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TMI Blog1975 (8) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... the same condition that he sold the the same to the retail dealers. On the ground that when the goods were sold by the petitioner to the retail dealers there was sale by him of the gunny bags in which they were contained also, the petitioner was assessed to tax by the Sales Tax Officer. His appeals from it to the higher authorities were unsuccessful. It was thereafter that he moved this court by this petition for revising those proceedings. 2.. The question whether the value of containers is independently assessable to tax has come up for consideration in several decisions. In Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 (S.C.). , a case of works contract, the Supreme Court held that packing materials formed an integral part of the process of re-drying tobacco and so sales tax could not be levied independently on the value of packing materials. 3.. In Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh[1966] 17 S.T.C. 624 (S.C.)., the question was whether sales tax could be levied on the value of containers and packing materials, which consisted of cardboard and dealwood, of cigarettes when on the sale of cigarettes sales tax could not be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly as a convenient vehicle to put the purchasers in possession of the cigarettes sold. 4.. Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd.[1967] 19 S.T.C. 84 (S.C). was a case of assessment on the value of containers of hydrogenated oil when sale of that oil itself was exempt from sales tax. The Supreme Court observed that sales tax could be levied on the value of the containers only if there was an express or implied agreement for the sale of the containers. 5.. A similar view was taken by the Supreme Court in M.A. Razack Company v. State of Madras[1967] 19 S.T.C. 185 (S.C.). also, where the question was whether on the value of packing material of chewing tobacco sales tax could be levied. That decision shows that the value of the packing material as compared to the value of the contents of the packet is really an Important matter and that if it is insignificant, an agreement to sell packing material independently of the contents cannot under the general law be implied. 6.. Shamsuddin Akbar Khan Co. v. State of Orissa[1970] 26 S.T.C. 280., Binod Mills Co. Ltd., Ujjain v. Commissioner of Sales Tax, M.P.[1972] 29 S.T.C. 413., Goverdhan Cement Agencies Private Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of Kerala [1972] 30 S.T.C. 596. 9. A Division Bench of this Court recently considered this matter In A. Srinivasa Pai v. State of Kerala[1975] 36 S.T.C. 482. (T.R.C. Nos. 35, 36 and 37 of 1973). There the question was whether on the value of gunny bags, tea-chests and F.A.C.T. manure bags used as containers of foodgrains sales tax could be levied. This court held that while the estimated turnover of gunny bags and tea-chests could be taxed, that of F.A.C.T. manure bags could not be taxed. In that decision, this court after citing the decisions in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 (S.C.)., Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh[1966] 17 S.T.C. 624 (S.C.)., Commissioner of Taxes v. Prabhat Marketing Co. Ltd.[1967] 19 S.T.C. 84 (S.C.). and M. A. Razack and Company v. State of Madras[1967] 19 S.T.C. 135 (S.C.)., said: "In the light of the above principles it is impossible to hold that teachests and gunny bags are things of no value or the value they fetch is too insignificant to be taken into consideration. They are independent commercial commodities having substantial resale value and they do not lose their phys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment that the articles were sold by the petitioner to the retail dealers at a price higher than that. The petitioner got the articles in gunny bags and supplied them to the retail dealers also in the same condition, that is, in gunny bags. The gunny bags were used only as a convenient and cheap vehicle for transporting the articles to the retail dealers. Whether the articles were supplied to the retail dealers in gunny bags or loose, the sale price was the same. Nothing extra was charged for the gunny bags at the time of the sale of the articles contained in them. In such circumstances, an agreement of sale of the gunny bags cannot be implied. 11.. The Tribunal has in its order stated that there was a subsequent Government order by which the Food Corporation of India was authorised to collect tax on packing materials also and that that indicated that tax could be collected on them previously also. There is no warrant for that assumption. 12.. In the result, the order of assessment passed by the sales tax authorities in respect of the gunny bags valued at Rs. 2,59,079 is set aside and this revision petition is allowed with costs. VISWANATHA IYER, J.-I agree. Since the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title over the containers is transferred by a registered dealer the value of the containers is taxable even though the registered dealer is not carrying on the business of purchasing and selling such containers. In other words, the view was if a registered dealer transfers the title of the containers in the course of the sale of their contents sales tax can be levied on the turnover of the containers. This can no longer be said to be the correct way of looking at the question in view of the Supreme Court decisions in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.[1965] 16 S.T.C. 240 (S.C.)., Hyderabad Deccan Cigarette Factory v. State of A.P.[1966] 17 S.T.C. 624 (S.C.)., Commissioner of Taxes v. Prabhat Marketing Co. Ltd.[1967] 19 S.T.C. 84 (S.C.). and Razack Co. v. State of Madras[1967] 19 S.T.C. 135 (S.C.). It is now settled that these containers can be taxed only if it can be established by the department that there was an agreement of sale either express or Implied In respect of them. There is no case for the department that there was an express sale. Whether there is an implied agreement for sale is a question of fact which will depend upon the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sales Tax Act. This latter decision, as said earlier, was before the decision of the Supreme Court in Hyderabad Deccan Cigarette Factory v. State of A.P.[1966] 17 S.T.C. 624 (S.C.). The question whether compared to the value of the contents the price of the gunny bags will be insignificant was never considered. It proceeds on the basis that the price for which the foodgrains are sold is inclusive of the price of the gunny bags and so their turnover is taxable. The fact that the packing materials, namely, the gunny bags, retain their physical or commercial identity after the contents are removed will not be decisive of the question. The question to be considered is whether from this fact alone an agreement to sell the containers can be inferred. This aspect is not seen pressed for consideration or decided. In A. Srinivasa Pai v. State of Kerala[1975] 36 S.T.C. 482. (T.R.C. Nos. 35, 36 and 37 of 1973), gunny bags and tea-chests used as containers of foodgrains, sugar and provisions were held chargeable to sales tax. From the fact that the gunny bags have got a resale value or that they retained the physical and commercial identity even after the contents are removed an inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the value of the foodgrains. That being so, it is not possible to infer that there was an implied agreement to sell the containers. The containers are seen to have been intended only to be used by the sellers as a convenient and cheap vehicle of transport, and a cheap method of preserving the foodgrains from getting spoiled or lost In the course of trade. 6.. It is seen from the order of the Appellate Tribunal that it has taken into account the directions issued from the Government to the Food Corporation of India to fix a price for the gunny bags and to collect sales tax for their turnover from 27th March, 1966. The fact that subsequent to that the same price is retained for a quintal of wheat and rice and the price structure shows that the value of the containers is included within it is no evidence to show that previously the value of the containers was ever in the mind of the Food Corporation. The fact that a low percentage of profit alone is allowed to the petitioner is not at all relevant to draw an Inference that the petitioner would not have intended to supply these containers free. It was more an intermediary who got a specified profit in the distribution and no in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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