Packing material classification for yarn cones and tubes recognised where trade usage treats wound yarn as a saleable package.

Paper cones and tubes used for winding yarn were treated as packing material in the spinning trade, because the wound yarn is commercially regarded as a package for sale and preservation. The Tribunal applied the principle that packing covers not only wrapping or encasing for storage and transport, but also placing a commodity in a container or wrapper for sale. On that basis, it held that the earlier classification of the article as goods used in connection with manufacture under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 could not stand and had to be ignored.

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Issues: Whether paper cones and tubes used in winding yarn are to be treated as packing material only, and whether the earlier classification of the product as "any goods" used in connection with manufacture under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 should be ignored.

Analysis: The Tribunal noted the materials placed before it showing that in the spinning industry the winding of yarn on cones and tubes is described as packaging, and that the wound yarn with such cones and tubes is treated as a package for sale. Relying on the principle that packing includes not only wrapping or encasing for storage and transport but also placing a commodity in a container or wrapper for sale and preservation, the Tribunal held that the earlier characterization of the product could not stand. The Tribunal therefore accepted the petitioners' contention that the paper cones and tubes function as packing material in relation to the yarn wound on them.

Conclusion: The paper cones and tubes are packing material only, and the contrary classification in the earlier order was directed to be ignored.

Final Conclusion: The review petitions succeeded and the product was held to fall within packing material rather than the earlier disputed classification.

Ratio Decidendi: Where an article serves to contain and present the principal commodity for sale in the trade understanding of the industry, it may be treated as packing material even if it is also used in the manufacturing process.

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