Panna Chand Jain, J.
1. The reference application No. 177 of 1980, under Section 15(2) of the Rajasthan Sales Tax Act, has been filed by the Commercial Taxes Officer (here in after for short, 'the CTO') against the order dated 1st March, 1979, passed by the Board of Revenue for Rajasthan, Ajmer (for short 'the Board' here in after) and reference application No. 217/198,0 has been filed by the Commercial Taxes Officer against the order dated 19th March, 1979, passed by the Board of Revenue. In both the cases the learned Board of Revenue refused to allow application for reference under Section 15(1) of the Act.
2. In view of the provisions of Sub-section (10) of Section 13 of the, Rajasthan Sales Tax (Amendment) Act, 1984 each reference application is treated as a revision petition, and is being disposed of accordingly.
3. As common question of law is involved both the revision petitions are being disposed of by this order.
Facts of the case of Mis. B.R. Oil Mills case;
4. The facts of this case, in brief, are that the assessee, M/s B.R. Oil Mills, Bharatpur, used to manufacture oil out of oil-seeds purchased locally as well as imported from outside the State. The assessee affected sale of oil-cakes and oil within the State along with 'bardana' and tins. The CTO, Special Cicle No. 2, Jaipur assessed the assessee under Section 9(3) of the Central Sales Tax Act read with Section 10 of the Rajasthan Sales Tax Act for the period from 16th November, 1963 to 3rd Nov., 1964. It is alleged that the assessee-firm had sold oil-cakes in the course of inter-State trade and commerce duly packed in gunny-bags. The sales of bardana (gunny bags) was estimated at Rs. 52,923.75. The assessee was also taxed on the sale effected in the course of inter-State trade commerce of edible oil amounting to Rs. 88,600.00. Against the order dated 12th May, 1967, passed by the CTO, the assessee went in appeal before the Deputy Commissioner (Appeals), Jaipur. The appeal of the assessee was allowed vide order dated 30th July, 1968 setting aside the levy of tax imposed on gunny-bags sold with the oilcakes and the edible oil both sold in the course of inter-state trade and commerce. Against tbe order of the Deputy Commissioner (Appeals), the CTO, Special Circle-II, filed a revision petition, which was heard by a Division Bench of the Board and the same was rejected vide its order dated 16th May, 1978. A reference application was filed by the CTO, Circle-E, Jaipur to whom the case was transferred under Rule 52 of the Rajasthan Sales Tax Rules, for referring the following questions of law arising out of the order passed by the Division Bench of the Board, to this Court, for adjudiction in accordance with law:
(1) Whether under the facts and circumstances of the case the Board of Revenue was justified in holding that no tax is leviable on the implied sale of bardana sold along with oii-cake ;
(2) Whether under the facts and circumstances of the case the Board of Revenue was justified in holding that no tax is leviable on the sale of edible oil amounting to Rs. 88,600.00 although no separate account of imported oil seed and purchased within the State was maintained separately.
The reference application was rejected by the Board, vide its order dated 1st March, 1979. Aggrieved by the said order, passed by the Board, the CTO has filed this reference application under Section 5(2)(b) of the Act, with the prayer that the Board may be directed to state and refer the questions set out in the reference application for this Court's authoritative pronouncement.
Facts of the case of Food Corporation of India ;
5. In this case, the assessing authority finalised the assessment of the assessee M/s Food Corporation of India, Jaipur for the assessment year 1969-70 on 30th September, 1972 and levied tax at rate of 3% and 10% on the sale of bardana. The matter relates to levy of tax on bardana. In appeal, Deputy Commissioner (Appeals) upheld the order of assessment. The learned Single Member of the Board of Revenue reversed the order passed by the Deputy Commissioner (Appeals) in the revision filed before the Single Bench of the Board, vide order passed on 19th August, 1977. A special appeal was preferred against this order which was summarily rejected by the Division Bench of the Board of Revenue. The case of the Revenue was that the assessing authority was right in holding that the sales-tax was leviable on implied sale of bardana in accordance with Section 5(4) of the Act and the Notification No. F. 5 (56) FD/(CT)67-5 dated 29th May, 1967. On the other hand, the contention of the learned Counsel for the assessee is that the order passed by the Board of Revenue is absolutely justified and in accordance with law. It was contended by the learned Counsel that since salt was not liable to tax, as such, no tax could be levied on the bardana even if there was an implied sale as it was not separately charged for. The learned Counsel further submitted that, in fact, there was no sale of bardana expressly or impliedly in the case. In this case, the following question of law was sought to be referred:
Whether on the facts and circumstances of the case the turnover of Rs. 1,70,000/- was taxable at rate of 3% and turnover of Rs. 14,000/-was taxable at rate of 10% in the absence of 'C' form
The reference was rejected by the Board of Revenue on the basis that the question involved in che case stands fully decided by the judgment of a larger Bench of the Board reported in 1976 RRD 84. The learned Division Bench of the Board of Revenue held that no tax will be -leviable on the bardana even if there was implied sale and as it was not separately charged for. It was also observed that in accordance with the proviso to Section 5 the rate of tax would be the same as on the commodity packed therein. It was also observed that in case the commodity was exempt from tax, the bardana could also be exempt where implied sale bad been proved.
