JUDGMENT
Dr. B.P. Saraf, J.
1. These three references arise out of a common order of the Maharashtra Sales Tax Tribunal (“the Tribunal”) passed on appeals under the Bombay Sales Tax Act, 1959 (“the Act”). The following common question of law has been referred by the Tribunal for our opinion :
“Whether, on the facts and circumstances of the case and upon interpretation of the contracts as revealed from the letters issued by the breweries, the Tribunal was justified in upholding the levy of purchase tax under section 13 of the Bombay Sales Tax Act, 1959, on the ground that there was no express or implied contract of sale of gunny bags, in which the empty bottles were sold ?”
2. The material facts, relevant for determination of the controversy in this case, are as follows :
The assessee deals in old bottles which are mostly sold to breweries. It is registered as a dealer under the Bombay Sales Tax Act, 1959. It was assessed by the Sales Tax Officer under section 33 of the Act for the periods April 1, 1977 to March 31, 1978 and April 1, 1978 to March 31, 1979, by his orders of assessment dated November 30, 1980. In these assessments, the Sales Tax Officer did not levy any purchase tax under section 13 of the Act on the purchases of gunny bags made by the assessee from unregistered dealers. Subsequently, the Sales Tax Officer noticed that purchase tax was leviable under section 13 of the Act on the turnover of purchases of gunny bags made by the assessee from unregistered dealers during the above periods, which had escaped assessment. He, therefore, initiated proceedings for reassessment under section 35 of the Act by issuing notice in form 28. By the said notice the assessee was informed that purchase tax was proposed to be levied under section 13 of the Act on the purchases of gunny bags amounting to Rs. 86,375 and Rs. 1,78,284 made by the assessee from unregistered dealers during the periods April 1, 1977 to March 31, 1978 and April 1, 1978 to March 31, 1979, respectively. The assessee did not respond to the said notice. The Sales Tax Officer, therefore, reassessed the amount of tax due from the assessee in these periods and levied purchase tax under section 13 of the Act on the turnover of purchases to gunny bags as mentioned in the above notice. The Sales Tax Officer also assessed the tax due from the assessee for the period April 1, 1979 to March 31, 1980 under section 33 of the Act by his order of assessment dated June 29, 1982. In that order also, the Sales Tax Officer levied purchase tax under section 13 of the Act on the turnover of purchases of gunny bags amounting to Rs. 3,34, 918 purchased by the assessee from unregistered dealers as he found that the gunny bags so purchased were not resold by the assessee. While making the above assessments, the Sales Tax Officer rejected the contention of the assessee that the gunny bags purchased by it from unregistered dealers were resold along with the empty bottles sold by it. Aggrieved by the above order of the Sales Tax Officer, in so far as it relates to the levy of purchase tax under section 13 of the Act on the purchase price of gunny bags, the assessee appealed to the Assistant Commissioner of Sales Tax. The sole contention of the assessee before the Assistant Commissioner was that the gunny bags had been impliedly resold with the empty bottles and hence not purchase tax was leviable under section 13 on the purchase price thereof. The Assistant Commissioner did not accept the above contention of the assessee and dismissed the appeal. The assessee went in second appeal to the Maharashtra Sales Tax Tribunal. Before the Tribunal, the assessee reiterated its contention that the gunny bags in question, which were used for packing of empty bottles, were sold by it along with the bottles and hence section 13 of the Act had not application. A few certificates issued by some of the breweries were also produced in support of its contention that there was a contract of sale of gunny bags along with the bottles. The contention of the Revenue before the Tribunal was that there was no sale of gunny bags, either implied or express, and hence section 13 of the Act was clearly attracted and purchase tax was leviable on the value thereof. The Tribunal, after going through the facts of the case and various decisions of the Supreme Court and different High Courts relied upon by the parties, came to the conclusion that there was no express or implied contract of sale of packing material, i.e., gunny bags. According to the Tribunal, the assessee intended to sell only empty bottles, the bargain was also for sale of empty bottles, and gunny bags were used merely as a convenient and cheap vehicle of transport. The Tribunal arrived at a finding that the empty bottles could not be put in trucks or wagons without putting them in gunny bags and that the gunny bags were used by the assessee merely as a convenient mode of transport of bottles. The Tribunal observed that the cost of gunny bags, which were used as packing material, was also not significant, it being about 2 per cent of the value of the contents. Considering the totality of all these factors, the Tribunal came to the conclusion that it was not possible to infer an implied sale of gunny bags. The Tribunal, therefore, confirmed the levy of purchase tax on the purchase price of gunny bags under section 13 of the Act and dismissed the appeals of the assessee. Hence, this reference at the instance of the assessee.
