R.J. Bhave, J.
1. The Sales Tax Tribunal (Board of Revenue, M.P.) has made this reference on being required to do so by this Court. The question referred for our decision is :
Whether, on the facts and in the circumstances of the case, the assessee could be taxed under the provisions of the C.P. and Berar Sales Tax Act, 1947, on the turnover of hessian cloth and iron hoops utilised by the assessee in the process of pressing the ginned cotton into bales ?
2. The assessee, the Nimar Cotton Press, Khandwa, carries on the business of ginning and pressing cotton. After the cotton' is pressed and turned into bales, the hessian cloth is wrapped round it and the same is tied down with iron hoops. The Sales Tax Authorities assessed the assessee to sales tax on the price of the hessian cloth and the iron hoops supplied by the assessee. The contention of the assessee was that there was no sale of hessian cloth or iron hoops as such, the hessian cloth and iron hoops were used as an integral part of the works contract of pressing the cotton and no separate charge was made for the said articles. This contention was negatived by the Sales Tax Tribunal, relying on the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313 F.B.
3. It is urged by the assessee that in view of the decision of the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.  16 S.T.C. 240 the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313 F.B, has no longer any binding force. In the case of Nimar Cotton Press1, this Court held :
A contract of sale is not constituted merely by reason that the property in the material is transferred to the customer. In addition to the transfer of property in the material, there must be an express or implied agreement between the parties for the sale of the material qua material.
It cannot be said that in a contract for work, labour and materials, sales tax can never be imposed on the value of the materials employed in the execution of the .contract. The question whether the material used in the course of carrying out a works contract is liable to sales tax depends On the existence of an express or implied agreement between the parties for the transfer of the material qua material and on proof of an intention to sell the material as such.
This Court then proceeded to consider the particular contract in question. This is what was observed by this Court :
When cotton is ginned, that is, separated from its seeds, it is in a very loose condition. In that state it cannot be easily dealt with for the purpose of trade, manufacture or transport. It has, therefore, to be pressed into bales. The compressing is not done by the hessian cloth or the iron hoops, but by a machine worked by mechanical or hydraulic power which exerts great and steady pressure on the ginned cotton in a cast and thus compresses it into bales. The packing material is for convenience of transport and to prevent the bales from being 'unloosened' during the course of handling. The necessity of packing compressed cotton varies with the factor of transport and the time within which the pressed cotton is to be spun and used for manufacture in the textile mills. If the pressed cotton is to be taken immediately to an adjoining textile mill and used for manufacture, it may be wholly unnecessary to use any packing material. The necessity would be great if the pressed bales are to be transported over long distances or to overseas. Therefore a contract for pressing cotton and delivery of the compressed cotton in a certain kind of packing is really divisible into two distinct contracts: (i) one of labour and work, namely, the pressing of the cotton, and (ii) the other of packing the compressed cotton which is partly of material and of labour. In the 'packing part' of the contract, the substance of the agreement is not the skill and labour but it is the material.
On this analysis of the process it was further held that even in the absence of an express agreement for the sale of packing material as such there would be a sale of the material, for in a contract of pressing cotton and delivery of compressed cotton in bales covered with hessian cloth and iron hoops for a consolidated charge of pressing and packing, it is implicit that there would be a sale of the packing material and the parties are impliedly ad idem on the passing of the property in the material qua material and the addition of its price to the pressing charges. If the property in the extraneous packing material vests in the owner of the cotton on payment of a consolidated price and the vesting is not accession, then it can only be under an implied contract of sale of the material. On the abovesaid reasoning this Court came to the conclusion that as the 'packing part' of the contract was the substance of the agreement and the 'skill and labour part' was immaterial and as the property vested in the assessee, there was an implied agreement of sale. This view of the matter has not been, in any way, affected by the decision of the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd.  16S.T.C. 240
4. In the case of Government of Andhra Pradesh v. Guntur Tobaccos Ltd.  16S.T.C. 240 their Lordships of the Supreme Court (majority judgment) enunciated the following propositions :
(i) The fact that in the execution of a contract for work some materials are used and property in the goods so used passes to the other party, the contractor undertaking to do the work will not necessarily be deemed on that account to sell the materials.
