Packing material cannot be separately taxed without proof of an independent sale, the Rajasthan High Court held.

The proviso to section 5(1) of the Rajasthan Sales Tax Act, 1954 was treated as part of the rate structure for computing tax and not as a deeming fiction creating an independent sale of packing material. Separate taxation of packing material required proof that the material was sold independently of the principal goods, with transfer of property for consideration referable to that material alone. Where there was only one transaction and one sale price, tax could not be split to treat the packing material as a separate sale. The issue was decided in favour of the assessee.

---

---

Issues: Whether tax could be levied separately on packing material contained in goods sold under a single sale transaction by invoking the last proviso to section 5(1) of the Rajasthan Sales Tax Act, 1954 without proving an independent sale of the packing material.

Analysis: The Court held that the proviso to section 5(1) is only part of the rate structure for computation of tax and does not create a legal fiction of an independent sale of packing material. Before separate tax can be imposed, the revenue must establish as a fact that the packing material was sold independently of the principal commodity, with transfer of property in the packing material for consideration referable to that material alone. Where there is only a single transaction and single sale price, tax cannot be split by treating the packing material as a separate deemed sale.

Conclusion: Tax could not be levied separately on the packing material merely by relying on the last proviso to section 5(1) without proof of an independent sale. The issue was decided in favour of the assessee.

Ratio Decidendi: A provision fixing rates for taxable turnover cannot, by itself, create a deemed independent sale; separate taxation of packing material requires proof of an actual transfer of property in that material for consideration as a distinct transaction.

---