Marketability test for packaging: plastic spools wrapped with adhesive tapes formed part of the goods, not packing material.

Plastic spools used for wrapping adhesive plaster tapes were treated as part of the goods because the decisive test was whether the item was necessary to make the product marketable. Since the tapes could be sold only after being wrapped on the spools, the spools were held to form part of the saleable product and not merely packing material. On that basis, they fell outside the entry for prohibited polythene packing material, and denial of set-off could not be sustained. The referred questions were answered against the Revenue and in favour of the assessee.

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Issues: Whether plastic spools on which adhesive plaster tapes are wrapped are to be treated as component parts of the finished goods or as packing material, and whether the assessee was therefore entitled to set-off.

Analysis: The decisive test applied was whether the article in question was necessary to make the product marketable. A commodity is not complete as goods unless it becomes marketable, and whatever enters into and forms part of the process by which the product becomes marketable is to be regarded as part of the end-product. Adhesive plaster tapes could be sold only after being wrapped on plastic spools. On that reasoning, the spools were not merely packing material; they formed part of the goods marketed. Once they lost the character of packing material, they could not fall within the entry treating polythene packing material as prohibited goods, and the denial of set-off could not stand.

Conclusion: The plastic spools were component parts of the adhesive plaster tapes and not packing material. The answers to the referred questions were in the negative, in favour of the assessee and against the Revenue.

Ratio Decidendi: Anything that is necessary to make a product marketable and forms part of the process of bringing the goods into a saleable state is part of the goods themselves and not merely packing material.

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