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PETITIONER: STATE OF TAMIL NADU ETC.

       Vs.

RESPONDENT: CEMENT DISTRIBUTORS PRIVATE LTD.  ETC.  ETC.

DATE OF JUDGMENT22/11/1972

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. REDDY, P. JAGANMOHAN KHANNA, HANS RAJ

CITATION:  1973 AIR  668            1973 SCR  (2)1019  1973 SCC  (3) 342  CITATOR INFO :  O          1978 SC 449  (47,52)

ACT: ’Sale’  Cement supplied in gunny bags-Price of  gunny  bags, fixed  under control order--Supply of gunny bags  whether  a sale taxable under- Madras General Sales Tax Act 1959. Madras  General  Sales Tax Act 1959, Rules  made  under-Rule 6(f)  (ii)  as it stood up to Sept. 27, 1963  providing  for exemption  in respect of ’charges for packing  and  delivery and  other such like services’-Price of gunny  bags  whether comes under exemption.

HEADNOTE: In appeal by the State of Tamil Nadu against the judgment of the  Madras  High  Court on the questions  (i)  whether  the producers  who  supplied  the Cement to  the  Slate  Trading Corporation  or its agent in gunny bags in pursuance of  the directions given by the Government ire liable to pay  sales- tax on the turnover relating to the price of the gunny bags, and (ii) whether the words ’charges for packing and delivery and  other such like services’ in r. 6(f)(ii) of  the  rules under  the  Madras General Sales Tax 1959 as it  stood  upto September  1963  had the effect of’  granting  exemption  in respect of price of packing materials. HELD  :  (i) From the relevant control orders it  was  clear that  the  Government  of India was purporting  to  fix  the piece.  of  the  gunny  bags in  which  the  producers  were required to supply cement to the State Trading Corporation. When  the  price  was wholly controlled the  supply  of  the guilty  bags  could  not be  considered  is  ’sales’.   This position was concluded by the decisions of this Court in New India  Sugar Ltd. and Cheyenne Mal Narain Das.   Accordingly the  price  of  gunny bases could not be  included  ,in  the taxable turnover. [1021 C] New  India  Sugar Mills Ltd. v. Commissioner of  Sales  Tax, Bihar  1  4,  S.T.C. 316; and Chittar  Mal  Narain  Dass  v. Commissioner of Sales Tax. U.P. 26, S.T.C. 344; applied. (ii) The charges for packing exempted under Rule 6(f) as  it stood  up to September 1963 included both the price  of  the packing  material as well as the labour charges relating  to the  packing.  The words aid other such like  services’  in

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sub-cl.  (ii)  of the rule referred to the  word  ’delivery’ ,immediately preceding those words.  The subsequent  charges effected  in the rule merely clarified the intention of  the rule  making  authority.  Therefore the  contention  of  the appellant  that  the rule as it stood till  September  1963, merely provided for exemption of service charges for packing and  not the cost of the packing material must be  rejected. [1023 F] State  of  Madras and Ors. v. Damodaran Chettiar &  Co.  18, S.T.C. 451 disapproved. State  of  Madras,  In  re : 7,  S.T.C.  355,  approved  and applied.

