Packing materials follow the tax status of exempt goods, so gunny bags used for coconuts were not taxable.

The amended scheme of section 3(7) and 3(8) of the Tamil Nadu General Sales Tax Act, 1959 treats the value of containers and packing materials, including gunny bags, as part of taxable turnover when goods are sold with packing, but it excludes that value where the packed goods themselves are exempt from tax. Because the coconuts were exempt, the exemption extended to the gunny bags used to pack them. Earlier Revenue authorities' reliance on pre-amendment decisions was inapposite, and the packing material was held not taxable.

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Issues: Whether the value of gunny bags used as packing materials for coconuts, the sale of which was exempt from tax, was liable to tax under section 3(7) of the Tamil Nadu General Sales Tax Act, 1959, after the amendment introducing sub-sections (7) and (8).

Analysis: The amended scheme of section 3(7) and 3(8) provides that where goods are sold with containers or packing materials, their value and the packing charges normally form part of the taxable turnover, but where the goods contained are exempt from tax, the value of the container or packing material and the packing charges are not liable to tax. The explanation also includes gunny bags within the meaning of containers. The exemption attached to the coconuts therefore extends to the gunny bags used for packing them. Earlier decisions relied on by the Revenue related to the pre-amendment position and were not applicable.

Conclusion: The gunny bags were not taxable when the coconuts packed therein were exempt from tax, and the assessee succeeded.

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