Packing materials are taxable only if shown to be sold as part of the bargain; tobacco exemptions do not automatically extend to them.

Packing materials are taxable only if, on the facts, they form the subject-matter of an express or implied contract of sale; that inquiry must be decided from relevant evidence such as accounts, oral testimony and surrounding circumstances, not on assumptions that the goods' price necessarily includes the packing. The exemption for tobacco and its products did not automatically extend to packing materials, because it covered the products themselves and not separate taxable bargains for containers or wrappers. On the material before it, the real factual question had not been properly determined, so the assessment could not stand and the matter required fresh consideration on whether the packing materials were part of the sale bargain.

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Issues: (i) Whether the packing materials used for cigarettes were themselves the subject-matter of an express or implied agreement of sale between the assessee and its customers. (ii) Whether the exemption granted in respect of tobacco and its products extended to the packing materials and displaced the sales tax levy on their value.

Issue (i): Whether the packing materials used for cigarettes were themselves the subject-matter of an express or implied agreement of sale between the assessee and its customers.

Analysis: A sale requires an agreement to transfer title for consideration, and the question whether containers or packing materials are sold with the goods is one of fact depending on the circumstances. The relevant enquiry is whether the parties intended to bargain for the packing materials or whether they were merely used as a convenient vehicle for transport. The taxing authority must decide that question on relevant material such as accounts, oral evidence, and surrounding circumstances, and cannot rest on fiction, surmise, or a mere assumption that the price of the goods necessarily included the packing materials. The authorities below and the High Court had not addressed the real factual question in that manner.

Conclusion: The issue was not finally and properly determined and had to be reconsidered on remand.

Issue (ii): Whether the exemption granted in respect of tobacco and its products extended to the packing materials and displaced the sales tax levy on their value.

Analysis: The statutory exemption covered tobacco and its products, not the packing materials. The inclusive definition of turnover would bring packing charges within tax only if there was in fact a sale of the packing materials. The excise duty argument did not prevent the State from taxing packing materials if they were separately sold or formed part of the taxable bargain. The exemption was therefore not coextensive with the broader fiscal argument advanced by the assessee.

Conclusion: The exemption did not automatically cover the packing materials, and this contention was rejected.

Final Conclusion: The assessment could not be sustained on the existing findings, and the matter was sent back for fresh determination of whether the packing materials formed part of the sale bargain.

Ratio Decidendi: Packing materials are taxable only if, on the facts, they are shown to be the subject-matter of an express or implied contract of sale; that factual inquiry must be made on relevant evidence and not on assumptions about pricing or commercial practice.

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