vil Appeal Nos
1924 27 of 1980 etc
From the Judgment and Order dated 14111979 of the Delhi High Court in Civil Writ No 1517 of 1979
359 Soli J Sorabjee SK Mehta HN Salve AN Banatwa la Rajiv Datta R Ravindran KK Patel Ujwal Rana MK Dua SM Sarin Aman Vachher EMS Anam PG Gokhale PB Agarwala RB Hathikhanawala Ms section Manchanda KK Mohan PK Chakravarty section Srinivasan KC Agarwal Madan Lokur A Minocha RB Datar KMK Nair SK Gambhir Sanjay Sarin Vivek Gambhir M Veerappa Ms Kamini Jais wal MKD Namboodiry DD Gupta EC Agrawala VK Pandita Ms Purnima Bhatt Atul sharma VN Ganpule CK Ratnaparkhi MML Srivastava MC Dhingra V Maya Krish nan DN Misra KK Gupta and Anis Ahmed Khan for the Appellants
K Parasaran Attorney General B Datta Additional Solicitor General and Kuldip Singh Additional Solicitor General KN Bhatt CV Subba Rao Ms A Subhashini Mrs Sushma Suri A Subba Rao AK Srivastava PP Singh RK Joshi and HK Gangwani for the Respondents
The Judgment of the Court was delivered by PATHAK CJ
These appeals by special leave are directed against the judgment and order of the High Court of Delhi dismissing writ petitions complaining of discriminatory treatment between the appellants and the State Trading Corporation in regard to the rate of customs duty levied on the import of edible oils
A number of writ petitions have also been filed directly in this Court by other private importers based on the same complaint
They pray for relief in terms of the same rate of customs duty as has been ap plied to the import of edible oils effected by the State Trading Corporation
As common questions of law arise in these appeals and writ petitions and the facts are substantially similar we proposed to treat Writ Petition No 3800 of 1980 Ms Liber ty Oil Mills vs Union of India  Others as the leading case
On 17 January 1977 the Government of India issued a Public Notice permitting private parties to import edible oils for direct human consumption
It was not permissible to use such imported oils for the manufacture of Vanaspati or for any industrial purpose
Under the Import Policy of 1978 79 the Government canalised the import of edible oils so that the State Trading Corporation alone was permitted to import edible oils
Some of the private importers who had entered into firm commitments with foreign suppliers and were now being denied permission to import the edible oils filed writ petitions in vari 360 ous High Courts and these writ petitions were allowed and they were granted licences to import the edible oils
Prior to 1 March 1979 the import of edible oils was exempt from customs duty but with effect from that date the exemption was partially withdrawn and certain specified oils were made liable to import duty at 12 12 per cent
Exemp tion was granted from additional duty chargeable under section 3 of the 
Auxiliary duty chargeable under the Finance Act was however payable
On 17 March 1979 the Government passed an order of exemption in favour of the State Trading Corporation under section 252 of the whereby the imports of the specified oils by the State Trading Corporation were made liable to customs duty at 5 per cent only and there was a total exemption from auxiliary and additional duty
The imports of the same specified oils by private importers were made liable to customs duty at 125 per cent ad valorem
The concessional rate of customs duty in favour of the State Trading Corpora tion was restricted to imports aggregating 3 lakh tonnes initially
That quantity was enlarged to 6 lakh tonnes on 26 June 1979
On 31 October 1979 a further order of exemp tion was made in favour of the State Trading Corporation granting it exemption for imports of five lakh tonnes of the specified oils and this was followed on 31 March 1981 by another order of exemption in respect of an aggregate quan tity of 5 lakh tonnes of oil
It may be mentioned that on 12 May 1981 the import of edible oil was exempted from the levy of auxiliary duty
On 18 July 1981 the Government reduced the exemption granted to the import of the specified oils by private operators by raising the customs duty to 42 12 per cent
The exemption in favour of the State Trading Corporation continued without change
Thereafter on 26 July 1981 by Ordinance No 9 of 1981 the Government raised the tariff rate of customs duty to 200 per cent ad valorem by amending the 
At the same time exemption was granted insofar that the effective rate of duty on the import of the specified edible oils except Rape Seed oil and Soybean oil was fixed at 125 per cent
The exemption from auxiliary duty was withdrawn
In the result a private importer had to pay a basic duty of 125 per cent and auxil iary duty of 25 per cent on the import of edible oils
The oil seeds imported by the State Trading Corporation contin ued to attract customs duty at 5 per cent
Writ Petitions were filed in the High Court of Delhi by private importers complaining of the differential treatment accorded between 361 the private importers and the State Trading Corporation but these writ petitions were dismissed by the High Court and the appeals by special leave have now been placed before us
As has been mentioned earlier writ petitions have also been filed directly
At the outset learned counsel for the private importers states that no objection is being taken to canalisation in favour of the State Trading Corporation
Nor is there any objection to the permission granted to the State Trading Corporation to import 17 lakh tonnes of edible oils
The complaint is directed against the differential treatment meted out to the private importers in the rate of customs duty
The contention of the petitioners is that the discrimi natory treatment has no real or substantial nexus with the proposed object of the exemption orders having regard to the terms of section 252 under which the exemption orders in favour of the State Trading Corporation have been made and therefore there is a violation of article 14 of the Constitu tion
S 252 provides 2 If the Central Government is satisfied that it is necessary in the public interest so to do it may by special order in each case exempt from the payment of duty under circum stances of an exceptional nature to be stated in such order any goods on which duty is leviable
