Separate sale of packing material depends on overall facts, and distinct pricing can support taxable treatment of containers.

Packing material such as HDPE bags used for cement is separately taxable only if the totality of facts shows a distinct sale of the containers and not a merely incidental transfer with the contents. The relevant enquiry turns on the contract, conduct of the parties, billing, accounting treatment, pricing, reuse potential, and other surrounding circumstances; the revenue bears the burden of proving taxability. On the evidence discussed, the bags were separately priced and accounted for, treated as a distinct trading activity, and supported by bills, orders, and related records, so the finding of a separate and independent contract was sustained in favour of the assessee.

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Issues: Whether the packing material, namely HDPE bags used for cement, was sold under a separate and independent contract so as to constitute a distinct taxable sale.

Analysis: The applicable test is whether the transaction, on a consideration of all surrounding facts, discloses a separate sale of the container or packing material, or merely an incidental transfer with the sale of the contents. The question is one of fact and must be decided from the contract, conduct of the parties, accounting treatment, billing pattern, pricing, reuse potential, and other surrounding circumstances. The burden to establish taxability lies on the revenue, and the mere fact that cement could not be sold without packing, or that no separate written agreement existed, is not . On the evidence accepted by the Tribunal, the HDPE bags were separately priced, separately accounted for, treated as a distinct trading activity, and supported by bills, orders, stockist communications, and related records. The findings were not shown to be perverse or unsupported by material.

Conclusion: The HDPE bags were sold under a separate and independent contract, and the finding that the assessee effected a distinct resale of packing material is upheld in favour of the assessee.

Ratio Decidendi: Whether packing material is separately sold depends on the totality of facts and the contract between the parties, and where the evidence shows a distinct commercial sale of the packing material, tax cannot be imposed on a mere assumption that the packing is only incidental to the sale of the contents.

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