1. This is an appeal under Section 37 of the Tamil Nadu General Sales Tax Act, 1959, against the order of the Board of Revenue (Commercial Taxes), Madras, dated 22nd July, 1972, passed in exercise of its suo motu powers of revision under Section 34 of the Act.
2. Most of the facts are not in controversy. The appellants herein purchased kerosene from M/s. Indian Oil Corporation, Ernakulam and sold the kerosene in Tamil Nadu. The kerosene purchased by the appellants was packed in sealed tins and the invoices prepared by the vendors showed the prices of the kerosene and the prices of the tins separately. Similarly, when the appellants sold the said kerosene in Tamil Nadu in the same sealed tins, the appellants also showed the prices of the kerosene separately and the prices of the tins separately. The prices of the tins so sold amounted to Rs. 69,752.50 for the assessment year 1969-70. The appellants claimed before the assessing authority that this amount should not be included in the assessable turnover. According to the appellants, there was no sale of the tins by the appellants to their customers and, in any event, the turnover referable to this case has to be excluded under Rule 6(cc)(i) of the Tamil Nadu General Sales Tax Rules, 1959. It was not in dispute that the turnover relating to the sale of kerosene was assessable at single point, 5 per cent, since that comes under entry 35 of Schedule I to the Act. The assessing officer overruling the objections of the appellants, assessed the disputed turnover at 5 per cent. When the appellants preferred an appeal to the Appellate Assistant Commissioner, the appellate authority sustained the assessability of the turnover, but assessed it at a different rate. The appellate authority held that kerosene alone was taxable at single point at the rate of 5 per cent; the turnover relating to tins was liable to be taxed at multi-point 3 per cent. Consequently, the disputed turnover was assessed at 3 per cent only. It is this order of the appellate authority that was sought to be revised by the Board of Revenue in exercise of its suo motu powers of revision under Section 34 of the Act. But, when the appellants were called upon to file their objections to the proposed revision by the Board of Revenue, the appellants challenged the conclusion of the appellate authority on the assessability of the turnover itself. Consequently, the Board of Revenue had considered both the questions, namely, the assessability of the turnover as well as the rate applicable to the same in the event of the same being held assessable. The Board of Revenue by the impugned order held that the turnover was assessable and it was assessable at 5 per cent just like kerosene. It is the correctness of this order which is challenged in the present appeal by the appellants herein.
3. Under the above circumstances, two questions arise for consideration. One is, whether the disputed turnover is liable to be assessed at all. If the appellants succeed on this, no further question arises in this appeal. However, if the appellants lose on this point, the second question which arises is regarding the actual rate of tax that should be applied to the disputed turnover. As far as the first question is concerned, the learned counsel relied on, as before the authorities below, Rule 6(cc)(i) of the Rules. According to the said provision :
6. The tax or taxes under Sections 3, 4 or 5 shall be levied on the taxable turnover of the dealer. In determining the taxable turnover, the amounts specified in the following clauses shall, subject to the conditions specified therein, be deducted from the total turnover of a dealer :-
(cc) all amounts falling under the head, charges for packing, that is to say, cost of packing materials and cost of labour-
(i) when charged for by the dealer separately without including such amounts in the price of the goods sold, in respect of the goods liable to tax at the hands of the assessee :
4. We are of the opinion that the appellants are not entitled to rely upon and obtain the benefit of this provision. From a mere reading of the rule, it will be clear that it contemplates only a sale of the contents and incidentally to the sale of the contents, certain packing materials being used by the dealer for delivering the sold goods to the customer and in that process the dealer charging for those packing materials and showing those charges separately without including the same in the price of the goods. In this particular case, from what we have pointed out, it is clear that the kerosene was purchased in sealed tins by the appellants from M/s. Indian Oil Corporation and, in turn, the appellants sold the kerosene in the same condition in which they purchased, namely, in sealed tins. Under those circumstances, we are of the opinion that the contract between the parties, namely the appellants and their customers, was not to sell merely the kerosene, but to sell the kerosene in the packed condition, in other words, to sell the kerosene in sealed tins in which they were. This view of ours derives support from several decisions of this court. United Bleachers Ltd. v. State of Madras  11 S.T.C. 278 is a decision of a Bench of this Court in relation to such a question. This Court observed :
The question whether there has been a sale of the material would depend on the contract between the parties, expressed or implied. A mere contract of service, although a transfer of a movable property is involved therein, cannot by itself imply a sale. For example, in the case of a bleaching and dyeing contract, the use of the materials utilised for the purpose of bleaching or dyeing though charged for even at a profit, would not amount to a sale, for the transfer of materials would be necessary 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.