 It is apparent that the power conferred on the Central Government under section 252 of the Act is to be exercised by it in its subjective satisfaction
It must be satisfied that it is necessary in the public interest to pass a special exemption order
The exercise of the power is controlled by the requirement in the sub section that the exemption order must contain a statement stating the circumstances of an exceptional nature under which the special exemption order has been considered necessary
The requirement is intended by the statute to ensure that the satisfaction of the Cen tral Government concerning the necessity of the order is not reached arbitrarily but flows from material relevant to the object for which the power has been conferred
The circum stances recited in the exemption orders are   
In view of high international prices of vegetable oils and in order to keep the domestic prices of vanaspati at reasonable levels it has been felt that certain speci fied vegetable non essential oils imported by the STC would need to be exempted from part of the customs duty 362 The reasons set forth in this statement have been analy sed by learned counsel for the private importers and an attempt has been made to establish that there is no justifi cation for relying on the international prices of vegetable oils nor the stated desirability of keeping the domestic prices of vanaspati at reasonable levels as grounds for making the impugned exemption orders in favour of the State Trading Corporation
In detailed argument learned counsel for the private importers urges that the public interest which could be contemplated under section 252 must be the reduction of the landed cost in order to reduce the domestic prices of the oils
That object it is said is not served by conferring an advantage upon a particular importer even if it be the State Trading Corporation who is engaged in the same activity in respect of the same goods
It is point ed out that the concession must relate to the goods and not to the personality of the importer
Further it is argued the allegation that the international prices of edible oils were high is inconsistent with the reality of the situation on the contrary it is pointed out there had been a fall in the international prices of various oils
In support of the latter submission reference has been made before us to the pleadings of the parties and a PAC report
Elaborating his submission in regard to the stated need for maintaining the domestic prices of vanaspati at reasonable levels learned counsel for the private importers urges that the oils which were being imported by private importers were intended for direct human consumption and could not have been supplied to the vanaspati industry
Reference is made to the affidavits of the parties to show that the oils imported by the petitioners could not be utilised in the manufacture of vanaspati as permission to do so had not been granted
Accordingly the private importers say there is no basis for the differential duty set out in the exemption orders and no real or substantial nexus between the differ entiation made and the object of section 252
Then it is also urged there is no real or substantial distinction between the private importers and the State Trading Corporation having regard to the object of the statute the nature of customs duty the rationale of section 25 and the professed object of the exemption orders under section 252
The State Trading Corporation it is contended cannot be equated with the Central Government and we are referred to STCv
Commercial Tax Officer Vishakapatnam t19641 4 SCR 99
It is a private limited company registered under the and liable to be wound up under that Act and that although it functions under the supervision of the Govern ment of India and its Directors it is not concerned with the performance of any governmental functions its functions being entirely commercial and in the nature of a trading activity
Reliance is also placed on Heavy Engineering Mazdoor Union 363 vs State of Bihar  Andhra Pradesh State Road Transport Corporation vs Income Tax Officer  and Vidarbha Housing Board vs Income Tax Officer City and Refund Circle Nagpur  Others Assum ing the private importers contend that the State Trading Corporation can be equated with the Central Government or that it is acting on behalf of the Central Government once the Government ventures into the commercial field it dons the robes of a trader and it cannot thereafter claim any special attribute or preference for differentiation from other traders
Learned counsel has placed before us the observations of this Court in LIC vs Escorts Ltd  344
There is no rational basis it is urged for making a distinction in the imposition of customs duty in respect of the goods imported by the private importers and the State Trading Corporation as both purchased the same commodity in the open market for direct consumption that the sales effected by them are on a commercial basis and there is nothing to show that the State Trading Corporation sold these oils at a price lower than the market price or at subsidised prices
It is asserted that the Central Govern ment like any other importer is liable to customs duty and we are referred to section 12 of the 
It is also complained that the differential proceeds on excessive classification and that results in violating the doctrine of equality enshrined in article 14 of the Constitution
Reli ance is placed on State of J  K vs TN Khosa   792 Mohammad Shujat Ali vs Union of India   470 and In Re The Special Courts Bill 1978  561 2
And finally the private importers claim that inasmuch as approximately 17 lakh tonnes of oil were imported by the State Trading Corporation as against a mere 1 lakh tonnes of oil imported by all the private im porters together and the exemption from duty has been granted in the public interest namely to control or reduce the price of edible oils the relief which should be granted is to include the imports made by the private importers within the particular customs duty rate of five per cent already extended to the oils imported by the State Trading Corporation
