JUDGMENT
Raju, J.
1. The assessee is the appellant herein. These appeals have been filed by the assessee against the order of the Joint Commissioner passed in suo motu exercise of revisional power for the assessment years 1974-75 and 1975-76.
2. The petitioner is a dealer in jaggery. As could be seen from the order of assessment itself, the cane jaggery was despatched to other States in gunny bags and the packing materials were not charged for in the bill. Further the assessing authority made revision of the assessment by estimating the value of the gunny bags on the ground that no materials had been placed to indicate the value of the gunny bags. When the matter was pursued on appeal, the first appellate authority has gone into the matter at length and took into account of the facts as noticed from the verification of the accounts that the appellant purchased jaggery packed in very poor and useless gunny bags and no price or value was fixed for the same when they were purchased from agriculturists. The appellant purchased jaggery from the agriculturists and it had not purchased any new or empty gunny bags for packing the jaggery so that it could be said that the appellant would have included the price of gunny while fixing the price of jaggery. In the view of the first appellate authority the cost of the gunny bags used for packing the jaggery might be in the range of 25 paise to 60 paise and was very negligible in the context of the goods purchased. The average price of one bag of jaggery was about Rs. 200. On such materials and having regard to the peculiar nature of the transaction under consideration the appellate authority held that the value of the packing materials which was comparatively insignificant and for which no separate cost was also fixed could not be said to have gone into the price structure of the commodity sold and consequently the value of the packing material would not be subject to tax. As against the order of the appellate authority, the Joint Commissioner, in exercise of his suo motu power of revision, thought it fit to interfere with the order of the appellate authority on the ground that the name and style of the business of the dealers were imprinted on the face of the gunnies used and further as they had to travel a long distance as far as Bombay, such gunnies should be of good quality. It may be pointed out at this stage that it is not the case of the revisional authority which has chosen to invoke the suo motu power of revision, that there was any material before it to factually contend or come to a finding that the gunnies used used were of good quality and on the other hand the reasoning of the revisional authority is based more on surmises than any actual facts or realities.
3. We have heard the learned counsel appearing on either side at length. While the learned counsel for the appellant contended, relying upon the reasoning of the first appellate authority that the turnover in question was not taxable and that at any rate the order passed by the revisional authority is vitiated by perversity of approach and lack of positive or definite material to support its action, the learned Additional Government Pleader would adopt the reasoning of the revisional authority and contend that irrespective of the value of the gunny bags in question used as packing material in these case or whether it was shown separately or not the same is liable to tax while admittedly all inclusive price has been charged, having regard to the definition of “sale price” in section 2(h) of the Central Sales Tax Act, 1956.
4. In Commissioner of Sales Tax v. Rai Bharat Das & Bros. [1988] 71 STC 277 the apex Court, while considering the scope of section 2(h) of the Act, has held that the question as to whether there was an agreement of sale of packing material is purely a question of fact depending upon the facts and circumstances of each case. Equally the supreme Court while adverting to its earlier decision reported in Jamana Flour & Oil Mill (P) Ltd. v. State of Bihar [1987] 65 STC 462 has pointed out that whether there was an implied agreement of sale of packing material along with the packed content therein is merely a question of fact. The Supreme Court was of the view that in view of the definition of section 2(h) of the Act, anything which was an integral part included any sum charged for anything done by the dealer in respect of the goods may form part but anything supplied separately pursuant to a separate order or directions or specifications to the purchaser could not form part of the sale price of goods since it was done to put the goods in the deliverable state and incidental to the same.
5. In a similar situation, a Division Bench of this Court in State of Tamil Nadu v. Venkateswara Roller Flour Mills and Metal Industries [1974] 33 STC 369 while sustaining the plea of the assessee, has observed as follows :
“Applying the above test to the facts of this case, it is clear that in the agreement there is no independent term for the sale of gunny bags as such by the assessee to the Food Corporation for a money consideration. As already stated, there is no reference to the supply of gunny bags, either old or new, apart from the contract to grind the wheat and supply wheat products in a packed condition. The assessees have used old and new gunny bags for packing the wheat products and this is only in the course of discharging their obligation of grinding wheat and supplying wheat products in a packed condition. The obligation to pack the wheat products in standard packing cannot be construed as an obligation to supply gunny bags for a price. We are, therefore, of the view, that, in this case, the Tribunal has come to the right conclusion.”
