TaxTMI 
TaxTMI 
1955 (8) TMI 33
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....bunal held, that, though tobacco was exempt from sales tax, the packing material was not exempt and that, as the packing materials were transferred to the constituents for consideration the transactions amounted to sales and, therefore, they were liable to sales tax. Mr. Sayee, learned counsel for the appellants, contended that pack- ing is an integral part of the drying process and, therefore, the contract between the parties is one of work and labour and that no sale is involv- ed in the transaction. The learned Government Pleader, on the other hand, argued that the process of packing is not a part of the drying process but is entirely extraneous to it. As the material is purchased by the assessees and the property therein is transferred to the customers for price, the transaction, in so far as the packing material is concerned, is clearly one of sale. Before adverting to the contentions of the parties it may be con- venient to notice briefly the manner in which raw tabacco undergoes the drying process. Why and how are the packing materials used? Are they used only to pack the dried tobacco to keep it intact and to pre- vent pollution and exposure, or, do they form a....
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....labour, it was ruled that the said contract was not covered by the 17th section of the Statute of Frauds which required a memorandum in writing if the contract was one of sale. Pollock, C.B., laid down the following rule to ascertain the character of contracts in similar cases: "Whether the work and labour is of the essence of the contract or whether it is the materials that are found." He proceeded to state: "My impression is that, in the case of a work of art, whether it be silver or gold or marble, or common plaster, that is a case of the appli- cation of labour of the highest description and the material is of no sort of importance as compared with the labour and therefore that all this would be recoverable as work and labour and materials found. I do not mean to say the price might not be recovered as goods sold and delivered if the work were completed and sent home. I am rather inclined to think it is only where the bargain is merely for goods thereafter to be made and not where it is a mixed contract of work and labour and materials found that the Act of Lord Tenterden applies." Martin, B., said: "There are three matters of charge well known in the law: for labour simply, fo....
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....was one of sale of goods or only of work and labour. The said decisions and others recognised four categories of contracts: (1) contracts for labour and work such as one for the pro- duction of a work of art, picture, statue, etc., (ii) contract primarily for labour and the materials supplied are only ancillary, i.e., paper and ink used by a painter or an artist, (iii) contract of sale of the finished product-denture or a ship of which the parts supplied become an integral part of the denture or the ship as the case may be, and (iv) contract of sale of the finished product but some of the materials supplied do not form part of the finished product but are sold sepa- rately. The present case is not covered by any of the aforesaid prin- ciples. Here, there is no sale of any finished product, for the assessee has no property in the tobacoo and has undertaken only to perform the drying process for consideration. It is simply a contract of work and labour so far as the drying process is concerned. It cannot be said that the packing material has become an integral part of the drying process like the parchment and ink of an artist. They are extraneous marketable material used to preserve ....
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.... wise not. If a building contract was not split up into its component parts, that is to say, material and labour, in legislative practice relating to the ordinary regulation of sale of goods, there is no warrant for holding that it could not be so spilt up even for purposes of taxation. The reasoning in the Madras case does not take into account the funda- mental fact that the Legislature could select out of a composite trans- action the actual sale of materials and tax such sale in the exercise of undoubted plenary powers." It is not necessary to express in this case our preference to one of the two views. Even if the Madras view be correct, it has no bearing on the present case as the learned judges held that the contract in that (1) [1955] 6 S.T.C. 93. case was one of labour and the material supplied became an integral part of the building. We shall now turn our attention to some of the cases, which are really relevant to the enquiry before us. In Varasuki & Co. v. The Province of Madras(1), a Division Bench of the Madras High Court, of which one of us was a member, had to consider whether gunny bags in which salt was packed was also exempt from sales tax along with the salt.....
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....o was consigned to the purchasers outside the State of Madras. The claim based upon section 4 of the Act is easiest dismissed. Packing materials cannot obviously come within the scope of tobacco in any form within the meaning of section 4 of the Act..........The value of the packing materials themselves had to be estimated." No doubt, in that case, it was held that the assessee was not entitled to the benefit of rule 5(1)(g)(ii) of the Turnover and Assess- ment Rules as he charged an inclusive price for both the tobacco and the packing materials when he sold the goods to the purchasers. In the present case, no attempt was made to rely upon the aforesaid rule, pre- sumably because the assessment related to a period prior to the coming into force of the rule. In Nimar Cotton Press, Khandwa v. The Sales Tax Officer, Khandwa(1), the petitioner owned a cotton press with which he pressed gin cotton belonging to his clients and recovered only the pressing charges. The question whether the hessian and iron hoops used for packing the bales were sold by the assessee and were, therefore, liable to sales tax was raised. In that context, the learned judges observed at page 443: "The order is....
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....s of those provisions. Section 3(1) says that, subject to the provisions of this Act, every dealer shall pay for each year a tax on his total turnover for such year. "Dealer" is defined to mean any person, who carries on the business of buying or selling goods [Vide section 2(b)]. Under section 2(C) " 'goods' means all kinds of movable property other than actionable claims, stocks and shares and securities and includes all materials, commodities and articles including those to be used in the construction, fitting out, improvement or repair of immovable property or in the fitting out, improvement or repair of movable property." Section 2(h) defines sale thus: "'Sale' with all its grammatical variations and cognate expres- sions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge." Section 2(1) defines "turnover" thus: "'Turnover' means the aggregate amount for which goods are either bought by or sold by a ....