1971 (8) TMI 200 - HC - VAT and Sales Tax

Summary

Issues:
1. Implied sale of packing material along with cloth bales for sales tax assessment.
2. Classification of coal ash under sales tax entry relating to coal.

Issue 1: Implied sale of packing material
The judgment addresses three sales tax references concerning the implied sale of packing material along with cloth bales. The dealer sold cloth in bales without separately charging for the packing material, consisting of bardana and iron hoops. The authorities inferred an implied sale of packing material based on the sale of cloth in bales. However, the court emphasized that for sales tax imposition, there must be an agreement, express or implied, for the sale of packing material. The burden of proof lies on the department to establish the implied sale, as highlighted in the Supreme Court case of Hyderabad Deccan Cigarette Factory v. State of A.P. The court noted that the packing material was used as a vehicle for transporting goods without a separate price, indicating no intention to sell the packing material. The judgment cited precedents like Shamsuddin Akbar Khan and Co. v. State of Orissa to support the view that no sale of packing material occurred without explicit evidence of an agreement.

Issue 2: Classification of coal ash
The judgment also addresses the classification of coal ash under the sales tax entry for coal. Referring to a previous Division Bench decision, the court held that coal ash falls under the definition of coal, including coke in all its forms. The court relied on the interpretation of the term "coal" in common parlance and commercial understanding, as discussed in Sales Tax Commissioner, Indore v. M/s. J. Singh. The court noted that coal ash, known commercially as cinder, is considered a low-grade fuel similar to coal, charcoal, and firewood. Therefore, based on the ordinary and commercial sense of the term, coal ash is included within the sales tax entry for coal.

In conclusion, the court answered both questions in the negative, indicating that there was no implied sale of packing material by the dealer and that coal ash is included in the entry relating to coal for sales tax purposes. The judgment provides a detailed analysis of the legal principles governing implied sales and the interpretation of terms under sales tax entries, drawing on relevant case law to support its conclusions.