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TMI Blog1965 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in that regard. - Civil Appeal No. 326 of 1966 - - - Dated:- 13-1-1965 - SUBBA RAO K., SHAH J.C. AND SIKRI S.M. JJ. D. Munikannaiah, Senior Advocate (T.V.R. Tatachari with him), for the respondent. N.A. Palkhivala, Senior Advocate (D. Venkatappayya Sastry and B. Parthasarathy and J.B. Dadachanji, O.C. Mathur and Ravinder Narain of J.B. Dadachanji Co., with him), for the appellant. -------------------------------------------------- The judgment of the Court was delivered by SUBBA RAO, J.- This appeal by certificate granted by the High Court of Andhra Pradesh is preferred against the judgment dated April 8, 1964, of the said Court in Tax Revision Case No. 48 of 1963. The appellant, Messrs. Hyderabad Deccan Cigarette Factory, hereinafter called the assessee, is a manufacturer of and dealer in cigarettes. The cigarettes are sold both within and outside the State of Andhra Pradesh. The appellant was assessed under the Andhra Pradesh General Sales Tax Act, 1957, hereinafter called the Act, to sales tax on its turnover of Rs. 1,77,363,01 for the period October 1, 1957, to December 13, 1957. As by a notification dated December 13, 1957, issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject-matter of the agreements of sale between the assessee and its customers. (2) The question whether the packing materials were the subject of the agreements of sale between the assessee and its customers was a pure question of fact depending upon the nature of the goods sold and the nature of the packing materials and the purpose for which the said materials were used. In the present case, it was said, the packing materials, namely, cardboard and dealwood boxes, were the minimum materials necessary to give or send the cigarettes to the customers and that it could not have been possibly the intention of the seller to sell or the buyer to buy the said materials which had no intrinsic worth apart from the cigarettes they contained. And (3) under the Act, the turn over of the sale transactions was exigible to sales tax; and the definition of "turnover" included the packing materials; that is to say, sales tax was payable on the sale of the cigarettes which included the packing materials. Under section 9(1) of the Act, read with the notification issued thereunder by the State Government the assessee was exempted from paying the said tax and, therefore, the scope of the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sale thus: "..............in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of trans ferring title to goods, which of course presupposes capacity to con-tract, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale." The same principle was reiterated by this Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. [1965] 16 S.T.C. 240. The contract of sale may be expressed or implied. In the instant case, it is not disputed that there were no express contracts of sale of the packing materials between the assessee and its customers. On the facts, could such contracts be inferred. The authority concerned should ask and answer the question whether the parties in the instant case, having regard to the circumstances of the case, intended to sell or buy the packing materials, or whether the subject-matter of the contracts of sale was only the cigarettes and that the packing materials did not form part of the bargain at all, but were used by the seller as a convenient and ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed by other manufacturers in the same field. The Assistant Commissioner of Commercial Taxes pursued a different line altogether and held that the packed cigarettes were finished products which by themselves had commercial value and therefore, the packing materials were subject of sale for a price in the course of business. He also did not consider the crucial question in the case. When the same argument was repeated before the Sales Tax Appellate Tribunal, it disposed of it in the following manner: "The other contention urged on behalf of the appellants is that the rate at which the cigarettes are sold is the same either with or without the packing cases and that indicates that there was no consideration and hence no sale of packing materials. This position has not been examined by the authorities below. There is only a submission made to that effect. However, it is submitted by Sri D.V. Sastry, Advocate for the appellants, that at the end of the year the account relating to packing material (cardboard and wrapping paper) has been transferred to manufacturing account and that the account relating to the dealwood boxes has been transferred to trading account. This would indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials were subject of the agreement of sale, express or implied. To ascertain the said fact he can rely upon oral statements, accounts and other documents, personal enquiry and other relevant circumstances such as the nature and the purpose of the packing materials used. A number of decisions have been cited at the Bar. We are not concerned in this appeal with "works contracts" and, therefore, the decisions bearing on that subject are not relevant for the present enquiry. The decisions relevant to sales turn upon the facts of each case: See Mohanlal Jogani Rice and Atta Mills v. State of Assam [1953] 4 S.T.C. 129. ; Indian Leaf Tobacco Development Co. Ltd. v. The State of Madras [1954] 5 S.T.C. 354.; Hanumantha Rao v. The State of Andhra [1956] 7 S.T.C. 486.; Varasuki and Co. v. Province of Madras [1951] 2 S.T.C. 1., and Chidambara Nadar Sons Co. v. State of Madras [1960] 11 S.T.C. 321. The learned Judges, though they differed on the facts, accepted the principle that to attract sales tax the packing material or the container, as the case may be, should have been the subject-matter of an agreement to sell. In this case the High Court has not arrived at that finding on the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced based upon section 4 of the Central Excises and Salt Act. Excise duty on cigarettes which was intended to be a substitute for the State's sales tax, the argument proceeded, was levied on the total turnover of the sale transactions of tobacco with the packings and that it would be unreasonable to construe the provisions of the Act in such a way as to enable the State to levy tax on a part of the turnover of the said transactions. Under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Act 58 of 1957) additional excise duty of sixty naye paise in a rupee was levied on the cigarettes manufactured by the assessee. The additional duty was distributed among the States as provided in the Second Schedule to that Act. It may be that for the purpose of excise duty the packing materials are not separated from the cigarettes, but that cannot possibly preclude the Sales Tax Authorities from taxing the packing materials, if they were the subjectmatter of the agreements to sell. There are no merits in the third contention. In the result, the order of the High Court is set aside. The High Court may consider afresh the question whether the packing materials were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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