Packing materials and empty bottles retained their identity, so purchase turnover was not liable under the sales tax provisions.

Empty bottles used only to fill and sell medicines after manufacture were not 'consumed' in the manufacturing process because their identity remained intact, so purchase turnover was not chargeable under section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act. Dealwood boxes used for packing and despatch formed part of the composite sale of the goods, with no separate bargain or return arrangement, so they were not treated as disposed of otherwise than by sale under section 7-A(1)(b). The turnover relating to both items was therefore held unsustainable and was set aside.

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Issues: (i) Whether empty bottles purchased by the assessee were consumed in the manufacture of drugs or syrups so as to attract section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act. (ii) Whether dealwood boxes used for packing and despatch of the manufactured goods were disposed of otherwise than by way of sale so as to attract section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act.

Issue (i): Whether empty bottles purchased by the assessee were consumed in the manufacture of drugs or syrups so as to attract section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act.

Analysis: The expression "consumed" in the sales tax provision requires the purchased goods to be used up in the process of manufacture so that their identity is lost. Bottles used only as containers for filling medicines after manufacture do not form part of the manufacturing process, and their identity remains unchanged. The mere fact that medicines are more conveniently sold after bottling does not mean that the bottles are consumed in manufacture.

Conclusion: The empty bottles were not consumed in the manufacture of drugs or syrups and their purchase turnover was not liable under section 7-A(1)(a).

Issue (ii): Whether dealwood boxes used for packing and despatch of the manufactured goods were disposed of otherwise than by way of sale so as to attract section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act.

Analysis: Packing materials used for despatch of the goods were treated as part of the composite sale of the manufactured articles. Where there is no separate bargain for the packing materials and no arrangement for their return, property in the packing material passes along with the goods sold. On that footing, the dealwood boxes could not be treated as goods disposed of otherwise than by sale.

Conclusion: The dealwood boxes were sold along with the goods and their purchase turnover was not liable under section 7-A(1)(b).

Final Conclusion: The assessment on the turnover relating to empty bottles and dealwood boxes was unsustainable and was set aside, with consequential relief to the assessee.

Ratio Decidendi: Goods used merely as containers or packing materials after manufacture do not amount to goods consumed in manufacture if their identity remains intact, and packing materials pass as part of the sale where they are used to deliver the goods sold without any separate bargain for their return.

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