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PETITIONER: COMMISSIONER OF SALES TAX, U.P.

       Vs.

RESPONDENT: RAI BHARAT DAS & BROS.

DATE OF JUDGMENT30/08/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) KANIA, M.H.

CITATION:  1989 AIR  315            1988 SCR  Supl. (2) 685  1989 SCC  (1) 143        JT 1988 (4)     3  1988 SCALE  (2)1073

ACT:   Central  Sales Tax Act, 1956: s. 2(h)--Packing  expenses incurred  on putting the goods in deliverable  state-Whether could be included in sale price-Whether exigible to tax.

HEADNOTE:     Section  2(h)  of  the  Central  Sales  Tax  Act,   1956 contemplates sale price as the consideration for the sale of any goods, inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or  before the delivery thereof, other than cost of freight or delivery and cash discount.     The assessee carried on the business of mining and  sale of silica sand. The sales tax authorities sought to levy tax on  the  packing  charges  that he  had  received  from  the purchasers.  The  Tribunal found that there was  an  implied agreement  for  sending  silica  in  gunny  bags,  that  the expenses on packing were incurred in order to put the  goods in  deliverable  state  prior to the  delivery,  that  these expenses  were rightly included in the sale price and  hence exigible to tax.     The  High  Court came to the conclusion that  since  the Tribunal had not recorded the finding that there was implied agreement  to  sell the gunny bags by the  assessee  to  its customers,  the packing charges were mentioned and not  cost of  gunny bags and since the price of goods and the  packing charges were separately charged the said charges could   not be included in the sale price paid by the purchasers to  the assessee.     Allowing the appeal by special leave,     HELD :  The High Court was in error in the view it took. [689B]     Whether  there is an implied agreement to  sell  packing material along with the product contained therein is a  pure question  of fact depending upon the circumstances  of  each case.  In  the  instant case the  Tribunal  found  that  the packing in the gunny bags was done by the dealer in  respect of the goods at the time of or before the delivery  thereof, that  it  was  done at the request of buyers  as  it  was  a                                                   PG NO 686 convenient  mode of delivery and that the buyers  had  given

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directions  for  the quality of packing. In  view  of  these facts  found  by  the Tribunal, which must be  taken  to  be conclusive,  it could not be said that the parties  did  not intend to sell or buy the gunny bags. [687E-G]     In  view  of  the  definition of s.  2(h)  of  the  Act, anything  which was integral part including any sum  charged for anything done by the dealer in respect of the goods, may form  part  but anything supplied separately pursuant  to  a separate   order,  directions  or  specifications   to   the purchaser  could  not form part of the sale  price.  In  the instant  case the packing was done in order to  putting  the goods in deliverable state and incidental to the same.  Such packing charges, therefore, could be included. The mere fact that  price of silica was shown separately and the  cost  of packing was also shown separately makes no difference to the assessment of sales tax. [688D,F-G]     Commissioner  of  Taxes, Assam v. Prabhat Marketing  Co. Ltd.,  19  STC 84 and Jamanu Flour ,e Oil Mill (P)  Ltd.  v. State of Bihar,65 STC 462 applied.

JUDGMENT:     CIVIL  APPELLATE JURISDICTlON: Civil Appeal No. 2456  of 1986.     From  the  Judgment and Order dated 12.7.  1982  of  the Allahabad High Court in Sales Tax Revision No. 42 of 1982.     S.C.   Manchanda  and  Ashok  K.  Srivastava   for   the Appellant.     The Judgment of the Court was delivered by     SABYASACHl MUKHARJI, J. This is an appeal by leave  from the judgment and order of the High Court of Allahabad, dated 12th July, 1982. The decision was rendered in a revision  by the  assessee  which was directed against the order  of  the Sales Tax Tribunal. The year involved is the assessment year 1974-75.     The assessee carried on the business of mining and  sale of silica sand. The question was whether the sales tax could be  charged from the assessee in respect of packing  charges received  by the assessee from the purchaser. The sales  tax authorities  as well as the Tribunal held that the  assessee was  liable to pay sales tax on the packing charges that  he had received from the purchaser. From the facts found by the Tribunal  it appears that there was a contract  for  packing                                                   PG NO 687 the  silica sand in gunny bags and packing charges had  been realised  on  the  basis  of  mt.  tons  though  these  were separately  shown  and were added up with the price  of  the silica sand and on the total sales tax was charged.     Section  2(h)  of  the  Central  Sales  Tax  Act,   1956 (hereinafter   called   ‘the  Act’)  provide   as   follows: "sale  price"  means  the  amount payable  to  a  dealer  as consideration  for  the  sale of any  goods,  less  any  sum allowed as cash discount according to the practice normally’ prevailing  the trade, but inclusive of any sum charged  for anything  done by the dealer in respect of the goods at  the time  of or before the delivery thereof other than the  cost of freight or delivery or the cost of installation in  cases where such cost  is separately charged. "     The  tribunal  categorically  found  that  there  was  a contract  for packing the silica sand in sound  gunny  bags, hence,held  that there was an implied agreement for  sending silica  in  gunny bags though these could be sent  loose  in wagons. As mentioned hereinbefore, Section 2(h) contemplates sale  price as the consideration for the sale of  any  goods