Submissions made by Shri G.S. Bapna on behalf of Revenue:
6. In the case of M/s B.R. Oil Mills Mr. G.S Bapna learned Counsel appearing for the Revenue, contended that the Board has misinterpreted the last proviso to Section 5(1) of the Act, which has been inserted along with the last but one proviso vide Act No. 4 of 1967 with effect from 24th July, 1967. He submitted that there was no question of considering the last proviso for assessment for the accounting period from 16th November, 1963 to 3rd November, 1964, as the same was non-existent during the relevant accounting period. He further submitted that the Deputy Commissioner (Appeals) and the Board fell into error by presuming the applicability of the last proviso. In his submission, the sale of oil cake was exempted from Entry No. 9 of the Schedule to the Act vide Amending Act No. 14 of 1961. Under Section 8(2A) of the Central Sales Tax Act, oil cakes were, therefore, exempted from tax during the relevant time. The learned Counsel, therefore, submitted that bardana became taxable not under the last proviso to Section 5(1) of the Act, but vide entry at S. No. 30, vide Notification No. F (7) E & T/62 Jaipur, dated 3rd April, 1962, reducing the rate on packing material sold with the goods exempt from the CST Act to one per cent together with another Entry at S. No. 40 vide Notification No. F. 5(40)/FD/RT/63-III, Jaipur dated 3rd May, 1963, increasing the rate of tax on bardana to the rate of 2%.
7. In the case of Food Corporation of India, the submission of Mr. Bapna is that tax was levied on implied sale of bardana in accordance with Section 5(4) of the Act and Notification No. F. 5(56)FD/(CD/CT) 67-5 dated 29th May, 1967.
Submissions made by Shri V.K. Singhal on behalf of assessee:
8. Mr. V.K. Singhal learned Counsel for the assessee, on the other hand, submitted that the aforesaid notifications are not applicable to this case. Oil cackes were sold by the assessee in packet bags and no separate price was charged for the sale of bardana in the bills. H submitted that during the period under consideration admittedly oil cakes were exempted from tax under the Act. Mr. Singhal further conteded that in such circumstances by virture of last proviso to Section 5 of the Act, since bardana in which the oil cakes had been packed had not been separately charged for no tax could be levied under the Act on bardana. Shri Singhal also submitted that in view of the provisions of Section 8(2A) of the Central Sales Tax Act, no tax would be leviable on such bardana even if sold in the course of inter-State trade and commerce.
Questions involved in B.R. Oil Mills case:
9. The main question involved in the two revision petitions is whether the Board of Revenue was justified in holding that no tax was leviable on the implied sale of bardana sold along with their contents. But, there is one more question to be answered in B.R. Oil Mill's case requiring assessment of tax on the sale of edible oil. Thus, we would like to deal with it first.
10. As regards the tax levied on the sale of edible oil in the course of inter-State trade and commerce, the facts are that the assessee had extracted edible oil from the oil-seeds purchased by him both from within the State and outside the State, and a portion of the oil, so extracted was sold within the State and a portion outside the State. It is also admitted that no separate accounts were maintained by the assessee which would indicate to what extent the oil extracted from the seeds purchased within the State and imported, separately, were sold firstly within the State, and secondly, in the course of inter-State trade and commerce.
11. Mr. Bapna, learned Counsel for the Revenue submitted that the order passed by the assessing authority levying tax on the sale of edible oil amounting to Rs. 88,6Q/-is perfectly justified. The assessing authority has estimated the sale of edible oil worth Rs. 88,600/- as manufactured.
12. On the other hand, Mr. Singhal, learned Counsel for the assessee contended that as per the books produced before the assessing authority, there is no exhibition of any transaction having been made in inter-State trade and commerce of edible oil manufactured out of the imported oil seeds.
