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PETITIONER: COMMISSIONER OF TAXES ASSAM, SHILLONG

       Vs.

RESPONDENT: PRABHAT MARKETING CO.  LTD., GAUHATI

DATE OF JUDGMENT: 27/10/1966

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. BHARGAVA, VISHISHTHA

CITATION:  1967 AIR  602            1967 SCR  (1) 961  CITATOR INFO :  RF         1987 SC1207  (6)  APL        1989 SC 315  (8)  F          1989 SC1696  (7)

ACT: Assam  Sales Tax Act (Act 17 of 1947)-Packing  materials  of exempted goods when liable to sales tax.

HEADNOTE: The respondent was a registered dealer under the Assam Sales Tax   Act,  1947.   The  Sales-tax  Officer   assessed   the respondent  to  Sales-tax in respect of  the  containers  of hydrogenated  oil and other exempted goods.  Appeals to  the Assistant  Commissioner of Taxes failed as also  second  ap- peals to the Assam Board of Revenue.  In reference the  High Court  held  that  the  value  of  the  containers  was  not assessable  to  sales tax "unless separate  price  has  been charged  for the containers." This finding was based on  the view  that  there  was no evidence  to  show  that  actually separate  price was paid for the containers and hence  there was  no  sale  and  there  could  not  be  any  tax  on  the containers.  In appeal to this Court by the Commissioner  of Taxes it was urged that the parties may have intended in the circumstances  to sell the hydrogenated oil apart  from  the containers  the mere fact that the price of  the  containers was not separately fixed would make no difference HELD  : The question as to whether there is an agreement  to sell  packing material is a pure question of fact  depending upon  the circumstances found in each case.  The High  Court was  in error when it answered the question of law  referred to  it  without addressing itself to  the  question  whether there  was an express or implied agreement for the  sale  of the containers of hydrogenated oil in the present case. [963 HI Hyderabad  Deccan  Cirgrette  Factory  v.  State  of  Andhra Pradesh, 17 S.T.C. 624, relied on.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 199 and  200

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of 1966. Appeals  by special leave from the judgment and order  dated May  20, 1964 of the Assam and Nagaland High Court in  Sales Tax Reference No. 1 of 1963. Naunit Lal, for the appellant (in both the appeals). B. P. Maheshwari, for the respondent (in both, the appeals). The Judgment of the Court was delivered by Ramaswami, J. These appeals are brought, by special,  leave, from  the judgment of the High Court of Assam  and  Nagaland dated May 20, 1964 in Sales Tax Reference No. 1 of 1963. The respondent is a registered dealer under the Assam  Sales Tax  Act  (Act  17 of 1947).  For  the  two  periods  ending September  30,  1959 and September 30, 1960, the  Sales  Tax Officer assessed the 962 respondent  to sales tax holding that hydrogenated  oil  was exempt from sales tax but the value of the containers should be  assessed at Re. 1/- for each container  of  hydrogenated oil and at 2 annas for salt bag and a small mustard oil  tin which  are  other  exempted  goods  for  the  period  ending September  30, 1959.  For the other period ending  September 30, 1960, the value of the containers of the exempted  goods was  estimated  at Rs. 21, 5001.  The  respondent  preferred appeals  to  the Assistant Commissioner of  Taxes,  but  the appeals  were  dismissed.  The respondent  preferred  second appeals-before the Assam Board of Revenue which by its order dated  June  17,  1963  also  dismissed  the  appeals.   The respondent  thereafter filed an application under s.  32  of the Assam Sales Tax Act, 1947 for reference of the following two questions of law to the High Court               "(1)  Whether delivery. of goods made  to  the               Assam Rifles and NEFA, at Rowriah Air Port for               consumption   outside  the  State  of   Assam,               constitutes  a sale liable to Sales Tax  under               the Act ?               (2)   Whether  the value of the containers  of               hydrogenated  oil is assessable to  Sales  Tax               under  the  Act though the oil itself  is  not               taxable under it ?" By  its judgment dated May 20, 1964 the High Court  answered the first question against the assessee.  With regard to the second  question, the High Court held that the value of  the containers was not assessable to sales-tax "unless  separate price has been charged for the containers".  The High  Court took  the  view  that there was no  evidence  to  show  that actually  separate  price was, paid for the  containers  and hence  there was no sale and there could not be any  tax  on the  containers.   The High Court accordingly  answered  the second question in favour of the assessee. The question presented for determination in these appeals is whether  the  value  of containers of  hydrogenated  oil  is assessable to sales-tax under the Assam Sales Tax Act, 1947. On behalf of the appellant Mr. Naunit Lal contended that the High Court has erred in holding that unless a separate price has  been  charged  for  the containers  the  value  of  the containers is not assessable to sales-tax.  It was submitted that  the parties may have intended in the circumstances  to sell the hydrogenated oil apart from the containers; and the mere  fact  that  the  price  of  the  containers  was   not separately fixed would make no difference to the  assessment of  sales-tax.  In our opinion, the argument put forward  on behalf of the appellant is well-founded and must be accepted as  correct.  It is well established that in order  to  con- stitute  a  sale  it is necessary that there  should  be  an agreement   between   the  parties  for   the   purpose   of

