Incidental packing materials in an indivisible works contract were not taxable as a separate sale.

Packing materials used in pressing and baling cotton and wool were treated as incidental to an indivisible works contract, not as the subject of a separate sale. Applying the distinction between a sale and a contract for work and labour, the Court found no separate express or implied bargain for the hessian cloth and iron hoops, so their estimated value was not liable to sales tax. The HC also declined to refuse writ relief on the ground of an alternative statutory remedy, because the petitions had long been pending and the challenge went to the jurisdiction to levy tax. The assessment and revisional orders were quashed.

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Issues: (i) Whether the hessian cloth and iron hoops used by the company for packing pressed cotton and wool formed part of an indivisible works contract so as to exclude sales tax liability on their estimated value. (ii) Whether the writ petitions should be refused on the ground of availability of an alternative statutory remedy.

Issue (i): Whether the hessian cloth and iron hoops used by the company for packing pressed cotton and wool formed part of an indivisible works contract so as to exclude sales tax liability on their estimated value.

Analysis: The transfer of packing material was held to be incidental to the execution of the pressing and baling work. Applying the settled distinction between a contract of sale and a contract for work and labour, the essential enquiry was whether the chattel passed as chattel for a price or whether the materials were merely used in carrying out the work. The packing materials were found to be a necessary and integral part of the pressing process, with no separate express or implied bargain for their sale.

Conclusion: The packing materials did not constitute a separate sale and the estimated value of the hessian cloth and iron hoops was not liable to sales tax. The issue was decided in favour of the assessee.

Issue (ii): Whether the writ petitions should be refused on the ground of availability of an alternative statutory remedy.

Analysis: The writ petitions had already been entertained and remained pending for a long time, and the challenge went to the very jurisdiction to levy tax on the transaction. In such circumstances, the availability of another remedy was not treated as a bar to relief under Article 226 of the Constitution of India.

Conclusion: The writ petitions were not rejected on the ground of alternative remedy. The issue was decided in favour of the assessee.

Final Conclusion: The assessment orders and the revisional orders were quashed because the packing materials used in the pressing process were held not to be taxable sales, and the Court declined to deny relief on the basis of an alternative remedy.

Ratio Decidendi: Where materials are merely incidental to an indivisible works contract and no separate agreement to sell the very goods for money consideration exists, their transfer does not amount to a taxable sale.

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