Implied sale of packing material requires proof from the facts; packed goods alone do not establish a taxable transfer.

An implied sale of packing material cannot be presumed merely because cotton bales are sold packed in bardana and patti; the taxing authority must prove from the facts that the packing material formed part of the sale transaction. The burden lies on the department to establish a separate or composite price, or other facts showing that the packing material was included in the bargain. Where no such finding is recorded and the relevant earlier decisions are factually distinguishable, the sale of the packing material is not inferred. The referred question was answered in the negative, in favour of the assessee.

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Issues: Whether, on the facts, the sale of cotton bales included an implied sale of packing material consisting of bardana and patti.

Analysis: The burden lay on the department to prove that the packing material was sold by implication. An implied agreement to sell packing material cannot be presumed merely because goods are sold packed; it must be established from the facts of each case. The earlier decision relied upon by the revenue was distinguishable because there the composite price for cotton and packing material had been accepted, whereas in the present case no such finding was recorded and no separate or composite price for packing material was proved. The cited Full Bench decision was also distinguishable on its facts, as it involved a contract for pressing and delivery of cotton bales for a consolidated charge including packing.

Conclusion: The department failed to discharge the burden of proving an implied sale of packing material, and the answer to the referred question was in the negative, in favour of the assessee.

Ratio Decidendi: An implied sale of packing material cannot be inferred merely from the sale of goods packed in such material, and the taxing authority must prove from the facts of the case that the packing material formed part of the sale transaction.

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