13. We have heard the respective submissions made by both the learned Counsel. We have also perused the record, and we are of the opinion that the assessing authority has erred in enhancing the taxable turnover by Rs. 88,600/-, on the ground that the assessee did not maintain separate accounts for the oil-seeds purchased from local markets as well as from the imported oil-seeds. It is on the record that the asseessee kept proper accounts for the purchase as well as manufacture of oil as would have been possible in the circumstances of the case; and for the sale of oil manufactured out of the imported seeds purchased from outside the State of Rajasthan which was verified from the books of accounts and at the time of assessment. The assessing authority has estimated the sale of edible oil worth Rs. 88,600/- as manufactured out of imported oil-seeds and has levied tax at rate of 2%, but a scrutiny of the record reveals that oil-seeds worth Rs. 1,14,485.64 were imported by the assessee during that period and the oil manufactured out of these oil-seeds was also sold by the assessee.
14. Rule 2(2) of the Rajasthan Sales Tax Rules also does not provide for keeping any separate accounts for manufacture of oil from oilseeds purchased locally and from the seeds imported from outside the State. Rule 20 of the Rajasthan Sales Tax Rules also does not provide for maintaining such separate accounts. The assessee has, in fact, maintained separate accounts for the sale effected by him in the course of inter-State trade outside the State and of exempted goods, as well as goods which had suffered tax before-hand.
15. The value of oil manufactured out of imported oil-seeds, has been estimated at Rs. 1,03,037.08 which is less in comparison to the value of oil sold by the assessee outside the State i.e. Rs. 6,54,556.55.
16. Further the learned Board of Revenue while repelling this contention of the Department that the assessee had imported oil-seeds and had also exported oil made out of these oil-seeds, as such was liable to tax under Notification No. F. 40-FD/(RF) 63B dated 23rd August, 1963 observed that in the instant case it has not been established that the oil exported was made out of imported oil seeds rather it has been claimed by the assessee that oil was exported prior to the import of the oil-seeds. Under these circumstances, we are of the opinion that the order passed by the assessing authority, was perfectly justified.
Common question involved:
17. In view of the submissions made by Mr. Singhal, learned Counsel for the assessee, as referred to above and finding it difficult to rebut Mr. Bapna, learned Counsel for Revenue, submitted that in the facts and circumstances of the case, the sale of packing material i.e. bardana in which the oil cakes or salt were packed should be considered as implied sale of packing material and is liable to tax. He vehemently contended that the sale of packing material is implied in the sale of their contents. He argued that though there was no express contract of sale of packing material, but an implied contract can be inferred from the facts and circumstances of the case. On the other hand, the learned Counsel for the assessee submitted that there was no sale of bardana. As such, the assessee was not liable to sales-tax in this regard. The learned Counsel for the parties supported their arguments by citing various authorities.
18 In a series of cases, this question has arisen before the Supreme Court as well as this court.
19. In the case of Mewar Sugar Mills and Ors. v. The State of Rajasthan 1969 (3) TR 127, a Division Bench of this Court, while answering the referred question, eluciated the meaning of expression, 'sale' and quoted the following questions from the case of Commissioner of Taxes, Assam v. Prabhat Marketing Co. Ltd. 1967 (19) STC 84 ;
(1) Whether delivery of goods made to the Assam Rifles and NEFA, at Rowriah Airport for consumption outside the State of Assam, constitutes a sale liable to sales tax under the Act ?
(2) Whether the value of the containers of hydrogenated oil is assessable to sales tax under the Act though the oil itself is not taxable under it ?
It that case, it has been observed as under:
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.
20. The same view was taken in the State of Rajasthan and Anr. v. Karamchand Thappar and brothers (Coal Sales) Ltd. Jaipur 1969 (23) STC(SC) 210.
21. In the Government of Andhra Pradesh v. Guntur Tobaccos Ltd. 1965 (16) STC 240, it was observed as under:
Although in the execution of a contract for work some materials are used and properly in the goods so used passes to the other party, the contractor undertaking the work will not necessarily be deemed, on that account, to sell the materials. A contract for work in the execution of which goods are used may take one of 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 assessary or incidental to the execution of the work; or it may be a contract for work and use of supply of materials, though not assessory to the execution of the contract, is voluntary or gratitous. 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 executian of work not involving sale of goods.
22. In the case referred to above, their Lordships of the Supreme Court have clearly observed that in the case of packing materials or containers, it is for the taxing authority to show that a particular transaction amounted to sale. It was also observed that an agreement to sell packing materials, is a pure question of facts, the burden lay strictly on the CTO to prove by cogent evidence that the turnover was liable to tax. It was also laid down by their Lordships of the Supreme Court that it cannot always be said that a sale of packing material is implied in the sale of contents, and it would depend on the fact whether the packing material is of significant value in comparison with the value of the contents.
