TMI Blog1989 (5) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... ses can be regarded as disposed of finally. It is regrettable but the cases must go back for proper findings on facts to be ascertained on fuller investigation. - Civil Appeal No. 1868-1875 of 1986, and 2802, 2803 of 1986, 11 of 1987, 1318 of 1987, 1977 of 1986, W.P. No. 1547, 1325 of 1986, 274 of 1987, - - - Dated:- 16-5-1989 - PATHAK R.S. C.J.I. AND KANIA M.H. JJ. M.K. Banerjee, Solicitor-General, and B. Datta, Additional Solicitor-General (T.V.S.N. Chari, Ms. Sunita and Ms. Vrinda Grover, Advocates, with them), for the respondents. A.K. Sen, Shanti Bhushan and A.K. Ganguli, Senior Advocates (Harish N. Salve, S. Krishnan, J.B. Dadachanji, Mrs. A.K. Verma, Joel Peres, R. Dave, A. Subba Rao, Sunil Kumar Jain, Vijay Hansaria, K. Srinivasamurti, Kailash Vasudev, Naunit Lal, A.T.M. Sampath, Rajan Karanjawala, Mrs. M. Karanjawala and H.S. Anand, Advocates, with them), for the appellants. -------------------------------------------------- The judgment of the Court was delivered by R.S. PATHAK, C.J.I.- These appeals are directed against the judgment of the High Court of Andhra Pradesh dismissing several writ petitions filed by the appellants challenging assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 1983, section 6-C was inserted in the Act by Andhra Pradesh Act No. 11 of 1984, and it provides: "Notwithstanding anything in sections 5 and 6-A, where goods packed in any materials are sold or purchased, the materials in which the goods are so packed shall be deemed to have been sold or purchased along with the goods and the tax shall be leviable on such sale or purchase of the materials at the rate of tax, if any, as applicable to the sale, or, as the case may be, purchase of goods themselves." The net turnover of a dealer assessable to tax is determined under rule 6 of the Andhra Pradesh General Sales Tax Rules, after deducting the amount specified in clauses (a) to (1) of that rule from the total turnover. Of these clauses, clause (g) speaks of: "All amounts relating to charges for services rendered in connection with the packing of goods when specified and charged for by the dealer separately, without including them in the price of the goods sold." The appellants filed the writ petitions, out of which the present appeals arise, in the High Court at Hyderabad challenging the assessments to sales tax made on the turnover of packing material employed either by way of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown separately may be evidence that two separate transactions are envisaged, but that circumstance alone cannot be conclusive of the true character of the transaction. It is not unknown that traders may, for the advantage of their trade, show what is essentially a single sale transaction of product and container, or a transaction of a sale of the product only with no consideration for the transfer of the container, as divisible into two separate transactions, one of sale of the product, and the other a sale of the container, with a distinct price shown against each. Similarly where a deposit is made by the purchaser with the dealer, the deposit may be pursuant to a transaction where there is no sale of the container and its return is contemplated, and in the event of its not being returned the security is liable to forfeiture. Alternatively, it may be a case where the container is sold and the deposit represents the consideration for the sale, and in the event of the container being returned to the dealer the deposit is returned by way of consideration for the resale. In every case, the assessing authority is obliged to ascertain the true nature and character of the transaction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 this Court accepted as well-founded submissions that the parties may have intended in the circumstances to sell hydrogenated oil apart from the containers, and the mere fact that the price of the containers was not separately fixed would make no difference in the assessment of sales tax, and went on to observe: "It is well-established that in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, the 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) Ltd. [1958] 9 STC 353 (SC); [1959] SCR 379]......... 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." There can be as many different kinds of transactions as the circum- stances of the case may require either by reason of prevailing trade practice or market conditions or perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the explanation when packing is done in cloth bags, a higher rate is admissible. The scheme clearly suggests that the price of gunny bags is inclusive and where cloth bag is used, a higher price over and above what has been provided for ordinary containers is permitted." It is, therefore, perfectly plain that the issue as to whether the packing material has been sold or merely transferred without consideration depends on the contract between the parties. The fact that the packing is of insignificant value in relation to the value of the contents may imply that there was no intention to sell the packing, but where any packing material is of significant value it may imply an intention to sell the packing material. In a case where the packing material is an independent commodity and the packing material as well as the contents are sold independently, the packing material is liable to tax on its own footing. Whether a transaction for sale of packing material is an independent transaction will depend upon several factors, some of them being: 1.. The packing material is a commodity having its own identity and is separately classified in the Schedule; 2.. There is no change, chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selves. And that is for the simple reason that it is the price of the goods alone which constitutes the transaction between the dealer and the purchaser. No matter what may be the component which enters into such price, the parties understand between them that the purchaser is paying the price of the goods. Section 6-C merely clarifies and explains that the components which have entered into determining the price of the goods cannot be treated separately from the goods themselves, and that no account was in fact taken of the packing material when the transaction took place, and that if such account must be taken then the same rate must be applied to the packing material as is applicable to the goods themselves. We find it difficult to accept the contention of the appellants that a rate applicable to the packing material in the Schedule should be applied to the sale of such packing material in a case under section 6-C, when in fact there was no such sale of packing material and it is only by legal fiction, and for a limited purpose, that such sale can be contemplated. In the circumstances, no question arises of section 6-C being constitutionally discriminatory, and therefore inval ..... X X X X Extracts X X X X X X X X Extracts X X X X
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