Packing material tax on free sale sugar was unsustainable absent separate charge; clarificatory amendment operated retrospectively.

Gunny bags used to pack free sale sugar were not taxable on an implied-sale basis merely because their cost formed part of the packing cost; no separate price was charged or realised from customers, so the levy on that footing was unsustainable. Section 3-AB of the U.P. Trade Tax Act was treated as declaratory and clarificatory, intended to remove doubt and ensure uniformity in taxation of packing materials, and therefore operated retrospectively as an explanation of the existing law. The tax demand on the gunny bags was set aside.

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Issues: (i) whether gunny bags used for packing free sale sugar, without any separate price being charged, were liable to sales tax as an implied sale; (ii) whether section 3-AB of the U.P. Trade Tax Act was declaratory and retrospective in operation.

Issue (i): Whether gunny bags used for packing free sale sugar, without any separate price being charged, were liable to sales tax as an implied sale.

Analysis: The dispute related only to gunny bags used in the packing of free sale sugar. The relevant charging scheme taxed turnover, and the definition of turnover included the price of packing material in which goods were packed. However, mere inclusion of packing cost in the cost of production did not mean that the dealer had charged or realised the price of the gunny bags from customers. The earlier decision concerning levy sugar was distinguished because it turned on a different factual and price-fixation context and did not govern free sale sugar.

Conclusion: The tax on gunny bags was not sustainable on the footing of an implied sale, and the finding against the assessee was unsustainable.

Issue (ii): Whether section 3-AB of the U.P. Trade Tax Act was declaratory and retrospective in operation.

Analysis: The provision was introduced to clarify the position and to bring uniformity in taxation of packing materials. The Statement of Objects and Reasons showed that the amendment was intended to remove doubts and explain the existing legal position. Applying the settled principles governing declaratory and clarificatory enactments, such a provision operates retrospectively because it explains what the law has always meant rather than creating a new liability.

Conclusion: Section 3-AB was held to be declaratory, clarificatory, and retrospective.

Final Conclusion: The revisions were allowed and the levy of tax on the gunny bags used for packing the assessee's free sale sugar was set aside.

Ratio Decidendi: Where packing material is not separately charged from customers in the sale of exempt goods, tax cannot be imposed on the footing of an implied sale, and a provision enacted to clarify that no tax is payable on such packing material is retrospective and declaratory in nature.

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