Packing material remains taxable when sold with exempt goods if its value is included in the composite sale price.

The exemption for paddy and rice did not extend to gunny bags used as packing material, because the bags retained their separate physical and commercial identity. Where the admitted sale price included the value of the bags, the transaction was treated as a composite sale of goods with packing material, and the absence of a separate charge did not exclude that value from assessment. Rule 6(cc) of the Tamil Nadu General Sales Tax Rules did not alter this result on the facts. The value of the gunny bags was therefore includible in taxable turnover, and no exemption was available for the packing material.

---

---

Issues: Whether the value of gunny bags used for packing paddy and rice was includible in the assessee's taxable turnover, and whether exemption from tax on the goods sold extended to the packing material.

Analysis: The exemption under the Tamil Nadu General Sales Tax Act, 1959, applied to the sale of paddy and rice, not to the gunny bags in which they were packed. Packing material does not lose its separate physical or commercial identity merely because it accompanies exempt goods. Rule 6(cc) of the Tamil Nadu General Sales Tax Rules, 1959, did not assist the assessee on the facts, because the sale price, as admitted by the assessee, included the value of the gunny bags. The transaction was therefore one of a composite sale of goods along with packing material, and the absence of a separate charge for the bags did not prevent taxation of their value. The authorities relied upon the principle that where the sale includes the container or packing material as part of the bargain, its value is assessable to tax.

Conclusion: The value of the gunny bags was rightly included in the taxable turnover, and the assessee was not entitled to exemption in respect of the packing material.

---