In some cases it is alleged that if the im ports effected by the private importers has to bear the duty levied upon them the impact of the total duty would be so impossible that it would cripple the business of those private importers
In reply the learned Attorney General has laid great stress on the submission that the State Trading Corporation in undertaking the imports acts solely as an agent or nominee of the Government of India and all the profits and losses are on account of the Government of India the State Trading Corporation being entitled to service charges 364 only at one per cent irrespective of loss or profit
It is submitted that the Central Government is not liable to customs duty and we are referred to various considerations in support of that claim
It seems to us unnecessary to enter into that question because we have before us a situa tion where customs duty has in fact been imposed even though at the rate of five per cent only
In accepting the imposition of customs duty albeit at five per cent neither the State Trading Corporation nor the Central Government rest their case on any claim to immunity of the Central Government from the levy of customs duty
It is not neces sary therefore to construe the amendment made in section 12 of the Customs Duty Act 1962 to which both learned counsel have made reference
The limited question before us is whether there is justification for the differential treatment accorded be tween the State Trading Corporation and the private import ers
Now it is significant to note that the import of the specified oils had been entrusted exclusively to the State  Trading Corporation with effect from 2 December 1978 and because the private importers had already prior to that date entered into contracts for purchase of the edible oils with foreign sellers they were permitted to make the im ports in question in order to honour their commitment
In other words contracts by private importers concluded before 2 December 1978 were allowed to be worked out after that date without affecting the principle that as from 2 Decem ber 1978 the business of importing such oils belonged exclusively to the State Trading Corporation
This is the background in which the questions raised before us need to be considered
First as to the contention that both the reasons set forth in the exemption notifications under section 252 of the Act are without foundation
It seems to us that the two reasons set forth in the exemption notifications can consti tute a reasonable basis for those notifications
It does appear from the material before us that international prices were fluctuating the although they may have shown a percep tible fall there was the apprehension that because of the history of fluctuation there was a possibility of their rising in the future
The need to protect the domestic market is always present and therefore encouragement had to be given to the imports effected by the State Trading Corpo ration by reducing the rate of customs duty levied on them
This involved a long term perspective since the exclusive monopoly to import these edible oils was now entrusted to the State Trading Corporation
What appears to have dominat ed the policy of the Government in issuing the exemption notifications was the consideration that the domestic prices 365 of vanaspati should be maintained at reasonable levels
It cannot be doubted that the entire edible oil market is an integrated one and that it is not reasonable to treat anyone of the edible oils or vanaspati in isolation
It is well accepted fact that vanaspati manufacturers constitute a powerful organised sector in the edible oil market and a high vanaspati price would encourage an unauthorised diver sion of the edible oils to vanaspati manufacturing units resulting in a scarcity in the edible oil market giving rise to erratic prices and depriving consumers of access to edible oils
The need for preventing vanaspati prices ruling high was also to prevent people normally using vanaspati from switching over to other edible oils thus leading to an imbalance in the oil market
An overall view made it neces sary to ensure that domestic prices of vanaspati remained at reasonable levels
To all these considerations the learned Attorney General has drawn our attention and we cannot say that they are not reasonably related to the policy underly ing the exemption orders
So that the Government would have sufficient supplies of edible oil at hand in order to feed the market the learned Attorney General says it was con sidered desirable and in the public interest to reduce the rate of customs duty to five per cent on the imports made by the State Trading Corporation
Now it is the Central Govern ment which has to be satisfied as the authority appointed by Parliament under section 252 that it is necessary in the public interest to make the special orders of exemption
It has set out the reasons which prompted it to pass the or ders
In our opinion the circumstances mentioned in those notifications cannot be said to be irrelevant or unreasona ble
It is not for this Court to sit in judgment on the sufficiency of those reasons
The limitations on the juris diction of the Court in cases where the satisfaction has been entrusted to executive authority to judge the necessity for passing orders is well defined and has been long accept ed
It is true that the State dons the robes of a trader when it enters the field of commercial activity and ordi narily it can claim no favoured treatment
But there may be clear and good reason for making a departure
Viewed in the background of the reasons for granting a monopoly to the State Trading Corporation acting as an agent or nominee of the Central Government in importing the specified oils it will be evident that policy considerations rendered it necessary to make consummation of that policy effective by imposing a concessional levy on the imports
No such conces sion is called for in the case of the private importers who in any event are merely working out contracts entered into by them with foreign sellers before 2 December 1978
366 We are also not satisfied that any of the private im porters have made out that their business will be crippled or ruined in view of the rate of customs duty visited on their imports
