Packing material with exempt goods can inherit the same tax exemption under Central sales tax rules.

Packing material sold with exempt goods may share the same tax treatment where the State sales tax law deems the packing to form part of the sale price of those goods. The Explanation to section 2(o) of the M. P. General Sales Tax Act, 1958 treats packing material or containers as part of the goods sold, and section 8(2A) of the Central Sales Tax Act, 1956 reduces Central sales tax to nil where the turnover relates to goods generally exempt under the State law. On that basis, gunny bags sold with exempt bidi were treated as exempt from Central sales tax.

---

---

Issues: Whether gunny bags sold along with exempted bidi were also exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act, 1956, read with the Explanation to section 2(o) of the M. P. General Sales Tax Act, 1958.

Analysis: The Explanation to section 2(o) of the M. P. General Sales Tax Act, 1958 creates a legal fiction that where goods are sold with packing material or container, the value of such packing material forms part of the sale price of the goods and is treated as part of the goods sold. Section 6(1A) of the Central Sales Tax Act, 1956 fastens liability on inter-State sales notwithstanding the absence of local tax liability, but section 8(2A) provides that where the turnover relates to goods exempt from tax generally under the sales tax law of the appropriate State, the Central sales tax payable shall be nil. Since bidi was exempt from tax during the relevant period, the packing material sold with it was treated as part of the exempt sale for the purpose of section 8(2A).

Conclusion: The gunny bags sold along with exempted bidi were exempt from Central sales tax, and the answer to the reference was in the affirmative in favour of the assessee.

Ratio Decidendi: Where packing material is statutorily deemed to form part of the sale price of exempt goods, the exemption applicable to the goods extends to the packing material for purposes of Central sales tax under section 8(2A) of the Central Sales Tax Act, 1956.

---