Purchase tax on packing material turns on whether its cost formed part of the composite sale price.

Liability under section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act, 1959 arises only when goods purchased without tax under sections 3, 4 or 5 are later disposed of otherwise than by sale in the State. In assessing dried plantain bark used as packing material for snuff, the material issue was whether it was separately transferred without consideration or sold as part of the composite sale of snuff. The absence of a separate sale did not by itself disprove sale; the relevant inquiry was whether the packing cost formed part of the snuff sale price. On the facts, no finding showed exclusion of that cost, so the packing was treated as essential to the sale and section 7-A(1)(b) was not attracted.

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Issues: Whether the purchase of dried plantain bark used as packing material for snuff was liable to purchase tax under section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act, 1959, on the footing that it was disposed of otherwise than by way of sale in the State.

Analysis: Liability under section 7-A(1)(b) arises only where goods are purchased in circumstances in which no tax is payable under sections 3, 4 or 5 and are thereafter disposed of in a manner other than by way of sale in the State. The decisive question was whether the packing material had been sold along with the snuff or merely transferred without consideration. The absence of a separate sale of the packing material, by itself, did not establish that it was not sold. The material question was whether the cost of the packing material had been included in the sale price of the snuff. On the facts, there was no finding that such cost had been excluded, and the nature of the transaction supported the assessee's stand that the packing was essential to the sale and formed part of the sale price.

Conclusion: Section 7-A(1)(b) was not attracted, and the purchase turnover was not liable to purchase tax.

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