5. In coming to the above conclusion, the court relied on the earlier decisions of this court in Varasuki and Co. v. Province of Madras  2 S.T.C. 1 and Indian Leaf Tobacco Development Co. Ltd. v. State of Madras  5 S.T.C. 354. If we substitute 'the kerosene in tins' for the expression 'rice or salt in gunny bags' in the observation extracted above, the above observation will fully apply to the facts of the present case. As a matter of fact, this court went further and observed that,-
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....
Thus, in order that there could be a levy of sales tax, there should be a sale. Whether in regard to packing materials utilised in the performance of a contract between the parties there was a sale, would depend on the agreement between the parties. Such an agreement could be express or implied. Where the main contract was one of sale of goods as packed, such an agreement to sell the packing materials could, having regard to the nature of the contract, be readily implied ; but where the main contract was merely one of service, the fact that in the performance of such service packing materials are used and charged for, would not lead to a necessary inference that a sale of the materials was intended. In such a case, the onus would be on the taxing authority to prove that there was an agreement to sell the packing materials and a sale by the passing of property therein.
6. The above observations will make it clear that in the present case the contract was one of sale of goods as packed, namely, kerosene in sealed tins and, therefore, an agreement to sell the packing materials can be readily implied. If so, admittedly, there was a sale of tins by the appellants to their customers. From this point of view there is no scope for invoking the provisions of Rule 6(cc)(i) of the Rules extracted already.
7. Independently of the above conclusion, it may also be stated that Rule 6(cc)(i) will apply to packing which takes place subsequent to the sale of the goods which were to be packed in those packing materials. When the contract itself is a composite contract in the form of purchase of kerosene in the packed condition and thereby implying a contract for the sale of the tins also, the rule referred to above can have no application. Consequently, we are of the view that the turnover in question was liable to tax as has been rightly held by all the authorities.
8. The only other consideration is the rate of tax applicable to the turnover. We are clearly of the opinion that the Board of Revenue was in error in revising the order of the appellate authority in this behalf. We have already referred to the fact that kerosene is liable to single point levy at the rate of 5 per cent. Entry 35 of Schedule I of the Act merely refers to kerosene and nothing more. Consequently, on the finding of the authorities, with which we have agreed, that there had been an implied contract for the sale of the tins, the turnover referable to the sale of the tins cannot be taxed at the same rate as the turnover relating to kerosene. The position might have been different if a single, consolidated or composite price has been charged for the kerosene along with the tins. But, as in the present case, where the kerosene has been charged separately and the tins have been charged separately, the rates applicable to turnover relating to kerosene cannot be applied to the turnover relating to the tins. As a matter of fact, the Board would appear to have proceeded on an erroneous basis when it held that the disputed turnover was assessable to tax at the same rate as kerosene. Though in the earlier portions of the order, the Board did refer to the fact that kerosene as well as the tins were charged separately, when it came to the ultimate portion of the order it has stated :
The composite price is to be chargeable for the purpose of tax.
9. In this case, admittedly there was no composite price; but there were two separate prices. The Board of Revenue might have been right if there had been a consolidated or single or composite price charged for the kerosene in packed condition, but so long as the kerosene and the tins were charged for separately, there being no composite price, the rate applicable to kerosene cannot be applied to the turnover referable to the tins also.
10. We may also point out that Patel Volkart Private Limited v. Commissioner of Sales Tax, M.P.  29 S.T.C. 515 , has taken the same view where the court stated that:
When different articles are transferred under a composite contract, the rate available for either of the two cannot be charged. The different items will have to be charged at the different rates.
11. Consequently, we allow the appeal and set aside the order of the Board of Revenue and restore that of the appellate authority.
12. There will be no order as to costs.