Composite redrying contract: packing materials used in tobacco processing were not separate sales and could not be taxed separately.

Packing materials used in redried tobacco were treated as part of an entire and indivisible redrying contract, not as a separate sale of goods. Because the charge was a single composite amount for redrying and packing, with no separate agreement or separate price for the packing materials, the transfer of those materials could not be severed and taxed independently. Applying the Supreme Court principle that materials merely accessory to work and labour do not constitute a sale in an indivisible contract, the value of the packing materials was excluded from taxable turnover.

---

---

Issues: Whether the value of packing materials used in packing redried tobacco was liable to be included in the assessees' taxable turnover as a sale.

Analysis: The packing of redried tobacco was held to be an integral and indispensable part of the redrying process. The charge made by the assessees was one inclusive and indivisible amount for redrying and packing, and there was no separate agreement or separate price for the packing materials. Applying the principle of the Supreme Court that a contract which is entire and indivisible, and in which the materials are merely accessory to the work and labour, does not amount to a sale of goods, the transfer of packing materials could not be split off and taxed as if there were a separate sale. The earlier decisions of the Andhra High Court treating such materials as sold goods were held not to accord with the later Supreme Court ruling.

Conclusion: The packing materials were not sold as such, and their value could not be included in the assessees' taxable turnover.

---