Packing cost in controlled cement sales forms part of sale price and may be corrected by statutory rectification.

Packed cement sold under a statutory price-control regime was treated as including the cost of the bags and packing material in the sale price, so that amount could not be excluded from taxable turnover under Rule 6(4)(ff) of the Karnataka Sales Tax Rules, 1957. The court also noted that once the packing deduction was wrongly allowed, the error became one of law and was capable of rectification under Section 25-A of the Karnataka Sales Tax Act, 1957 because no bar to the statutory rectification power was shown. The rectified assessments were sustained.

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Issues: (i) Whether the cost of packing material and packing charges in the sale of cement were liable to be excluded from taxable turnover under Rule 6(4)(ff) of the Karnataka Sales Tax Rules, 1957. (ii) Whether rectification under Section 25-A of the Karnataka Sales Tax Act, 1957 was impermissible in the absence of an apparent mistake on the face of the record.

Issue (i): Whether the cost of packing material and packing charges in the sale of cement were liable to be excluded from taxable turnover under Rule 6(4)(ff) of the Karnataka Sales Tax Rules, 1957.

Analysis: Cement was sold as a controlled commodity under the Cement Control Order, 1967, and the price fixed for packed cement included the cost of packing material as one of its components. The sale of cement in bags therefore necessarily involved the sale of the bags themselves, and the amount recovered for such packing formed part of the sale price rather than an excludible packing charge.

Conclusion: The deduction claimed under Rule 6(4)(ff) was not available and the inclusion of the packing material cost in taxable turnover was upheld against the assessee.

Issue (ii): Whether rectification under Section 25-A of the Karnataka Sales Tax Act, 1957 was impermissible in the absence of an apparent mistake on the face of the record.

Analysis: Once the packing cost was treated as part of the sale price, the original allowance of deduction became an error of law. That error was capable of rectification under the statutory power, and the record disclosed no bar to the exercise of that power.

Conclusion: Rectification under Section 25-A was held to be valid and permissible.

Final Conclusion: The assessment orders as rectified were sustained, and the revision petitions failed.

Ratio Decidendi: Where packed goods are sold under a statutory price-control regime and the price of the packed article includes the cost of containers, the container cost forms part of the sale price and cannot be excluded from taxable turnover; such an erroneous allowance of deduction may also be corrected by statutory rectification powers.

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