Goods and composite sales for sales tax: steam and bagged sugar taxable, worker grain supply not taxable

Steam supplied in the course of business was held to be "goods" under the Hyderabad General Sales Tax Act because it was a movable commodity sold in trade, and its turnover was taxable absent exemption. The value of gunny bags formed part of turnover where sugar was sold in bags, since the sale was a composite supply of sugar and packing materials for consideration; separate packing-service charges alone were not exempt. By contrast, turnover attributable to gunny bags used for supplying grain to workers' shops was not taxable because the material did not establish that the grain supply was carried on as a taxable business or trade in that commodity.

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Issues: (i) whether steam supplied in the course of business was "goods" and liable to sales tax; (ii) whether the turnover attributable to gunny bags in which sugar was sold was taxable; and (iii) whether the turnover attributable to gunny bags used for supplying grain to workers' shops was taxable.

Issue (i): whether steam supplied in the course of business was "goods" and liable to sales tax.

Analysis: The definition of "goods" in the Hyderabad General Sales Tax Act was construed broadly to include movable property. Steam was held to be a tangible, movable commodity capable of being sold in the course of trade. The absence of profit in the particular transaction did not affect taxability, because sales tax attaches to turnover from a sale unless the item is exempt.

Conclusion: Steam was goods and its turnover was liable to sales tax, subject to no applicable exemption.

Issue (ii): whether the turnover attributable to gunny bags in which sugar was sold was taxable.

Analysis: Gunny bags were treated as distinct goods and the invoices and accounts showed that their cost formed part of the composite price charged for sugar sold in bags. The court held that the sale was of sugar plus bags for valuable consideration, so the value of the bags entered the turnover. Rule 8(g)(ii) exempted only separate charges for packing services, not the value of packing materials themselves. The absence of a distinct profit motive in gunny bags did not prevent the assessee from being taxable on the turnover of that part of the composite sale.

Conclusion: The turnover attributable to gunny bags in which sugar was sold was liable to sales tax.

Issue (iii): whether the turnover attributable to gunny bags used for supplying grain to workers' shops was taxable.

Analysis: The grain shops were maintained for supplying cheap grain to workers and were not shown to be run as a business of buying, selling, or supplying grain in the course of trade. On the material available, the essential statutory character of dealer/business in grain was not established for this item.

Conclusion: The turnover attributable to gunny bags used for supplying grain to workers' shops was not liable to sales tax.

Final Conclusion: The petition succeeded only in part, with the assessment sustained for steam and gunny bags used with sugar, but quashed for the gunny bags used in the workers' grain supply.

Ratio Decidendi: For sales tax purposes, a movable commodity may be "goods" even if intangible in ordinary parlance; in a composite sale, the value of packing materials included in the price forms part of turnover, while tax cannot be levied where the statutory character of trading or supplying in the relevant commodity is not established.

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