JUDGMENT: CIVIL APPELLATE JURISDICTION :Civil Appeals Nos. 21842195 of 1969, 498 to 502 of 1970 & 884 to 885 of 1971. 1020 Civil Appeals Nos. 2184-2195 of 1969 and 498 to 502 of 1970. Appeals  by  certificate from the judgment and  order  dated March  25, 1969 of the Madras High Court in W.P. Nos.  4161- 4164  & 4246-4249 of 1965 and Writ Petitions Nos. 198 &  199 and T. C. Nos. 227 and 228 of 1967 and Civil Appeals Nos. 884 to 885 of 1971. Appeals  by  certificate from the judgment and  order  dated March  2, 1970 of the Madras High Court in Tax Case Nos.  21 and 22 of 1970. S.   T. Desai, A. V. Rangam, K. Venkataswami and A.  Subhas- him for the appellants (in C. As.  Nos. 2184-2195/69). Govind  Swamindadhan, A. V. Rangan, K. Venkataswami  and  A. Subhashini  for  the  appellants (in C.  As.   Nos.  498  to 502/701). A.   V.  Rangam and A. Subhashini for the appellants. (in C. As. Nos. 884-885/71). F.   S.  Nariman, Addl.  Solicitor-General of India,  D.  S. Dang, H.  K.   Puri, S. K. Dhingra and Krishna Sen  for  the respondents  (in C. A. Nos. 2184-2195/69), Respondent No.  2 (in C.A. Nos 498-500) and Respondent (in C.A. Nos. 501-502): The Judgment of the Court was delivered by HEGDE, J. These appeals by certificate can be disposed of by one  judgment.   They raise common questions  of  law.   The material  facts are not, in dispute.  In Civil Appeals  Nos. 498,499  to 502 of 1970, the principal question of law  that arises  for decision is whether the producers  who  supplied the cement to the State Trading Corporation or its agents in gunny  bags  in  pursuance of the directions  given  by  the Government  are  liable  to pay sales-tax  on  the  turnover relating  to  the price of the gunny bags.  The  only  other question  that arises for decision in these appeals  relates to the interpretation of Rule 6(f) of the rules framed under the Madras General Sales Tax Act, 1959.  This question  will be considered while dealing with the other appeals.  In  the other  appeals  the  question for decision  is  whether  the selling  agents of the State Trading Corporation are  liable to  pay sales tax in respect of the price of the gunny  bags in  which they sold the cement to the consumers.   The  High Court  has  decided both these questions in  favour  of  the assessees.   Aggrieved by that decision, the State of  Tamil Nadu has come up in appeal. 1021 Taking  first  the  case of  the  transactions  between  the producers  and  the State Trading Corporation, there  is  no dispute  that so far as the supply of cement  is  concerned, the same cannot be considered as "sales" within the  meaning

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of  the  Madras General Sales Tax Act, 1959 in view  of  the Cement  Control Order, 1958.  The, only question is  whether the  gunny  bags  in  which the cement  in  question  ,A  as supplied can be considered to have been sold.  There is  no, dispute that if the price of the gunny bags is also held  to have  beer  wholly controlled then the supply of  the  gunny bags cannot be considered as "sales".  This position must be held to be concluded by the decisions of this Court-see  New India  Sugar  Mills  Lid. v.  Commissioner-  of  Sales  Tax, Bihar(1) and Chittar Mat Narain Das v. Commissioner of Sales Tax,  U.P.(2). Therefore all that we have to see is  whether the price of the gunny bags in which the cement was supplied to  the State Trading Corporation was, controlled under  cl. 6(4)  of  the  Cement Control  Order,  1958.   The  relevant assessment  years  with  which we  are  concerned  in  these appeals  are assessment years 1959-60, 1960-1961  and  1961- 1962.   It  is admitted that the Central Government  by  its order dated’ March 26, 1959 informed all, concerned thus :               "Packing   charges  for  cement   for   period               commencing  to First April to  Thirtieth  June               Nineteen  Fifty  nine will  be  Rupees  Eleven               Decimal five four per ton in New Gunny Bags". Again  by its order dated June 24, 1959, it stipulated  that the packing charges for cement for the period commencing 1st July  to 30th September 1959 will be Rs. 11.04 per  ton,  in new gunny bags.  The Central Government by its letter  dated December  26,  1959 informed the Staff  Trading  Corporation that it has accepted the Tariff Commission’s recommendations in  respect of the fixa,ion of the packing char-es  and  the principle  that  would be adopted was on the  basis  of  the average  of  the  maximum and minimum market  price  of  the packing material during each week of the9 months immediately preceding  the quarter for which the charges were to  be  in force plus Rs. 1 25 per ton to cover incidental charges.  By its telegram dated February 17, 1961, the Central Government informed all the State Governments that having regard to the prevailing jute bag price, the Government was pleased to fix under  clause  6(4) of the Cement Control  Order,  1958  the charges  for packing cement in D.W. as well as  service-able second hand DW Heavy Cases Jute Bags at Rs. 17 per ton,  for the period effective from the 20th of February to the 3 1 St Marc  b  1 9 6 1. From these orders, it is  clear  that  the Government  of India was purporting to fix the price of  the gunny  bags in which the, producers were required to  supply cement to the State Trading- (1) 14, S.T.C. 316.                    (2) 26, S.T.C. 344. 1022 Corporation.   The  learned Advocate-General of  Tamil  Nadu contended that the Central Government under cl. 6(4) of  the Cement Control Order, 1958 could have fixed only the maximum price of gunny bags and not the actual price; that being so, there was scope for bargaining between the producers of  the cement  and the State Trading Corporation.  This  contention has  not  been taken in the High Court; nor  in  the  appeal memo.  The Central Government has not put in its  appearance in this Court.  Hence we cannot go into the question whether the Central Government had power to fix the actual price  of the  gunny  bags.   The  fact  remains,  that  the   Central Government  had  fixed the actual price of the  gunny  bags. Its  right  to fix the price had not been  disputed  in  the pleadings before the High Court nor does it appear from  the judgment  of  the High Court that that  question  was  urged before it. It is raised for the first time at the hearing. In   the  result,  for  the  reasons  mentioned  above   the contention  that  supplies of gunny bags  by  the  producers

