packing materials. Inclusion of packing materials cost in assessable turnover. Implied contract for sale of packing materials. Eligibility for deduction under rule 6(cc) of Tamil Nadu General Sales Tax Rules.

Analysis:
The respondents, printers and publishers, were assessed under the Central Sales Tax Act and the Tamil Nadu General Sales Tax Act for the years 1971-72 and 1974-75, respectively, for transactions involving printing question papers for universities and educational institutions using packing materials to maintain secrecy. The assessing officer and the Appellate Assistant Commissioner included the value of packing materials in the assessable turnover. An appeal was made by the respondents against this inclusion, arguing that there was no justification for it. The Appellate Tribunal agreed with the respondents, leading to the tax revision cases filed against this decision.

The main issue raised was whether the cost of packing materials, without an express contract, should be deemed part of the price of question papers themselves, making it assessable turnover. The argument was also made that an implied contract for the sale of packing materials could be inferred due to the necessity of packing for maintaining secrecy. However, the Court disagreed with these arguments. It held that the cost of packing materials, shown separately, was eligible for deduction under rule 6(cc) of the Tamil Nadu General Sales Tax Rules. The Court found that the packing materials were incidental to the supply of question papers and not the primary purpose of sale. Citing a Supreme Court case, the Court emphasized that in the absence of a contract for sale of packing materials, any supply should be treated as incidental to the packing work involved.

The Court concluded that the respondents were entitled to claim an exemption for the cost of packing materials, especially since they charged for it independently and were eligible for deduction under the rules. The Tribunal's decision was upheld, stating that the packing materials used were incidental to the printing and despatching of papers. Therefore, the Court decided not to interfere and dismissed the tax revision cases.