23. While considering the question as to what are the characteristics of a sale under the Rajasthan Sales Tax Act, the Supreme Court in the case of State of Rajasthan v. K.C. Thapper (Supra), observed that in order to constitute a sale of goods, property in goods must be transferred from the seller to the buyer under a contract of sale and therefore, a contract of sale was an essential pre-requisite to a sale which must be understood not in the popular sense, but in the sense in which it was used in the Sales of Goods Act.
24. In Rajputana Cotton Press Public Lid. Co. v. The State of Rajasthan 1979 (44) STC 373, a Division Bench of this Court, agreeing with the observations made by another Division Bench of this court in Nenuram v. State of Raj. 1967 (20) STC 551 (which was upheld by their Lordships of the Supreme Court in State of Raj. v. Nenuram 1970 (26) STC 268, observed that the contract for supply and fixing of wooden window and doors, there was no sale of goods within the meaning of the Act as the contract was not merely to make certain material but to fix them, and until they were so fixed, the property in the goods would not pass to the buyer. It was also observed by the said Division Bench that the test in each case is whether the object of the party sought to be taxed is that the cattel as chattel passes to the other party and the services rendered in connection with the installation are under a separate contractor are incidental to the execution of the contract of sale. In that case, the cases of (1) State of Rajasthan v. Man Industrial Corporation Ltd. 1969 (24) STC 349, Mahalaxmi Cotton Ginning and Pressing Factory v. The State of Rajasthan ILR 1969 (19) Raj. 246, which was decided along with the case of Mewar Sugar Mills Ltd. v. State of Rajasthan ILR 1969 (19) Raj. 246 were also taken into consideration. The learned Division Bench in that case, observed as under:
If the above-mentioned tests, laid down by their Lordships of the Supreme Court and which have been recognised and followed by a number of decisions in this country, are applied to the facts of the present case, it is clear beyond doubt that no sale of the packing materials was intended nor there was any contract express or implied for the sale of the packing materials between the parties. But, the transfer of the packing materials by the company to its customers formed an integral part of the contract for work of pressing wool or cotton, which was undertaken by the company. We, therefore, hold that, in the present case, there was a service or works contract which was performed by the company and as no sale of the goods was involved the company was not liable to make payment of sales-tax on the estimated cost of the packing materials, which constituted an essential or necessary component of the work of pressing and bailing performed by the company.
25. In the above referred Rajputana Cotton Press Public Limited Company's case, the learned Division Bench also considered certain cases cited by the counsel for the assessing authority, such as, Niman Cotton Press & Sales Tax Officer (1961) 12 STC 313, Niman Cotton Press Factory v. Commissioners of Sales Tax, M.P. 1969 21 STC 505 and Vimal Chand Prakash Chand v. Commissioner of Sales Tax 1968 22 STC 22, which were decided by the Madhya Pradesh High Court. But all were dissented from, while holding that the packing materials are an integral part of the pressing and baling of cotton and the processing of packing is incidental to the process of pressing.
26. In Government of Andhra Pradesh v. Guntur Tobaccos Ltd. (supra), the question about sale of packing material was considered, and the Supreme Court in that case observed that if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale. So also, if the consideration for the transaction was not money, but other valuable consideration, it may then be exchange or barter but not a sale. And, if under the contract of sale title to the goods has not passed, then there is an agreement to sell and not a complete sale.
27. In the case of State of Tamil Nadu v. Viswanathan (P&P;) P. Ltd. 1979 (44) STC 156, while dealing with the packing materials used in packing of question papers for certain universities, it was held that such packing materials were used as incidental to the supply of question papers and not for the primary purpose of sale of packing materials themselves, because packing work was inevitable having regard to the secrecy which the printer was required to maintain while despatching the question papers. On the basis of this authority, it was argued that in the absence of the contract for the sale of packing material any supply of packing material has to be treated as incidental to the packing work involved.
28. In Goverdhan Cement Agency (P) Ltd. v. State of Mysore 1974 (33) STC 269, the assessee had sold cement in gunny begs. The packing charges were taken into consideration in fixing the price of cement at Rs. 25/-per tonne. It was held by the Mysore High Court that as cement could not be sold loose and the use of gunny bags was a necessity, no implied Sale of gunny bags could be inferred.
