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TMI Blog1996 (1) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned orders the said writ petitions of the appellants have been dismissed by the High Court on the ground that the question raised is covered by the decision in Ranganatha Associates v. State of Karnataka [1990] 78 STC 1 (Kar); ILR 1990 Kar 820. The appellants are manufacturers of cement the price of which is controlled by the Cement Control Order, 1967, issued by the Central Government in exercise of the powers conferred by section 18-G and section 25 of the Industries (Development and Regulation) Act, 1951. The appellants supply the cement packed either in gunny bags or in plastic bags. They also sell the same loose to bulk consumers. Till April 1, 1986, the appellants were enjoying deduction in respect of packing charges from the taxable turnover. After the introduction of sub-section (3-D) in section 5 of the Act the packing material was brought within the purview of the Act and made exigible to tax. Section 5(3-D) of the Act provides as under: "Section 5: Levy of tax on sale or purchase of goods.- .................................. (3-D). Notwithstanding anything contained in this Act, where goods sold or purchased are contained in containers or are packed in any packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t two separate transactions are envisaged, but that circumstance alone cannot be conclusive of the true character of the transaction. It is not unknown that traders may, for the advantage of their trade, show what is essentially a single sale transaction of product and container, or a transaction of a sale of the product only with no consideration for the transfer of the container, as divisible into two separate transactions, one of sale of the product, and the other a sale of the container, with a distinct price shown against each. Similarly where a deposit is made by the purchaser with the dealer, the deposit may be pursuant to a transaction where there is no sale of the container and its return is contemplated, and in the event of its not being returned the security is liable to forfeiture. Alternatively, it may be a case where the container is sold and the deposit represents the consideration for the sale, and in the event of the container being returned to the dealer the deposit is returned by way of consideration for the resale. In every case, the assessing authority is obliged to ascertain the true nature and character of the transaction upon a consideration of all the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to comprehend the need for such a provision. It can at best be regarded as a provision by way of clarification of an existing legal situation. If the transaction is one of sale of the goods only, clearly all that can be taxed in fact is the sale of the goods, and the rate to be applied must be the rate as in the case of such goods. It may be that the price of the goods is determined upon a consideration of several components, including the value of the packing material, but none the less the price is the price of the goods. It is not open to anyone to say that the value of the different components which have entered into a determination of the price of the goods should be analysed and separated, in order that different rates of tax should be applied according to the character of the component (for example, packing material). What section 6-C intends to lay down is that even upon such analysis the rate of tax to be applied to the component will be the rate applied to the goods themselves. And that is for the simple reason that it is the price of the goods alone which constitutes the transaction between the dealer and the purchaser. No matter what may be the component which enters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it from the computation of the turnover regarding the particular goods (which was packed in the packing materials or housed in the container). Simplicity of procedure and convenience of the tax collection are not irrelevant while considering the validity of a particular levy. Section 5(3-D) on the face of it elevates the status of the container (or the packing material) to that of the goods dressed in it. Such a container/packing material is distinct from, another container/packing material which has not housed any goods." (at page 22 of STC; pages 852-853 of ILR) The Karnataka High Court has also referred to the decision of this Court in Union of India v. Bombay Tyre International Ltd. [1984] 1 SCR 347; [1986] 59 Comp Cas 460 and has said: "A seller who sells the bottles only and the purchaser who purchases them as such, are not concerned with anything else, except the marketability of the bottles. But the person who sells liquor contained in a bottle, and a person who purchases such a liquor, is concerned with the liquor and its marketability; the payment of a price for the bottle in such a situation, is part of the bargain for the sale and purchase of the liquor. In other w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, which are similar to the provisions contained in section 5(3-D) of the Act, the question as to the liability for sales tax would depend on the actual ingredients of the contract and intention of the parties which has to be determined in each case. Shri T.L. Vishwanath Iyer, the learned senior counsel appearing for the State, has, however, supported the decision of the Karnataka High Court and has placed reliance on the decisions of this Court in Commissioner of Sales Tax, U.P. v. Rai Bharat Das & Bros. [1988] 71 STC 277 and Ramco Cement Distribution Co. Pvt. Ltd. v. State of Tamil Nadu [1993] 88 STC 151. Having carefully considered the decision of the Karnataka High Court in Ranganatha Associates v. State of Karnataka [1990] 78 STC 1; ILR 1990 Kar 820, we are of the view that the High Court was in error in construing the provisions of section 5(3-D) to hold that the Legislature has thought it fit and convenient to treat the sale of goods contained in a container as an integrated, single transaction of sale of the goods and that it makes it unnecessary to analyse the components of a particular sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction as the one involving the sale of the merchandise (the contents) only and the sale of the container, if any, would get merged in the sale of the content itself and thus it is always treated as a single transaction of sale of both the container and the content and the container whose identity pales into insignificance is identified with the content itself and the value of the container forms part of the consideration paid by the purchaser and it is one of the components of the sale price like the other components such as freight charges, excise duty, sales tax, etc. This Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379, however, did not approve the said view of the Andhra Pradesh High Court and, while allowing the appeals, observed: "In the appeals before us, we find that the High Court has proceeded on the assumption that the transactions are covered by trade practice and having regard to the nature of the goods it has inferred that what is charged is the price of the bottled beer or of cement packed in gunny bags, and reference has also been made to the excise law and the Cement Control Order requiring that the liquor or the cement, as the case may be, must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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