JUDGMENT
K. Subba Rao, C.J.
1. This is a revision against the order of the Andhra Sales Tax Appellate Tribunal confirming that of the Commercial Tax Officer, East Godavari district.
2. The petitioner carries on the business of baling and pressing palmyra fibre. He purchases gunny cloth and iron hoops for the purpose of using them in the baling process. For the year 1951-52, the Sales Tax Authorities assessed him to sales tax on a turnover of Rs. 22, 865-7-6 being the value of gunny cloth and iron hoops. It was contended before the Tribunals that the contracts entered into between the petitioner and his constituents were works contracts and that the gunny cloth and the iron hoops became an integral part of the product entrusted to him for baling and pressing. Both the Tribunals negatived the contention and held that the petitioner is a “dealer” and that the transactions relating to gunny cloth and iron hoops were “sales” within the meaning of the Act.
3. Learned counsel raised before us the same points, which his client unsuccessfully raised before the Tribunals. He relies strongly upon the decision of a Division Bench of the Madras High Court in Gannon Dunkerley & Co. v. State of Madras (1954 5 S.T.C. 216; 1955 1 M.L.J. 87) in support of his contention that the contracts in question were not “sales” within the meaning of the definition of sale in the Act but only works contracts. There, Messrs. Gannon Dunkerley & Co. entered into a contract with third parties. They purchased some materials, which were made part of the building. One of the questions that arose for consideration was whether the materials supplied and made part of the building were sold by the assessee to the employer. The Division Bench held that there was no transaction of sale between the assessee and the employer and that the materials supplied became an integral part of the building constructed by them, under the contract. This view was dissented from by the Nagpur High Court in Pandit Banarsi Das v. State of Madhya Pradesh (1955 6 S.T.C. 93). Hidayatullah, J., who delivered the judgment on behalf of the Bench, after noticing the decision of the Division Bench of the Madras High Court, observed at page 105 thus :-
“The Madras decision, with all due respect, seems to suggest that the expression ‘sale of goods’ received its full and final meaning by 1935 through legislation and decided cases. The cases cited there do not refer to taxation but deal with other matters. So also the statutes. That building contracts are entire, that property in the building materials passes when they are part of immovable property and that payment is in a lump sum and not separately for the materials may be matters of consequence in some contexts. But there is always a sale if goods are transferred to another and paid for by him. It cannot be gainsaid that there is payment for materials, though the payment is not made separately but as part of a larger amount. That building materials are goods is clear from Deputy Federal Commissioner of Taxation v. Stronach (55 C.L.R. 305) and M. R. Hornibrook (Pty) Ltd. v. Federal Commissioner of Taxation (62 C.L.R. 272) and certain other rulings in Australia. The Sales Tax (Assessment) Acts, 1930-36, lay the tax on goods manufactured or imported into Australia granting exemptions for some building materials and these cases may not be fully apposite. But there is a clear statement that building materials can be treated as ‘goods’ and the wide definition of that term in the Constitution Act, 1935, renders the dictum easily applicable here. The Canadian Statutes also tax ‘manufacture’ but the cases of tailors (e.g. The King v. Pedrick and Palen (59 D.L.R. 315)) are interesting, though again not quite appropriate.”
4. It is not necessary in this case to express our preference to one or other of the two views, for, in this case, we are concerned only with movable property and they continued to be movable even after the works contract was completed. The only question therefore is whether the assessee is a “dealer” and whether there is a “sale” as defined in section 2(h) of the Madras General Sales Tax Act. Under section 2(b), “dealer” means any person who carries on the business of buying or selling goods. “Sale” is defined in section 2(h) thus :
“‘Sale’ with all its grammatical variations and cognate expressions 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.”
5. If the transactions in question involved sales, it is very difficult to hold that the assessee is not carrying on the business of selling goods, for it is admitted that the assessee carries on the business of baling and pressing fibre and, in the course of the same business, he transfers property in goods worth thousands.
6. In Krishna & Co., Ltd., Guntur v. State of Andhra (1956 7 S.T.C. 26 at pages 30, 35; 1955 A.L.T. 841), a Division Bench of this Court, of which one of us was a member, considered a similar question in the context of the process of redrying of tobacco. There, the question was whether the turnover of the packing material for redrying the tobacco was liable to tax. It was argued, as it is now argued before us, that the packing material had become an integral part of the drying process and, therefore, there was no sale involved in the transactions. After considering the case law on the subject, the Division Bench observed at page 845 :
“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 dried tobacco from contamination or loss.”
7. After adverting to the relevant provisions of the Act, at page 849 the following observations were made :
“They are clearly movable property within the wide meaning of the word ‘goods’ in the Act. The assessee had property in these goods, for, it is conceded that he purchased the material. It cannot also be disputed that he transferred the property in the goods to his customer for consideration. The accounts clearly show that he charged for the material in addition to his remuneration for drying the tobacco, though the price shown in the accounts is the inclusive one. All the ingredients of the charging section, read with the definition, are satisfied. Unless we can hold that the materials, after being packed, have been transformed into some other commodity not covered by the definition of goods, it is not possible to hold that there was no sale of that material. Though the learned counsel for the petitioner argued that packing material was an integral part of the drying process, he did not go to the extent of contending that the material lost its character as movable property. When the provisions of the Sales Tax Act clearly apply, there is really no scope for exempting them on some hypothetical considerations.”
8. In the present case, as in that case, the packing materials were “goods” within the definition of the Act. The assessee certainly had property in the goods and it is not disputed that he transferred them to his constituents. But what is said is that he did not sell the goods for consideration. It is said that he did not charge a separate price for the packing material. But, the order of the Andhra Sales Tax Appellate Tribunal clearly shows that he entered into three kinds of transactions, (i) where he charged an inclusive rate for both the gunny coverings and also the pressing process, (ii) where the gunny cloth and the hoops were supplied by the customers and rebate was granted by the assessee, and (iii) where the price of the goods and the cost of labour involved were separately shown. It is obvious that whatever method was adopted, the assessee charged for the gunny cloth and the hoops and it is impossible to conceive that a business man like the assessee would not have included in the charges the large amounts he spent for purchasing the gunny cloth and iron hoops. We, therefore, following the judgment in Krishna & Co., Ltd., Guntur v. State of Andhra (1956 7 S.T.C. 26; 1955 A.L.T. 841) hold that the transactions in question were “sales” within the meaning of the Act and, therefore, were liable to sales tax.
9. In the result, the revision fails and is dismissed with costs. Advocate’s fee Rs. 50.