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transferring title to goods, the 963 agreement must be supported by money consideration, and that as a result of the transaction the property should  actually pass  in the goods.  Unless all the ingredients are  present in  the  transaction  there could be no sale  of  goods  and sales-tax  cannot  be  imposed [State of  Madras  v.  Gannon Dunkerley  and Co. [(Madras)](1).  But the contract of  sale may  be express or implied.  In Hyderabad  Deccan  Cigarette Factory  v. The State of Andhra Pradesh(2).  It was held  by this  Court  that  in a case of this  description  what  the Sales-tax  authorities had to do was to ask and  answer  the question   whether  the  parties,  having  regard   to   the circumstances  of  the  case, intended to sell  or  buy  the packing  materials  or  whether  the  subjectmatter  of  the contracts of sale was only an exempted article, and  packing materials did not form part of the bargain at all, but  were used  by  the sellers as a convenient and cheap  vehicle  of transport.   At  page  628  of the  Report  Subba  Rao,  J., speaking for the Court,, observed as follows: "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, inten- ded  to  sell or buy the packing materials, or  whether  the subject-matter  of the contracts of sale was only the  ciga- rettes  and that the packing materials did not form part  of the  bargain at all, but were used by the seller as  a  con- venient and cheap vehicle of transport.  He may also have to consider  the question whether, when a trader in  cigarettes sold  cigarettes priced at a particular figure for a  speci- fied  number and handed them over to a customer in  a  cheap card-board container of insignificant value, he intended  to sell  the cardboard container and the customer  intended  to buy the same ? It is not possible to state as a  proposition of  law  that  whenever  particular goods  were  sold  in  a container  the  parties did not intend to sell and  buy  the container  also.   Many cases may be  visualized  where  the container is comparatively of high value and sometimes  even higher  than  that contained in it. Scent or whisky  may  be sold in costly containers.  Even cigarettes’ may be sold  in silver  or gold caskets.  It may be that in such  cases  the agreement  to  pay an extra price for the container  may  be more readily implied." The  question  as to whether there is an agreement  to  sell packing material is a pure question of fact depending,  upon the  circumstances found in each case.  But the  High  Court answered the (1) [1959] S. C. R. 379. (2) 17 S. T. C. 624. 964 question  of  law  referred to it by the  Board  of  Revenue without addressing itself to the question whether there  was an  express  or  implied  agreement  for  the  sale  of  the containers of hydrogenated oil in the present case. We accordingly set aside the judgment of the High Court  and direct that the answer to the second question should be that the value of containers of hydrogenated oil is assessable to salestax  under the Act if there is an express  OK,  implied agreement  for the -sale of such containers.  These  appeals are,  accordingly, allowed  At the time of grant of  special leave  this Court made a condition that the  appellant  will pay the cost of the respondent in any event.

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Mr.  Naunit  Lal on behalf, of the appellant gave  an  under -taking  that if these appeals are allowed no further  steps will  be taken to tax the respondent for the containers  for the periods covered in the present case. G.C. Appeals allowed. 965