(ii) A contract for work in the execution of which goods are used may take one of the three forms: The contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price ; it may be a contract for work in which the use of materials is accessory or incidental to the execution of the work ; or it may be a contract for work and use or supply of materials though not accessory to the execution of the contract is voluntary or gratuitous. In the last class there is no sale because though property passes it does not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances; if it is of the first, it is a composite contract for work and sale of goods ; where it is of the second category, it is a contract for execution of work not involving sale of goods.
(iii) In business transactions the works contracts are frequently not recorded in writing setting out all the covenants and conditions thereof, and the terms and incidents of the contracts have to be gathered from the evidence and attendant circumstances. The question in each case is one about the true agreement between the parties and the terms of the agreement must be deduced from a review of all the attendant circumstances.
(iv) The burden of proving the facts and circumstances which warrant the inference that there was a taxable sale is always on the department and that burden is not merely Discharged by showing that property in goods which belonged to the party performing service or executing the contract stands transferred to the other party.
5. In that particular case their Lordships observed that the departmental authorities had proceeded on the assumption that immediately after the tobacco emerged from the reconditioning chamber and it was packed in waterproof material, it was handed over to the owners of the tobacco and therefore packing of tobacco was not an integral part of the process of re-drying. Their Lordships, after considering the whole process of re-drying, came to the conclusion that the use of the packing material was an integral part of the whole re-drying process. That process continued even after the tobacco was packed in the packing material and hence it was an integral part of the process. On this finding, it was held that the use of the packing material was an incident of the re-drying process and was a part thereof. In the absence of any evidence, from which the contract to sell packing material for a price may be inferred, the only conclusion possible was that there was no intention to sell the packing material as such.
6. From the facts of the said case it would appear that the ratio of the case is that in a works contract, where packing material is used and where there is no specific agreement to transfer the packing material, the test to determine whether there was a sale of the packing material or not is to find out from the circumstances of each case whether the packing was an integral part of the works contract or it was extraneous to it ; if it was an integral part, no agreement for sale could be inferred ; if it was not so, then an implied contract of sale could be inferred from the facts and circumstances of the case. If we are correct in our appreciation of the decision of the Supreme Court, it is evident that it does not, in any way, overrule the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313 F.B.
7. It may also be noted at this stage that their Lordships of the Supreme Court referred to certain decisions of the various High Courts as illustrations of the various propositions laid down by them. One such case is M. S. Chidambara Nadar Sons & Co. v. State of Madras  11 S.T.C. 321. In that case it was held that where under an agreement to purchase cotton to be delivered by the seller to the buyer, it was implicit that the goods should be delivered as packed, the contract to pay for and purchase the packing material may be implied and the turnover relating to the packing material would be liable to sales tax. This case was quoted with approval by their Lordships of the Supreme Court. The facts of that case are in no way different from the facts in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313. In this case also this Court held that the two processes, namely, the pressing of cotton and the packing thereof, were two different processes and that the packing was not an integral part of the pressing contract and from that it was deduced that there was an implied agreement to transfer the packing material to the owner of the cotton. For the aforesaid reasons, in our view, the contention of the assessee that the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313 stands overruled is without substance.
8. Shri Dharmadhikari, learned counsel for the assessee, however, urged that from the decision of the Supreme Court it was clear that the burden was on the department to prove that there was the necessary implied contract between the parties. He urged that the departmental authorities as well as the Tribunal did not make any effort to state on what facts and circumstances the implied contract was held to be proved. The submission is without any force. The present assessment proceedings are of the same assessee whose case was decided in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa  12 S.T.C. 313 for previous years. The facts and circumstances are not, in any way, different. When the taxing authorities say that they inferred the implied contract on the basis of the decision of this Court, referred to above, what they mean is that the same facts and circumstances are present in the present case also from which the same inference is inevitable. In our view, it was not necessary for the taxing authorities to restate all the facts and circumstances and then record the finding that there was the necessary implied contract to sell the packing materials.
9. Shri Dharmadhikari then urged that there was no finding by the taxing authorities as to how much material was used by the assessee for packing purposes during the assessment period. This submission is also without any substance. The assessee itself had claimed deduction of certain amount indicating the cost price of the material utilised by it in packing the cotton bales. That amount was taken to be the sale price of the material supplied by the assessee and that was treated as the turnover. There was, therefore, no question of determining the quantity of the material used by the assessee.
10. For the aforesaid reasons, our answer to the question is in the affirmative. The assessee shall pay the costs of the Commissioner of Sales Tax, M.P. Hearing fee Rs. 150.