Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987 Equivalent citations: 1987 AIR 1207, 1987 SCR (2)1047, AIR 1987 SUPREME COURT 1207, 1987 LAB. I. C. 907, 1987 TAX. L. R. 2087, 1987 3 JT 165, 1987 21 STL 137, 1987 2 ALL TAX J 762, 1987 2 UJ (SC) 230 Author: Misra Rangnath Bench: Misra Rangnath, R.S. Pathak PETITIONER: JAMANA FLOUR & OIL MILL (P) LTD. Vs. RESPONDENT: STATE OF BIHAR DATE OF JUDGMENT16/04/1987 BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH PATHAK, R.S. (CJ) CITATION: 1987 AIR 1207 1987 SCR (2)1047 1987 SCC (3) 404 JT 1987 (2) 155 1987 SCALE (1)835 CITATOR INFO : APL 1989 SC 315 (10) F 1989 SC1696 (8) ACT: Bihar Sales Tax Act, 1959 and Roller Mills Wheat Products (Price Control) Order, 1964--Wheat products sold in gunny- bags--Whether gunny bags a different commodity and sale thereof assessable to higher rate of tax--Whether there was contract to sell packing material along with the product--Question of fact depending on circumstances of each case. HEADNOTE: For the year 1964-65, the assessee, a registered dealer, Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987  1 under the Bihar Sales Tax Act, 1959 returned a gross turn- over of Rs.53,39,981 which was accepted by the Assessing Officer. He determined the taxable turnover at Rs.52,79,962 representing the sale of wheat products taxable at 2%. He found that the dealer has sold gunny bags in which wheat products had been packed and determined its turnover at Rs.1,37,150 and assessed the same at 4-1/2%. The First Appellate Authority on assessee's appeal held that the Assessing Officer was not justified in adding back the price of container in the gross turnover. What he should have done is to tax a portion of the taxable turnover at a different rate or out of the turnover taxable, the price of bags calculated at the rate of 70 paise per 100 kilogram should have been deducted and taxed at the rate of 4-1/2%. The remaining was to be taxed at the rate of 2%. In the revision before the Tribunal the assessee con- tended that the demand of sales-tax payable at different rates on the calculated turnover of gunny bags was not at all warranted as no price had been charged for the contain- ers. The Tribunal held that the lower Courts were justified in levying tax at a different rate on the turnover on ac- count of sale of gunny bags in which the wheat products were sold and directed that the Assessing Officer should ascer- tain from the accounts, the turnover on account of sale of gunny bags as container of wheat products during the period under consideration and assess tax thereon at the prescribed rate of 4-1/2%. The balance turnover shall be assessed at 2%. In the reference the High Court affirmed this view. Dismissing the appeal, 1048 HELD: 1. The Control Order contemplates a net weight which means that the weight of the bag is included in the price to be charged by the dealer. Under the explanation when packing is done in clothbags, a higher rate is admissi- ble. The scheme clearly suggests that the price of gunny- bags is inclusive and where cloth-bag is used, a higher price over and above what has been provided for ordinary containers is permitted. [1051C-D] Commissioner of Taxes v. Prabhat Marketing Company Ltd., 19 STC 84, referred to. 2. The Tribunal rightly came to the conclusion that there was implied agreement of sale of the gunny-bags. Admittedly, gunny bags are a different commodity and sale thereof is assessable to tax at 4V1%. It is not disputed that appellant bought gunny-bags for packing wheat products for the purpose of sale. [1051C] 3. The question as to whether there was an agreement to sell packing material is a pure question of fact depending upon the circumstances found in each case. [1051G-H] 4. The Tribunal and the High Court in the instant case, have recorded a clear finding that there was an implied contract for sale of the gunny bags with the products con- tained therein. [1051H] Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987  2 JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 103 of 1975. From the Judgment and Order dated 19.4.1974 of the Patna High Court in Taxation Case No. 21 of 1970. S.K. Dhingra and K.B. Rohtagi for the Appellants. D .N. Goburdhan and D. Goburdhan for the Respondents. The Judgment of the Court was delivered by RANGANATH MISRA, J. This appeal is by special leave. Challenge herein is to the decision of the Patna High Court rendered on a reference under Section 33(1) of the Bihar Sales Tax Act, 1959. The following question was referred to the High Court for its opinion, by the Commercial Taxes Tribunal of Bihar:- "Whether in the facts and circumstances of the case, the direction of the Tribunal to ascer- tain the price of the containers (gunny bags) of wheat products sold for an all inclusive price under the provisions of the Roller Mills Wheat Products (Price Control) Order, 1964, for taxing the same at a higher rate of 4-1/2 % is legally valid? For the year 1964-65, the assessee, a registered dealer, under the Bihar Sales Tax Act returned a gross turnover of Rs.53,39,981 which was accepted by the assessing officer. He determined the taxable turnover at Rs.52,79,962 representing sale of wheat products taxable at 2 per cent. He found that the dealer had sold gunny bags in which wheat products had been packed and determined its turnover at Rs. 1,37,150 and assessed the same at 4-1/2 %. The First Appellate Authority on assessee's appeal held: "The learned Assessing Officer was not justi- fied in adding back the price of container in the gross turnover. What he should have done is to tax a portion of the taxable turnover at a different rate or in other words out of the turnover taxable under the Bihar Sales Tax Act, the price of bags calculated @ Rs.O.70 paise per hundred kilogram should have been deducted and taxed @ 1/2%. The remaining was to be taxed @2% The dealer filed a Revision before the Tribunal and contended that the demand of sales-tax payable at different rates on the calculated turnover of gunny bags was not at all warranted as no price had been charged for the contain- ers. The Tribunal found:- "(1) The dealer transferred the property in the gunny bags, the packing material, to the purchasers f:or price. (2) The price of the gunny bags was included in the consolidated rates of price charged by the dealer. Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987  3 (3) There was an implied agreement for the sale of gunny bags between the dealer and the different purchasers to whom the wheat products were supplied. (4) The transfer of gunny bags was impliedly covered by the contract of sale with regard to the wheat products. On these findings the Tribunal held:- "We hold that the learned lower courts were justified in levying tax at a different rate on the turnover on account of sale of gunny bags in which the wheat products were sold." It further found:- "The learned Deputy Commissioner has given a direction for determination of the turnover on account of sale of gunny bags. On being asked the applicant accepted that the accounts maintained by him would reveal the exact number of gunny bags used in the trans- action of sale under consideration as also the price of the same. Hence we direct in modifi- cation of the orders passed by the learned Deputy Commissioner in this behalf that the learned Assessing Officer should ascertain from the accounts, the turnover on account of sale of gunny bags as container of wheat products during the period under consideration and assess tax thereon at the prescribed rate of 4-1/2 %. The balance turnover shall be assessed at 2%" Reliance was placed on the provisions of clause (3) of the Roller Mills Wheat Products (Price Control) Order, 1964. That clause provides:- "3. Maximum ex-mill prices of wheat products. "No owner or other person in charge of a roller mill shall sell, or offer for sale, ex-mill any of the wheat products specified in column 1 of the Schedule II to this Order-- ( a ) ............................................... (b) In the State of Maharashtra (excluding Greater Bombay) and in any other State (not being a State specified sub-clause (a), to which this Order applies, at a price exceeding the price specified against the clause 3 thereof. Explanation :-The prices referred to in this clause are: (i) Exclusive of: ( a ) ............................................... ( b ) ............................................... (ii) for net weight (inclusive of the cost of the bag), but where wheat products are sold in cloth bags in quantities of 40 kgs. net, 20 kgs. net and 10 kgs. net, a sum of 70 np. 37 np. and 19 np. respectively, towards the cost of the cloth bag may be charged in Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987  4 addition to the said prices." In our view, the Tribunal rightly came to the conclusion that there was implied agreement of sale of the gunny bags. Admittedly gunny bags are a different commodity and sale thereof is assessable to tax at 4-1/2 %. It is not disputed that appellant bought gunny bags for packing wheat products for the purpose of sale. The Control Order contemplates a net weight which means that the weight of the bag is includ- ed in the price to be charged by the dealer. Under the explanation when packing is done in cloth-bags, a higher rate is admissible. The scheme clearly suggests that the price of gunny bags is inclusive and where cloth-bag is used, a higher price over and above what has been provided for ordinary containers is permitted. This Court in Commissioner of Taxes v. Prabhat Marketing Company Ltd., 19 STC 84 has held:- "In Hyderabad Deccan Cigarette Factor)' v. The State of Andhra Pradesh, (17 STC 624) it was held by this Court that in a case of this description what the Sales-tax Authorities had to do was to ask and answer the question whether the parties, having regard to the circumstances of the case, intended to sell or buy the packing materials or whether the subject-matter of the contracts of sale was only an exempted article (here exigible to tax at redical rate), and packing materials did not form part of the bargain at all, but were used by the sellers as a convenient and cheap vehicle of transport." In that decision it was further pointed out that the ques- tion as to whether there was an agreement to sell packing material was a pure question of fact depending upon the circumstances found in each case. The Tribunal and the High Court have recorded a clear finding that there was an im- plied contract for sale of the gunny bags along with the products contained therein. In this Court, the assessee filed an affidavit and produced a communication purporting to be of the Regional Director (Food), Eastern Region, Government of India, dated July 23, 1957. This not being the part of the record and the affidavit having been filed at a belated stage has got to be rejected. There is no scope to dispute the assessability of sales-tax on the turnover of gunny bags. This appeal fails and is dismissed. Parties are directed to bear their own costs. A.P.J. Appeal dismissed. Jamana Flour & Oil Mill (P) Ltd vs State Of Bihar on 16 April, 1987  5