Statutory levy procurement is not a taxable sale, and incidental packing material needs a separate sale agreement to be taxed.

Procurement of rice under a statutory levy scheme was treated as compulsory acquisition rather than a consensual sale, because the supplier had no real freedom to bargain and the Food Corporation of India was not acting as a dealer in that context; sales tax on those procurements was therefore unsustainable. Bardana transferred with the goods was treated as incidental packing material, and in the absence of a separate bargain or independent agreement to sell it, no distinct taxable sale of bardana could be inferred. The tax demands and allied orders were accordingly set aside on these substantive points.

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Issues: (i) Whether the procurement of rice by the Food Corporation of India under the levy orders amounted to a sale exigible to sales tax; (ii) whether tax could be levied on bardana transferred along with the goods in the absence of an independent agreement to sell.

Issue (i): Whether the procurement of rice by the Food Corporation of India under the levy orders amounted to a sale exigible to sales tax.

Analysis: The transactions under the levy orders were held to be in the nature of compulsory acquisition under a statutory scheme, with no real freedom to bargain in the relevant area. The earlier decision in the Corporation's favour was treated as still governing such levy-order transactions, because the later Supreme Court authorities did not displace that ratio in cases where the statutory order operates as compulsory procurement rather than consensual trading. The Court held that there was no profit-motive at this stage and that the Corporation did not act as a dealer in the legal sense for these procurements.

Conclusion: The rice procured under the levy orders did not amount to a taxable sale, and the levy of sales tax on those transactions was unsustainable.

Issue (ii): Whether tax could be levied on bardana transferred along with the goods in the absence of an independent agreement to sell.

Analysis: Bardana was treated as merely a cheap and incidental mode of packing and conveying the commodity. In the absence of proof of a separate bargain or independent agreement to sell the packing material, no distinct taxable sale of bardana could be inferred merely from its delivery with the goods.

Conclusion: The assessment of sales tax on bardana was quashed.

Final Conclusion: The impugned tax demands and allied orders were set aside, and the writ petitions succeeded on the substantive tax issues decided by the Court.

Ratio Decidendi: Where goods are procured under a statutory levy scheme that leaves no real freedom to bargain, the transaction is not a sale; and packing material transferred incidentally with the goods is not separately taxable unless an independent agreement to sell it is shown.

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