TMI Blog1959 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... loth 43,240 yards. 21.53 per yard 3,839-08-3 To stitching, folding, stamping, baling charges for above folded into 20 yards and fents 2 Pies per yard 401-04-0 4,240-12-3 or 4,240-12-0 (Rupees four thousand two hundred and forty and annas twelve only) Rules Nos. 6541 to 6550, 6571, 6580 to 6591-23. For the years 1953-54 and 1954-55, the assessee was assessed to sales tax on a turnover representing the price of the packing materials utilised by them in their business. The turnover for the former year was ascertained to be Rs. 20,117-4-2, while for the latter year it was Rs. 65,373-1-5. Both the Deputy Commercial Tax Officer, Mettupalayam, and, on appeal, the Commercial Tax Officer, Coimbatore North, held that the turnover was liable to assessment. On further appeal by the assessee, the Sales Tax Appellate Tribunal held that, although the assessee did not deal specifically in packing materials, a portion of the profits, earned in the business of bleaching and calendering, could be legitimately attributed to the packing materials, as the transaction involved a sale thereof for consideration, and that such a sale would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or incidental to the contract of service. But, if a person were to buy rice or salt in gunny bags, one could imply a contract to purchase the goods as packed, i.e., along with the packing materials. In such a case, even if the seller does not intend to make a profit on the gunnies as such, there would be a sale within the meaning of the Act, as there is a profit motive in the business of selling rice or salt. The question whether there has been a sale of packing materials would therefore depend not so much on the fact whether there was a profit motive in making the transfer of those materials, but whether there was an express or implied contract to sell them, it being sufficient that there was a profit motive for the entire business. In Varasukhi and Co. v. Province of Madras[1950] 2 S.T.C. 1; (1950) 2 M.L.J. 449. , salt was sold in gunny bags. Salt, however, was exempt from sales tax. A question arose whether the exemption would extend to the gunny bags as well. The learned Judges held that the assessee in that case should be held to have carried on the business of buying and selling gunny bags as well, in addition to the business of buying and selling salt, and that the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d depend on the evidence. Where, however, there are no such distinct contracts, i.e., where the contract is one and indivisible, and the essential portion of that contract is one for service or labour, the question whether the use of the packing materials also charged for in rendering the service would amount to a sale or not, would depend on the intention of the parties. Packing itself might be a part of the service stipulated, and the fact that certain materials had to be utilised in rendering that service, might not always mean that there was a sale of the packing materials. It may be that packing was incidental to a service. In Krishna and Co., Ltd. v. State of Andhra[1956] 7 S.T.C. 26., the assessee had a plant for drying raw tobacco. Certain customers delivered raw tobacco to them for redrying in the machinery. After the process of redrying, the assessees packed the tobacco with the necessary packing materials, purchased by them, and delivered the same to the respective customers. The assessees collected from each customer a consolidated charge for redrying as well as packing. A question arose whether the assessee would be liable to sales tax on the turnover of the packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that, unless there was an intention in the contract specifically to pass the property in the materials as and when they were brought to the site, the property in the materials passed only when they were fixed in the building, and the contract for building being one and entire, there would be no element of sale of the materials as such. What distinguishes then a mere contract of labour in which certain materials are used from a contract when such materials could be held to be sold, is the existence of an intention in the latter to sell the materials as such. Such an intention might be expressed or implied; but in the absence of such an intention, there could be no sale. Although the decision of this Court in Gannon Dunkerley and Co.'s case(1) was referred to in Krishna Co. v. State of Madras[1956] 7 S.T.C. 26. the learned Judges did not consider it necessary to base their conclusion on the principle of that decision. Since the decision of the Andhra High Court in the two cases mentioned above, the Supreme Court has rendered its judgment in the appeal from the decision of this Court. The Judgment of the Supreme Court is reported in State of Madras v. Gannon Dunkerley a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that accessory. In the Gannon Dunkerley case[1954] 5 S.T.C. 216., this Court held that in the case of a chattel which has to be produced by the supply of labour and work of the contractor and also by the supply of materials necessary for producing the thing, when the property in the larger corpus passes to the other party, the contract is one for the supply of the larger chattel, and that there is no contract for sale or purchase of the component materials separatim. In the instant case there is no question of the transfer of property in the larger corpus, viz., car, as the car belonged to the customer. The contract was to execute works on the car of the customer, and in the course of such repairs certain new accessories or parts had to be put in. There is no doubt that the property in those materials would eventually pass to the customer, but the question would be whether the agreement between the parties was that such parts should be treated as sold separatim or where they merely supplied in the course of carrying out a works contract of repair and charged as such. Therefore whether in a particular case there is a contract of sale of materials as distinct from a pure works contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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