Composite sale principle protects packing material from separate tax where transfer is merely incidental to exempt goods.

Packing material sold along with exempted goods under the Incentive Scheme, 1989 was not separately taxable under the last proviso to section 5(1) of the Rajasthan Sales Tax Act, 1954 where its transfer was merely incidental to the sale of the principal commodity. The court treated the transaction as a composite sale and held that the taxable sale of the main goods could not be split into two parts to isolate the packing material for independent taxation. On that reasoning, the assessee's exemption prevailed and the packing material could not be subjected to tax in the stated circumstances.

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Issues: Whether a unit eligible for sales tax exemption under the Incentive Scheme, 1989 was liable to tax on sale of packing material in which the manufactured goods were contained by invoking the last proviso to section 5(1) of the Rajasthan Sales Tax Act, 1954.

Analysis: The decisive consideration was that where the packing material accompanies goods sold under an exemption scheme, the property in the packing material passes only incidentally and not as a separate principal sale. The taxable sale of the principal commodity cannot be split into two parts so as to bring the packing material independently to tax by resort to the last proviso to section 5(1).

Conclusion: The packing material could not be subjected to tax under the last proviso to section 5(1) of the Rajasthan Sales Tax Act, 1954 in the present circumstances, and the assessee's exemption prevailed.

Ratio Decidendi: Where exempted goods are sold along with packing material, and the transfer of the packing material is merely incidental to the sale of the principal commodity, the composite sale cannot be split to tax the packing material separately under the proviso to section 5(1).

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