3. We have heard the counsel for the parties. There is no dispute about any of the material facts or the law. The admitted position is that the contracts between the assessee and the breweries were contracts of sale of empty bottles only. There were no express contracts of sale of gunny bags which were used for packing the bottles. No price was charged for the gunny bags. The only controversy is whether such contracts could be inferred. Counsel for the parties are agreed that, in the present case, if contracts of sale of gunny bags can be inferred, no purchase tax would be leviable under section 13 of the Act. If not, purchase tax would be leviable. It may be pertinent to mention that section 13 provides for levy of purchase tax on certain purchases of goods from an unregistered dealer, if the purchased goods are not resold by the purchasing dealer. The case of the Revenue is that there were no sales of gunny bags, express or implied and hence purchase tax would be leviable on purchases of the same. The assessee also does not contend that there is any express sale of gunny bags. He, however, wants an implied sale of gunny bags to be inferred. The taxing authorities, including the Tribunal, on consideration of the facts of the case, arrived at a finding that no implied contract of sale of gunny bags could be inferred. It is this decision of the authorities, confirmed by the Tribunal, which is subject-matter of challenge in this reference before us.
4. Similar controversy came up before the Supreme Court in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh [1966] 17 STC 624. In that case, the taxing authorities sought to assess the assessee, a manufacturer and dealer in cigarettes, on the turnover in respect of packing materials of cigarettes consisting of cardboard and dealwood. The sales of cigarettes were exempt from sales tax. The assessee contended that there was no sale of packing materials as it sold only cigarettes at Rs. 8.50 per thousand without charging extra for packing materials. It was not disputed that there was no express contract of sale of packing material. The contention of the Revenue was that the consolidated price for which the packed cigarettes of the were sold represented in part the sale price of the packing materials and an agreement to sell the packing materials for a price was embedded in the consolidated price for which the packed cigarettes were sold. The Supreme Court observed that the law is well-settled that in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, that it must be supported by money consideration, and that as a result of the transaction property must actually pass in the goods. Unless all these elements are present, there can be no sale. The Supreme Court, however, held that the contract of sale may be express or implied.
Dealing with the question whether such contract could be inferred in the case before it, the Supreme Court observed :
“…… The authority concerned should ask and answer the question whether the parties in the instant case, having regard to the circumstances of the case, intended to sell or buy the packing materials, or whether the subject-matter of the contracts of sale was only the cigarettes and that the packing materials did not form part of the bargain at all, but were used by the seller as a convenient and cheap vehicle of transport. He may also have to consider the question whether, when a trader in cigarettes sold cigarettes priced at a particular figure for a specified number and handed them over to a customer in a cheap cardboard container of insignificant value, he intended to sell the cardboard container and the customer intended to buy the same ?”
The Supreme Court, however, made it clear that it was not possible to state as a proposition of law that whenever particular goods were sold in a container the parties did not intend to sell or buy the container also, and observed :
“….. Many cases may be visualised where the container is comparatively of high value and sometimes even higher than that contained in it. Scent or whisky may be sold in costly containers. Even cigarettes may be sold in silver or gold caskets. It may be that in such case the agreement to pay an extra price for the container may be more readily implied.”
5. It is clear from the above decision of the Supreme Court that implied sale of packing materials cannot be inferred except in cases where the special facts and circumstances of that case justify such an inference. It is necessary in most of the cases to pack the goods in some material or container for the purpose of transportation, handling, etc. Take for example, foodgrains, pulses, atta, etc. They are to be packed in some container. The containers ordinarily used for the purpose are gunny bags. Similarly, oils are packed in tins, plastic cans, PVC bags, etc. Various other foods and provisions are also packed in one container or the other, depending upon the nature of the goods packed, quantity packed, risk of deterioration of the quality of the product by atmospheric forces, etc. Medicines are packed in glass or plastic bottles, strips, etc. Mineral water is packed in plastic bottles. Cement, fertilisers, paints, etc., are all packed in some container. Even stone chips are packed in gunny bags. In all these cases neither the seller intends to sell the containers nor the buyer intends to but the same. These containers are actually used merely as a convenient and cheap vehicle of transport. No sale of packing materials or container is involved in such cases. The fact that the seller had procured these packing materials for a price, or that the value of the containers must have been taken into account while fixing the price of the goods packed therein, or that the used packing material, even as waste product, would have some value howsoever insignificant it might be, is not relevant for deciding whether there is an implied sale of containers or packing materials. Equally irrelevant is the fact that the goods could have been packed in some other material which might be cheaper than the material used, because that is a decision which can be taken only by the manufacturer or the seller, keeping in view the convenience of handling, carriage, preservation, etc., of the goods packed therein and the relative merits and demerits of the different types of packing materials. No contract of sale of packing material can, therefore, be inferred in the cases referred to above.