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amounted to "sales" must be rejected. Now  coining to the contention raised in the  other  appeals which also arises in some of the appeals earlier considered, it  relates to the interpretation of rule 6(f) of the  rules framed  under the Madras General Sales Tax Act, 1959.   That rule as it stood upto September 1 963 read thus :               "All  amounts falling under the following  two               heads,  when specified and charged for by  the               dealer  separately, without including them  in               the price of the goods sold               (i)   freight.               (ii)  charges  for  packing and  delivery  and               other such like services."               On  September 27, 1 963, this rule was  recast               thus               "All amounts falling under the following three               heads,  when specified and charged for by  the               dealer  separately, without including them  in               the price of the goods sold :               (i)   freight;               (ii)  charges  for  packing, that is  to  say,               cost of packing materials and cost of labour,               (iii) charges for delivery and other such like               services."               This  rule was again recast on March 9,  1964.               The rule as               refrained reads thus               10 2 3               "All amounts falling under the following three               heads  when specified and charged for  by  the               dealer  separately, without including them  in               the price of the goods sold               (i) freight;               (ii)  charges  for  packing, that is  to  say,               cost  of packing materials and cost of  labour               and other such like services;               (iii) charges for delivery." In the above group of appeals, some relate to the assessment years 1962-63, and 1963-64. Mr. S. T. Desai, learned Counsel appearing for the State  of Tamil Nadu in this group of appeals contended that the  rule as  it  stood  till  September  1963,  merely  provided  for exemption of service charges for packing and not the cost of packing material.  It is not disputed that the price of  the packing  materials  was  separately  charged  in  the  bills issued.  In support of his contention that price of  packing material  is not covered by the rule in question, Mr.  Desai relied on the decision of the Madras High Court in State  of Madras  and  Ors. v. K. Damodaran Chettiar &  Co.  (1)  This decision  undoubtedly supports Mr. Desai’s  contention;  but the  learned  judges  who decided that  case  overlooked  an earlier decision of that High Court in The State of  Madras. In re (2) ; In that case Rajagopalan and Rajagopala Ayyangar JJ.  had taken the view that a rule identical in terms  with rule  6 (f ) as it stood till September, 1963  exempted  the price  of the packing material as well.  We are entirely  in agreement with the view taken by the learned judges in  that case.  The charges for packing include both the price of the packing  material as well as the labour charges relating  to packing.  The words in sub. cl. (ii) of rule 6(f) "and other such  like  services"  in  our opinion  refer  to  the  word "delivery’   immediately   preceding   those   words.    The subsequent changes effected in the rule merely clarified the intention  of  the  rule making  authority.   We  hold  that Damodaran Chettiar’s case (supra) was not correctly decided.

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At  the hearing a new contention was sought to be raised  by Mr. S. T. Desai.  He sought to urge that the exemption given for  packing  material must be held to be not  available  in respect  of  the cases arising under the Central  Sales  Act (some of the appeals relate to assessments under the Central Sales  Tax  Act) in view of certain amendments made  in  the Central  Sales  Tax Act in 1969. with  retrospective  effect after the disposal of the petitions by the (1) 18, S.T.C. 451.                   (2) 7, S.T.C. 355. 1024 High Court.  We did not permit him to raise that totally new contention  as  the  same  was  not  raised  either  in  the petitions of appeal or by any special application.   Further the  appellant did not serve ,any notice on the  respondents informing  them of its intention to raise that  question  at the hearing. In the result these appeals fail and they are dismissed with costs; but there will be only three sets of hearing fee, one set  for  the  counsel  appearing  for  the  State   Trading Corporation  and its agents; one for the  counsel  appearing for  Dalmia  Cement Baharat Ltd.; and one  for  the  counsel appearing for Thiruvalargal India ,Cement Ltd. Appeals dismissed. 1025