29. In Binod Mills Co. Ltd. Ujjain v. Commissioner of Sales Tax, MP 1972 (29) STC 413, a Division Bench of the Madhya Pradesh High Court observed as under:
No separate price was charged for the packing material. The price was charged for the cloth either on the basis of meterage or on the basis of weight of the cloth. The price charged for the cloth bore no relation to the value of the packing material. A sample receipt, enclosed along with the order of reference, showed that the price of one bale of cloth roughly came to Rs. 1,500/-. Compared to that, the value of the packing material of Rs. 4 per bale, as fixed by the assessing authority, was so insignificant that it was not possible to draw any inference that the dealer intended to sell the packing material to the customers.
30. In Hyderabad Deccan Cigarette Factory v. State of A.P. 1966 (17) STC 624 (SC), the question involved was wehther there was an implied sale of the containers in which cigarettes were sold, which could be subjected to tax. Their Lordships made the following observations:
In the instant case, it is not disputed the there were no express contracts of sale of the packing materials between the assessee and its customers. On the facts could such contracts be inferred The authorities concerned should ask and answer the question whether the parties in the instant case, having regard to the circumstances of the case, intended to sell or buy the packing materials, or whether the subject-matter of the cont acts of sale was only the cigarettes and that the packing materials did not form part of the bargain at all, but were used by the seller as a convenient and cheap vehicle of transport. He may also have to consider the question whether when a trader in cigarettes sold cigarettes priced at a particular figure for a specified number and handed them over to a customer in a cheap cardboard container of insignificant value, he intended to sell the cardboard container and the customer intended to buy the same It is not possible to state as a proposition of law that whenever particular goods were sold in a container the parties did not intend to sell and buy the container also. Many cases may be visualised where the container is comparatively of high value and sometimes even higher than that contained in it. Scent or whisky may be sold in costly containers. Even cigarettes may be sold in silver or gold caskets. It may be that in such cases the agreement to pay an extra price for the container may be more readily implied.
31. The Hyderabad Deccan Cigarette Factor's case (supra) was followed by the Supreme Court in Commissioner of Taxes v. Prabhat Marketing Co. Ltd 1967 (19) STC 84 where the question was, if the value of the containers in which hydrogenated oil was sold could be assessed to sales tax ?
32. Mr. Bapna referred to Mahavir Rice Mills v. State of Orissa 1983 (54) STC 218 to support his contention. But, in that case, the asses-see had supplied a quantity of rice to the Food Corporation of India packed in gunny bags and the assessee was held liable to sales-tax on the turnover on account of sale of gunnies. This ruling is helpful as in that case the finding was that the assessee had as a fact charged at agreed rate for gunny bags.
33. The packing materials are necessary not only for soiled articles but also for those in liquid or semi-liquid forms. In the society in which we are living, it produces food-stuff and other manufactured articles in one locality and uses them in another, wraping or container becomes necessary during storage, transport and for sale. The Hon'ble Supreme Court in the case of Lt. Governor, Dehli v. Ganesh Floor Mills Co. Ltd. : 3SCR211 , while dealing with the importance of packing materials observed as follows:
The function of a package are : (1) to contain a convenient sized unit or amount of a product; safe delivery to the consumer, and (2) in some cases to display the product and promote its sale or to act as a dispencer of it.
34. From the above discussions and the various authorities, referred to above, the following principles may be conveniently laid down for the consideration, if packing material is subjected to levy of sales tax:
(1) There should be a contract to sell the packing material between the parties and to constitute sale there should be passing of title to such goods and the property, in fact, must actually pass in the goods and it must be supported by money consideration. Unless all these elements are present, there could be no sale.
(2) That simply because the property in the packing material is transferred to customer an implied agreement for sale of the packing material cannot be inferred;
(3) That the assessing authority is to consider if the parties intended to sell or buy the packing material, or whether the subject-matter of contract for sale was of some commodities and packing material did not form part of bargaining at all, but were used by the seller as a convenient and just vehicle of transport;
(4) That in order to decide the liability to be taxed regarding packing materials, if should be taken into account whether the packing material are comparatively of insignificant value;
(5) That it is not possible to state proposition of law that whenever particular goods are sold in a container the parties did not intend to sell or buy the container also;
(6) That the burden lies upon the taxing authorities to show that there was a taxable sale and that the burden is not discharged by merely showing that property in the goods which belongs to the party performing the service or executing the contract stands transferred to other party;
(7) That the question whether there is an agreement to sell, packing material is a pure question of fact depending upon circumstances of each case.
35. In view of the observations made above, we are of the opinion that the authority completely failed to make out a case of either express or implied sale of the packing material in the facts and circumstances of each case.
36. Thus, in both the cases, the revision petitions are hereby dismissed without any order as to costs.