6. The only cases where sale of containers or packing material can be implied are the case, where considering the extraordinary nature of the container used by the dealer, it can be said that one of the considerations in the mind of the purchaser could have been to get the special container by paying extra consideration for the product packed therein. Some of the cases falling in this category as indicated by the Supreme Court in Hyderabad Deccan Cigarette Factory [1966] 17 STC 624, are cigarettes sold in silver or gold caskets or scents and whisky sold in costly containers. Many more cases may be visualised which would fall in this category. One such instance may be of edible oil sold in costly stainless steel cans or containers which can be used in the kitchen as utensil. Another instance may be of packing foodgrains, pulses, etc., in very costly cloth-bags or bags made or tarpauline/parachute cloth. We do not propose to multiply the instances. Suffice it to say, that implied sale can be inferred only where the container is of such an exceptional type and of unusually high value which, in ordinary course of business, is not used for packing the goods in question. In these cases only an agreement to pay extra price for the container may be implicit, which may justify an inference of implied sale of container or packing material.
7. We may now turn to the facts of the present case to ascertain whether there was an implied sale of gunny bags which were used for packing the empty bottles sold by the assessee to the breweries. Admittedly there was no express sale of contract of the gunny bags. The contract was only for supply of empty bottles which is evident from the description of material contained in the purchase orders. In the purchase order order from M/s. Skol Breweries Ltd., the following description appears :
————————————————————————
Description of material Quantity ordered Rate
------------------------------------------------------------------------
Second-hand 650 ml. amber empty 6 lacs bottles F.O.R. Urah
beer bottles duly sorted out so as 0.66 each
to be absolutely free of any kind + 3 per cent
of smell and foreign matter. M.S.T.
------------------------------------------------------------------------
The purchase order from M/s. Hindustan Breweries and Bottling Limited contains the following description of the goods intended to be purchased, quantity and the rate per unit :
------------------------------------------------------------------------
Articles Specifications (including Quantity Rate per
make where necessary unit unit Rs. P.
------------------------------------------------------------------------
Second-hand beer 650 ml. 24 lacs 71 each
bottles amber colour
------------------------------------------------------------------------
8. It is also evident from the certificates issued by some of the breweries who had purchased the empty bottles from the assessee that the subject-matter of agreement was empty bottles and not gunny bags in which they were packed. It is stated in the certificate issued by M/s. Kosang Co-operative Distillery Ltd. as under :
“Our contract was for purchase of bottles only. We agreed to purchase the bottles and all bottles are packed in gunny bags each containing 72 bottles. They have not charged for gunny bags separately but the price of gunny bags is included in the sale price for the bottles.”
M/s. Krishna Sahakari Sakhar Karkhana Ltd. has issued the following certificate :
“This is to certify that in the years 1978-79 to 1982-83 we have purchased old empty bottles packed in old gunny bags from M/s. Dhariwal Bottle Trading Co., 12/A, Arab Lane, Mistri Compound, Bombay-8. They have not charged any extra price for the gunny bags separately.”
The certificate from M/s. Skol Breweries Ltd. is in the following terms :
“This is to certify that we have been purchasing empty beer bottles from Ms/. Dhariwal Bottle Trading Co., from the start of this brewery.
The contract is for purchase of beer bottles which are normally packed in gunny bags containing 72 bottles each. We have not paid for gunny bags separately and the contract price is inclusive of cost of gunny bags, loading charges, transport cost, etc.”
M/s. Hindustan Breweries and Bottling Ltd. issued a letter to the assessee wherein it confirmed that the order was only for purchase of empty bottles. It reads :
“We hereby confirm that whenever we place an order with you for the purchase of empty beer bottles, the order is always inclusive of the cost of packing container and no separate price is payable to you towards gunny bags.”
9. From purchase orders and the statements contained in the above certificates and letter, it is clear that the subject-matter of agreement of sale between the parties in the present case was empty bottles and not the gunny bags in which they were packed. Gunny bags, obviously, were used only as a convenient and cheap means of transport, because without packing the bottles in some containers, it was difficult to carry them from one place to another. Gunny bags were naturally the obvious choice. In such circumstances, it is difficult to hold that the purchasers of empty bottles intended to purchase the gunny bags also. That being so, no implied sale of gunny bags can be inferred.
10. In view of the above discussion, we are of the clear opinion that the Tribunal was justified in upholding the levy of purchase tax on the assessee under section 13 of the Bombay Sales Tax Act on the ground that there was not sale of gunny bags express or implied along with the empty bottles sold by the assessee.
11. Accordingly we answer the question referred to us in the affirmative and in favour of the Revenue.
Under the facts and circumstances of the case, there shall be no order as to costs.
Reference answered in the affirmative.