In the above circumstances, we are of the view that the value of the gunny bags in question in which the agriculturists themselves have sold the jaggery to the appellant, who in turn sold them to outside State dealers, could not be included as part of the sale price having regard to its insignificant value and also for the reason that neither the agriculturists nor the assessee agreed to charge any price for the gunnies. In our view, the first appellate authority was right in coming to the conclusion that having regard to the condition of the gunny bags and the further fact that the prices charged was for the net weight of the jaggery there could not have been any occasion to sell those gunny bags for cost to the purchaser or to fix the value of the goods supplied including the value of the gunnies so that the value of the gunny bags could be held to form part of the sale price.
6. The ratio of the unreported decision of a Division Bench of this Court to which one of us was a party rendered in T.C. (A) No. 1102 of 1981 on March 1, 1991 (A. R. Manickam Chettiar & Sons v. State of Tamil Nadu) [Since reported in [1992] 87 STC 134 (Mad.)] does not in any manner help to justify the stand of the Revenue. While considering the relevant case law on the subject the Division Bench noticed the relevant tests as well as circumstances which should guide the authorities in dealing with a claim of the nature in question. It could be seen from the ratio of the decisions considered by the Division Bench itself that the circumstance that the price was not separately fixed or that it was shown separately or not was not relevant and that what was really relevant is whether the parties to the transaction either expressly or impliedly agree to sell or transfer the property in the packing materials and whether the price charged included the price of the packing materials also. As a matter of fact the observations of the Division Bench as hereunder will go to show the real ratio of the decision :
“In the instant case, in the reply to the notice the assessee had admitted that the price of gunny bags was included in the price of the rice or paddy. That shows that neither rice nor paddy by themselves were sold free nor the gunny bags were sold free. The price was inclusive. The question as to whether there is an agreement to sell packing material is a pure question of fact depending upon the circumstances of each case. Whether packing material was subject to any agreement, express or implied, needs to be determined and would depend upon the nature of the transaction. On the basis of the admission of the assessee and keeping in view the nature of the transaction that what was sold was not merely rice or paddy but the same along with the packing material, that is, gunny bags, the Board of Revenue rightly found that the price of gunny bags was liable to be included in the taxable turnover.”
7. In [1989] 74 STC 379 (Raj Sheel v. State of Andhra Pradesh) the apex Court was of the view that the issue as to whether the packing material has been sold or merely transferred without consideration depends upon the contract between parties and the fact that the packing material is of insignificant value in relation to the contents may imply that there was no intention to sell the packing material. No doubt the apex Court also held that though the price of the goods is determined upon a consideration of several components, including the packing material and the price is the price of the goods it is not open to any one to say that the value of the different components which entered into a determination of the price of the goods should be analysed and separated in order that different rates of tax should be applied according to the character of the component. So far as the case on hand is concerned, not only the value of the packing materials was found to be insignificant when compared to the value of the jaggery but that the prices charged was for the net weight of the jaggery and there was no material to show that either the sale price of the jaggery included the value of the packing material or that an implied sale of packing materials was proved by the existence of any material on record. On such a fact situation of the cases before us, we are of the view that the order of the appellate authority was in accordance with law and it was not permissible for the Joint Commissioner to interfere with the said order on mere assumptions and conjectures alone, in exercise of his suo motu powers of revision.
8. That apart it is to be seen whether the Joint Commissioner could be said to have exercised his suo motu power of revision with proper and required care and for sufficient reasons or concrete materials as visualised under section 34 of the Tamil Nadu General Sales Tax Act, 1959. As for the scope of the appellate power of this Court in respect of such an order, a Division Bench of this Court in Sankar and Company v. State of Tamil Nadu [1980] 46 STC 32 has held that the right of appeal to the High Court under section 37 of the Act is both on questions of fact as well as questions of law, because the authority concerned was interfering with an order of a subordinate authority in revision and the appeal to the High Court is in substance and effect a first appeal. This is because the revisional authority exercising its suo motu power of revision virtually interferes with the order of a subordinate authority passed in favour of the assessee and the remedy of appeal provided for against such orders of suo motu powers is the first remedy to the assessee to seek relief and therefore it has got to be necessarily of the wide amplitude to enable the appellate authority to do real and substantive justice in the matter.
9. As we have noticed supra, except on assumption which in our view was not based on any substantial material but merely on surmises that the distance involved in the conveyance of the goods should lead to conclusion that the gunny bags, should be of good quality there is no material worth justifying the invocation of the suo motu powers of revision by the revisional authority on the facts and circumstances of this case. In the teeth of a specific and categoric finding of the first appellate authority based on accounts on the nature of the transaction, the Joint Commissioner in our view has exceeded his suo motu powers of revision to interfere with the well-considered finding of the appellate authority without any sufficient material or basis.
10. In the result, the order of the Joint Commissioner is set aside and the order of the first appellate authority is restored. The tax cases (appeals) are allowed. No costs.
11. Appeals allowed.