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unless  any  sum allowed as cash discount according  to  the practice  prevailing in the trade, but inclusive of any  sum charged  for anything done by the dealer in respect  of  the goods at the time before the delivery thereof other than the cost  of freight or delivery or the cost of installation  in cases  where  such cost is separately  charged.  Hence,  the short question is whether the price was charged for anything thing done in respect of the goods at the time of or  before the delivery thereof.     The  Tribunal  also found that packing was done  at  the request  of the buyer and that it was a convenient  mode  of delivery. The buyers had given directions for the quality of packing and it appears from the order form this always  done in  respect  of the goods for putting these  in  deliverable state   and  so  the  packing  charges,  according  to   the Tribunal,are  exigible  to tax in  this  case.  The-Tribunal clearly  came to the conclusion that all the these  expenses were incurred in order to put the goods in deliverable state prior to their delivery. As per the agreement these expenses were rightly included in the sale price and it could not  be said  that these were not part of the sale price. Hence  the Tribunal held that the tax was rightly levied under the  Act on the sale price so computed.                                                   PG NO 688     The High Court came to the conclusion that the  Tribunal had  not  recorded  the finding that there  was  an  implied agreement  to  sell the gunny bags by the  assessee  to  its customers.  Packing charges were         mentioned  and  not the cost of gunny bags. Packing charges for each  metric ton obviously  include labour charges. In view of the fact  that the  price of goods and the packing charges were  separately charged,  the  High Court came- to the conclusion  that  the packing charges could not be included in the sale price paid by the purchasers to the assessee. That is impugned in  this appeal.     We are of the opinion, in view of the facts found by the Tribunal  which must be taken to be conclusive, and  in  the light  of  Section 2(h) of the Act, the High  Court  was  in error. In the facts of this case such packing charges  could be included. There was an agreement to sell the gunny  bags, as  found  by the Tribunal. The price of  silica  was  shown separately   and  the  cost  of  packing  was   also   shown separately. In view of the definition of Section 2(h) of the Act,  anything which was an integral part included  any  sum charged  for anything done by the dealer in respect  of  the goods,  may  form  part  but  anything  supplied  separately pursuant  to a separate order, directions or  specifications to  the purchaser could not form part of the sale  price  of the  gunny bags. This was done in order to putting  them  in deliverable state and incidental to the same.     In  a  slightly different state of facts  this  question came  before this Court in Commissioner of Taxes,  Assam  v. Prabhat Marketing Co. Ltd., 19 STC 84. There, the respondent sold hydrogenated oil which was exempt from sales tax  under the Assam Sales Tax Act, 1947. The question was whether  the value  of the containers in which hydrogenated oil was  sold could be assessed to sales tax under the Act. The High Court held that the value of the containers was not assessable  to sales  tax  unless separate price had been charged  for  the containers.  On an appeal this Court held that the value  of the  containers was assessable to sales tax under  the  said Act  if  there was an express or implied agreement  for  the sale of such containers and the mere fact that the price  of the containers was not separately fixed, made no  difference to the assessment of sales tax. This Court, however, came to

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the  conclusion  that where there was an agreement  to  sell packing  material is a pure question of fact depending  upon the circumstances of each case.     In  this  case this Court asked the  question  that  the sales tax authorities had to address themselves the question whether  the parties having regard to the  circumstances  of the  case,  intended  to sell or buy  packing  material  and                                                   PG NO 689 whether the subject-matter in the context of sale, was  only an exempted article or packing material did not form part of the bargain at all.     In  that  being  the principle and the  fact  that  here packing in the gunny bags was done by the dealer in  respect of  the goods at the time of or before the delivery, in  our opinion,  the High Court was in error in the view  it  took. This  Court had to consider again this aspect of the  matter in  Jamana Flour & Oil Mills (P) Ltd. v. State of Bihar,  65 STC  462.  There this Court held that whether there  was  an implied  agreement to sell packing material along  with  the products contained therein, is a question of fact.     In  view  of  the principles  enunciated  in  these  two decisions, though the facts were different, and on the basis of  the  conclusive findings recorded by the  Tribunal  that there  was a contract for packing the silica in sound  gunny bags,  the cost of packing materials had been  realised,  we are clearly of the opinion that the High Court was in error.     In the aforesaid facts and circumstances of the case the judgment  and order of the High Court are set aside and  the order  of the Tribunal is restored. There will, however,  be no order as to costs. P.S.S.                                     Appeal allowed.