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Issues: (i) Whether an implied sale of packing material used with bidis could be presumed on the facts proved; (ii) Whether, by reason of the retrospective amendment to Schedule I, hessian cloth used as packing material was outside the exempted entry and liable to State and Central sales tax for the period prior to 6 May 1971.
Issue (i): Whether an implied sale of packing material used with bidis could be presumed on the facts proved.
Analysis: The decisive test was whether the circumstances showed that the packing material formed part of the bargain and that the parties intended a transfer of property in that material for consideration. The surrounding facts established that the price of the packing material was taken into account while fixing the price of the bidis, the goods were required to be supplied in packed form, the purchaser would not accept loose delivery at the settled price, and property in the packing material passed to the purchaser. On these facts, the transaction was not a mere use of packing as a transport device but involved an implied agreement to sell the packing material itself. The question was one of fact, and the findings supported the inference of sale.
Conclusion: An implied sale of packing material was rightly presumed, and the value of that material was taxable.
Issue (ii): Whether, by reason of the retrospective amendment to Schedule I, hessian cloth used as packing material was outside the exempted entry and liable to State and Central sales tax for the period prior to 6 May 1971.
Analysis: The earlier view that hessian cloth fell within the exempted meaning of cloth under entry 6 of Schedule I was displaced by the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1971. Sections 9 and 10 substituted the relevant entry and gave the amendment retrospective effect, thereby excluding hessian cloth from the exemption from the inception of the principal Act in so far as that amendment operated. Once the retrospective amendment was applied, hessian cloth used in packing no longer remained within the protected entry and became taxable for the relevant prior period.
Conclusion: Hessian cloth was outside the exemption under entry 6 of Schedule I and was liable to State and Central sales tax for the period prior to 6 May 1971.
Final Conclusion: Both referred questions were answered against the assessee, and the reference was answered in a manner sustaining taxability of the packing material and the hessian cloth involved.
Ratio Decidendi: Whether packing material is sold with the goods is a question of fact to be determined from the surrounding circumstances, and a retrospective statutory amendment to an exemption entry excludes the specified article from exemption for the period to which the amendment is made to relate back.
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