Container turnover follows the tax rate of the goods supplied when bags are part of the contract and not separately charged.

Gunny bags supplied with rice under a contractual supply arrangement were treated as containers sold with taxable goods rather than exempt turnover. The statutory proviso applied because the bags were supplied with the rice, formed an integral part of the transaction, and were not separately charged in substance. As a result, the tax rate applicable to the containers followed the rate applicable to the rice contained in them, and the gunny bag turnover was taxable at the same rate as the rice.

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Issues: Whether gunny bags supplied along with rice, and forming part of the contractual supply arrangement, were liable to be taxed at the same rate as the rice contained therein under the fifth proviso to section 5(1) of the Orissa Sales Tax Act.

Analysis: The turnover of gunny bags was not exempt from tax. The question was confined to the applicable rate. The contract contemplated supply of rice in bags, and the Tribunal had treated the gunny as having an intimate connection with the supply of rice even though a separate price element could be perceived. Since rice was taxable at 3 per cent during the relevant period, the fifth proviso to section 5(1) applied to containers sold with taxable goods and not charged separately, making the container turnover taxable at the same rate as the goods contained therein.

Conclusion: The gunny bag turnover was rightly taxed at 3 per cent.

Ratio Decidendi: Where containers are supplied with taxable goods under the contract and are not separately charged in substance, the tax rate applicable to the containers follows the rate applicable to the goods contained therein under the statutory proviso.

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