The material before us is not sufficient to warrant any conclusion in their favour
As in our opinion the private importers are not enti tled to relief no question arises of considering whether the exemption orders should be struck down or their benefit extended in favour of the private importers also
The appeals and Petitions for Special leave to appeal as well as the writ petitions before us are dismissed but there is no order as to costs
RSS Appeals and Petitions are dismissed


Summary:
The appellants in some of the appeals are manufactur ers of or dealers in beer the appellants in the other appeals are manufacturers of or dealers in cement
The appellants filed writ petitions in the Andhra Pradesh High Court challenging the assessment made under the Andhra Pradesh General Sales Tax Act 1957 on the turnover of packing material employed either by way of bottles for containing beer or by way of gunny bags for packing cement
The appellants challenged the application of such rate in assessments made in relation to the period before 8 July 1983
The appellants also challenged the application of that rate proposed pursuant to section 6C in show cause notices issued by the concerned authority
Section 6C was inserted in the Act with effect from 8 July 1983
The High Court while dismissing the writ petitions proceeded on the basis that having regard to the nature of the goods and to the trade practice in respect of beer and cement the containers were necessary concomitants in the transactions and the transfer of property in the containers was incidental or unavoidable that the sale transactions had to be regarded as composite and integrated sales of the containers and their contents and what was really sold was the bottled beer or the cement packed in gunny bags
The learned Judges expressed the view that the consideration paid by the purchaser to the dealer consisted not only of the price of the contents namely beer or cement but also included the price of the containers that is the bottles and the cartons in the case of beer and gunnies in the case of cement
While allowing the appeals and remanding the cases to the High 306 Court and in the case of the writ petitions while direct ing the assessing authority to determine the matters after allowing the dealers to show cause this Court HELD 1 A transaction of sale may consist of a sale of the product and a separate sale of the container housing the product with respective sale considerations for the product and the container separately or it may consist 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 of a third case it may consist of a sale of the product with the transfer of the container without any sale consideration therefore
The question in every case will be a question of fact as to 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
In every case the assessing authority is obliged to ascer tain the true nature and character of the transaction upon a consideration of all the facts and circumstances pertaining to the transaction
310C E H 311A Hyderabad Deccan Cigarette Factory vs The State of A P 1966 17 STC 624 referred to
2 There can be as many different kinds of transactions as the circumstances of the case may require either by reason of prevailing trade practice or market conditions or personal convenience and as human ingenuity may devise for bonafide reducing the burden of tax
Whether a transaction for sale of packing material is an independent transaction will depend upon several factors
312E 3 The issue as to whether the packing material has been sold or merely transferred without consideration de pends on the contract between the parties
The fact that the packing is of insignificant value in relation to the value of the contents may imply that there was no intention to sell the packing but where any packing material is of significant value it may imply an intention to sell the packing material
In a case where the packing material is an independent commodity and the packing material as well as the contents are sold independently
The sale of the packing material is liable to tax independently
313E G Commissioner of Taxes Assam vs Prabhat Marketing Co Ltd 1967 19 STC 84 The State of Karnataka vs Shaw Wel lace  Company Ltd 1981 48 STC 169 Arlem Breweries Ltd vs The Assistant Commissioner of Sales Tax Panaji 1983 53 STC 172 Ms Jamana Flour 307 Mill P Ltd vs State of Bihar  and Punjab Distilling Industries Ltd vs The Commissioner of Income Tax Simla 1959 Supp 1 SCR 683 referred to
Section 6C seems to envisage a case where it is the goods which are sold 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 alongwith the goods
In that event 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 diffi cult 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 which merely explains that the components which have entered into determining the price of the goods cannot be treated separately from the goods them selves and that no account was in fact taken of the packing material when the transaction took place and that if such account must be taken then the Same rate must be applied to the packing material as is applicable to the goods them selves
314D E 315A B 5 It is difficult to accept the contention of the appellants that a rate applicable to the packing material in the Schedule should be applied to the sale of such packing material in a case under section 6C when in fact there was no such sale of packing material and it is only by legal fic tion and for a limited purpose that such sale can be contemplated
In the circumstances no question arises of section 6C being constitutionally discriminatory and therefore invalid
315B C 6 The High Court has proceeded on the assumption that what is charged is the price of the bottled beer or of cement packed in gunny bags
No attempt was made by the tax authorities to ascertain the facts of each case and to determine what were the actual ingredients of the contract and the intention of the parties
Assumptions had been made when what was required was a detailed investigation into the facts
Because of the lack of adequate and clear factual material the High Court also was compelled to proceed on the basis of generalised statements and broad assumptions
315C E