TMI Blog1996 (1) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... . Vishwanath Iyer, Senior Advocate (M. Veerappa and K.H. Nobin Singh, Advocates, with him), for the respondents. -------------------------------------------------- The judgment of the Court was delivered by S.C. AGRAWAL, J.- Special leave granted in both the special leave petitions. Both these appeals are directed against the judgment of the Karnataka High Court dated December 7, 1990, in writ petitions (Writ Petitions Nos. 20736 and 21195 of 1986) filed by the appellants wherein they had assailed the constitutional validity of section 5(3-D) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"). By the impugned orders the said writ petitions of the appellants have been dismissed by the High Court on the ground that the question raised is covered by the decision in Ranganatha Associates v. State of Karnataka [1990] 78 STC 1 (Kar); ILR 1990 Kar 820. The appellants are manufacturers of cement the price of which is controlled by the Cement Control Order, 1967, issued by the Central Government in exercise of the powers conferred by section 18-G and section 25 of the Industries (Development and Regulation) Act, 1951. The appellants supply the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a sale of the product and a sale of the container but both sales being conceived of as integrated components of a single sale transaction; or, what may yet be a third case, it may consist of a sale of the product with the transfer of the container without any sale consideration therefor. The question in every case will be a question of fact as to what are the nature and ingredients of the sale. It is not right in law to pick on one ingredient only to the exclusion of the others and deduce from it the character of the transaction. For example, the circumstance that the price of the product and the price of the container are 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 again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not make the sale of packing an integrated part of the sale of the product." (page 387) "Turning to section 6-C of the Act, it seems to envisage a case where it is the goods which are sold and there is no actual sale of the packing material. The section provides by legal fiction that the packing material shall be deemed to have been sold along with the goods. In other words, although there is no sale of the packing material, it will be deemed that there is such a sale. In that event, the section declares, the tax will be leviable on such deemed sale of the packing material at the rate of tax applicable to the sale of the goods themselves. It is difficult to comprehend the need for such a provision. It can at best be regarded as a provision by way of clarification of an existing legal situation. If the transaction is one of sale of the goods only, clearly all that can be taxed in fact is the sale of the goods, and the rate to be applied must be the rate as in the case of such goods. It may be that the price of the goods is determined upon a consideration of several components, including the value of the packing material, but none the less the price is the price of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er). This is not an irrelevant principle at all, if one considers the practical aspect of a trading transaction. Here, under section 5(3-D) the Legislature has thought it fit and convenient to treat the sale of goods contained in a container as an integrated, single transaction of sale of the goods; this levy makes it simpler for the assessee to maintain his accounts, and convenient for the Revenue to levy and collect the tax; it makes it unnecessary to analyse the components of a particular sale and enter upon investigation to find out the real price (i.e., genuine price) at which the packing material (or the container) is purported to have been sold, and separate it from the computation of the turnover regarding the particular goods (which was packed in the packing materials or housed in the container). Simplicity of procedure and convenience of the tax collection are not irrelevant while considering the validity of a particular levy. Section 5(3-D) on the face of it elevates the status of the container (or the packing material) to that of the goods dressed in it. Such a container/packing material is distinct from, another container/packing material which has not housed any goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he product of a sound discretion." Shri Harish N. Salve, the learned senior counsel appearing for the appellants, has not assailed the constitutional validity of the provisions of section 5(3-D) of the Act. He has confined his submissions to the interpretation of the said provisions. The learned counsel has submitted that in Ranganatha Associates v. State of Karnataka [1990] 78 STC 1 (Kar); ILR 1990 Kar 820 the High Court was in error in departing from the law laid down by this Court in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379. Shri Salve has urged that in view of the decision in Raj Sheel v. State of Andhra Pradesh [1989] 74 STC 379 (SC) in respect of the provisions of section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, which are similar to the provisions contained in section 5(3-D) of the Act, the question as to the liability for sales tax would depend on the actual ingredients of the contract and intention of the parties which has to be determined in each case. Shri T.L. Vishwanath Iyer, the learned senior counsel appearing for the State, has, however, supported the decision of the Karnataka High Court and has placed reliance on the decisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated in the Andhra Pradesh General Sales Tax Act to obviate the possibility of different assessing authorities taking different views on the rate of tax exigible on the turnover and relating to packing material. The Andhra Pradesh High Court rejected the contention that by virtue of section 6-C the rate of tax applicable to the containers will vary according to the rate applicable to the contents and this would lead to arbitrariness and discrimination inasmuch as the same kind of containers would be subject to different rates of tax. The High Court held that when the content was sold with the container, both the dealer as well as the purchaser treated the transaction as the one involving the sale of the merchandise (the contents) only and the sale of the container, if any, would get merged in the sale of the content itself and thus it is always treated as a single transaction of sale of both the container and the content and the container whose identity pales into insignificance is identified with the content itself and the value of the container forms part of the consideration paid by the purchaser and it is one of the components of the sale price like the other compon ..... 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