Sales tax treatment of gunny bags and rice products: packed bags taxable, khudi and bhushi exempt under Schedule III.

Gunny bags supplied for a charge with rice were treated as goods under the Assam Sales Tax Act, 1947, and the turnover from their supply was taxable because the bags were movable property sold by a dealer; absence of profit on the bags did not affect taxability. By contrast, khudi, being broken rice, fell within the exemption for rice in Schedule III and remained exempt because it was not sold in sealed containers. Bhushi, treated as rice bran, was also held to fall within the exemption for cereals under Schedule III and was not assessable.

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Issues: (i) whether the turnover from the supply of gunny bags packed with rice was taxable under the Assam Sales Tax Act, 1947; (ii) whether khudi was an exempt form of rice under Item 1 of Schedule III; (iii) whether bhushi was exempt under Item 1 or Item 12 of Schedule III.

Issue (i): whether the turnover from the supply of gunny bags packed with rice was taxable under the Assam Sales Tax Act, 1947.

Analysis: Gunny bags were movable property and therefore goods within the Act. The bags were supplied for a charge and the transaction amounted to a sale by a dealer within the meaning of the Act. The contention that the assessee acted merely as an agent was not supported by the facts. The fact that no profit was made on the bags was immaterial, since the levy was not one on income.

Conclusion: The turnover from the supply of gunny bags was liable to tax.

Issue (ii): whether khudi was an exempt form of rice under Item 1 of Schedule III.

Analysis: Khudi was broken rice and therefore fell within the expression rice in Item 1 of Schedule III. The exemption covered cereals and pulses, including all forms of rice, except rice sold in sealed containers, and khudi was not sold in sealed containers.

Conclusion: Khudi was exempt from assessment.

Issue (iii): whether bhushi was exempt under Item 1 or Item 12 of Schedule III.

Analysis: Bhushi was rice bran and could reasonably be treated as included within the expression cereal in Item 1 of Schedule III. On that basis, it was unnecessary to exclude it from exemption merely because it was bran of rice rather than wheat.

Conclusion: Bhushi was exempt from assessment under Item 1 of Schedule III.

Final Conclusion: The reference was answered by holding the bags turnover taxable, while khudi and bhushi were held not assessable, leaving the assessee successful on the substantial part of the reference.

Ratio Decidendi: A dealer supplying goods for a charge is taxable on the turnover of those goods even if the goods are packed with another commodity, while rice products falling within the statutory exemption for cereals and forms of rice remain exempt unless specifically excluded by the Act.

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