ATMARAM MANAKLAL Vs. COMMISSIONER OF SALES TAX
LAWS(MPH)-1980-2-22
HIGH COURT OF MADHYA PRADESH
Decided on February 25,1980

ATMARAM MANAKLAL Appellant
VERSUS
COMMISSIONER OF SALES TAX Respondents




JUDGEMENT

- (1.)BY this reference under Section 44 of the M. P. General Sales Tax Act, 1958, hereinafter called the Act, at the instance of the assessee, the following question of law has been referred to this Court for its opinion :
Whether, under the facts and the circumstances of the case, the finding that there was implied sale of packing material consisting Of bardana and patti, along with sale of cotton bales, was justified ?

(2.)THE material facts giving rise to this reference briefly are as follows: The assessee is a dealer in cotton bales and has been assessed to sales tax under the Central Sales Tax Act for the year 1966-67. During this period, the assessee sold 1,842 bales of cotton for Rs. 4,94,914. The assessee contended that the sale was in respect of cotton only and that no price was charged in respect of packing materials consisting of bardana and patti. It was also contended by the assessee that the price of cotton charged was for net weight of cotton. The assessee also produced certificates from the purchasers to prove its contention that it had sold cotton alone and that no payment was made for packing material. The assessing authority rejected the contention of the assessee and held that there was an implied sale of packing material. On appeal; the Appellate Assistant Commissioner upheld the order of the assessing authority. On further appeal, the Board of Revenue held that in the light of the decisions of this Court in Vimalchand v. Commissioner of Sales Tax, M. P. 1968 M. P. L. J. 665 and Nimar Cotton Press v. Sales Tax Officer [1961] 12 S. T. C. 313 (F. B.), the contention of the assessee that there was no sale of packing materials was liable to be rejected. Aggrieved by the order of the Board the assessee submitted an application for making a reference to this Court, and it is at the instance of the assessee that the aforesaid question of law has been referred to this Court for its opinion.
(3.)NOW, the burden lay upon the department to prove that there was an implied sale of packing material. The Board has assumed that whenever goods, which are packed, are sold, there is an implied sale of packing material. But, as held by the Supreme Court in 'hyderabad Deccan Cigarette Factory v. State of A. P. [1966] 17 S. T. C. 624 (S. C.), the question as to whether there is an agreement to sell the packing material cannot be decided on fictions or surmises. The finding that there is an implied sale of packing material has to be arrived at on the basis of facts in each case. In Vimalchand v. Commissioner of Sales Tax, M. P. 1968 M. P. L. J. 665, on which reliance has been placed by the Board,: it was observed as follows : It must be noted that in Chidambara Nadar Sons and Co. v. State of Madras [1960] 11 S. T. C. 321, the Madras High Court held that where there is an agreement to purchase cotton to be delivered by the seller to the buyer, it is implicit in the contract that the goods should be delivered as packed ; and that in such a case a contract to pay for and purchase the packing materials can be implied and the turnover relating to the packing materials would be liable to sales tax. This decision of the Madras High Court was approved by the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. [1965] 16 S. T. C. 240 at 250 (S. C. ). While noting the decision of the Madras High Court, the Supreme Court observed (at page 250):
'the sale price of packing material employed for effecting sale of cotton was held to be liable to sales tax by the Madras High Court in Chidambara Nadar Sons and Co. v. State of Madras [1960] 11 S. T. C. 321. The learned Judges in the aforesaid case rightly held that whether the commodity conserved in the container is sold or not, the transaction involved a contract of sale of the packing material. '
The aforesaid observations of the Supreme Court, on which reliance was placed by the learned Judges in Vimalchand v. Commissioner of Sales Tax, M. P. 1968 M. P. L. J. 665, appear in the minority judgment delivered by Subba Rao, J. , a fact which, with respect it must be stated, seems to have been lost sight of by the learned Judges. Shah, J. , delivering the majority judgment, held that from the mere use of packing material an inference that there was an intention to sell the packing material cannot be drawn. Moreover, in Vimalchand v. Commissioner of Sales Tax, M. P. 1968 M. P. L. J. 665, the fact that the assessee had charged the purchasers a composite price for compressed cotton and packing materials was admitted by the assessee and was no longer in dispute. This fact had not been admitted in the instant case by the assessee, and the assessing authorities have not found that the assessee had charged composite price for cotton and packing material. The Board, therefore, erred in relying upon the decision in Vimalchand v. Commissioner of Sales Tax, M. P. 1968 M. P. L. J. 665 for coming to the conclusion that there was an implied sale of packing materials. The Full Bench decision of this Court in Nimar Cotton Press v. Sales Tax Officer [1961] 12 S. T. C. 313 (F. B.), referred to by the Board, is distinguishable on facts because in that case there was a contract for pressing cotton and delivery of compressed cotton in bales covered with hessian cloth and fastened with iron hoops for a consolidated charge of pressing and packing. It was in these circumstances that it was held in that case that there was an implied sale of packing material. In the instant case, it has not been found that separate price was charged for the packing material or that a composite price for cotton and packing materials was charged by the assessee. The contention of the assessee that the price which was charged was for net weight of cotton was not found to be untrue. The burden was on the department to prove that there was an implied sale of packing materials and this burden was not discharged by the department. In these circumstances, we are of the opinion that there was no sale of packing materials.


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