Destination delivery of unascertained goods made packing and handling charges part of sale price, while timber packing inputs escaped purchase tax.

Where unascertained goods were sold under arrangements making destination delivery and safe transit integral to completion of the bargain, property passed only on unconditional appropriation at delivery, so charges for packing, handling, loading, unloading, delivery, iron strapping, binding and lafa formed part of the sale price and were taxable. Packing timber used for crates and other packing materials was treated as an integral consumable in the marketing process, so its purchase against form 19 declarations did not attract purchase tax as an unauthorised use. The reference was therefore answered partly in favour of taxability of the service charges and partly against purchase tax on timber used for packing.

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Issues: (i) Whether the property in the goods passed to the purchasers only on delivery at the destination, and whether the amounts recovered for packing, handling, loading, unloading, delivery, iron strapping, binding and lafa charges formed part of the sale price under the Gujarat Sales Tax Act, 1969 and the Central Sales Tax Act, 1956; (ii) Whether the purchases of timber against declarations in form 19 for use as packing materials were liable to purchase tax under section 16 of the Gujarat Sales Tax Act, 1969.

Issue (i): Whether the property in the goods passed to the purchasers only on delivery at the destination, and whether the amounts recovered for packing, handling, loading, unloading, delivery, iron strapping, binding and lafa charges formed part of the sale price under the Gujarat Sales Tax Act, 1969 and the Central Sales Tax Act, 1956.

Analysis: The Tribunal's findings showed that, in the normal course of dealings, the assessee undertook to pack the fragile goods, arrange transport, and ensure delivery at the purchasers' destination. The evidence also showed that the charges were recovered for special packing and for services performed before the goods became ready for delivery, and that the purchasers did not, as a rule, take delivery ex-factory. In the case of unascertained goods, property passes on unconditional appropriation to the contract with the buyer's assent, and the surrounding circumstances indicated that appropriation and completion of the bargain occurred only when the goods were safely delivered at destination. Charges incurred for doing acts in respect of the goods at or before delivery, and charges forming part of the consideration for completing the sale, fell within the statutory concept of sale price.

Conclusion: The property in the goods passed only on destination delivery, and the disputed packing and allied charges were part of the sale price and taxable.

Issue (ii): Whether the purchases of timber against declarations in form 19 for use as packing materials were liable to purchase tax under section 16 of the Gujarat Sales Tax Act, 1969.

Analysis: The timber was used for making crates and packing materials. The later decision of the same court had already taken the view that packing materials could qualify as consumable stores when they formed an integral part of the manufacturing and marketing process, and that such materials were not excluded merely because they were used for safe transit and delivery. On that footing, the earlier contrary view of the Tribunal could not stand.

Conclusion: The purchases of timber for packing crates were not liable to purchase tax as a breach of the form 19 declarations.

Final Conclusion: The reference was answered by upholding taxability of the after-sale service charges but disallowing purchase tax on timber used for packing materials, with the remaining issue not pressed.

Ratio Decidendi: In a sale of unascertained goods, where the contract and conduct show that delivery and safe transit at destination are integral to completion of the bargain, the property passes only on such delivery and all consideration charged for pre-delivery packing and related services forms part of the sale price; packing materials used as an integral consumable in manufacture or safe marketing may not be treated as unauthorised purchases.

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