Chandra Reddy, C.J:— The controversy that is raised in this appeal filed by the State Government against the judgment of our learned brother, Veeraswami, J., relates to the scope and ambit of the notification dated 28th February, 1955. By and under that notification, potatoes among other goods were exempted from the payment of sales tax. The respondent who is a dealer in potatoes submitted returns for the year 1958-59, disclosing a gross turnover of Rs. 7,36,333.20 and claiming a deduction on a turnover of Rs. 7,21,454.52 as representing inter-State sales of potatoes. The balance of Rs. 14,878.68, being the value of packing material, was shown as assessable turnover. The break-up of this figure of Rs. 14,878.68 was as follows: Rs. 11,239.87 as the price of gunnies sold prior to 1st October, 1958, and taxable at 2 per cent., and Rs. 3,638.81, being the cost of the packing material sold subsequent to 1st October, 1958, and taxable at 7 per cent. On checking the accounts, the assessing authority thought that the value of gunnies sold before and after 1st October, 1958, should be computed at Rs. 15,491.25 and Rs. 4,851.75 respectively. He, therefore, issued a notice to the respondent to show cause why the assessable turnover should not be determined on that basis. As no objections were filed, the assessment was finalised and the tax payable by the assessee was fixed at Rs. 649.45 It is to remove these proceedings on certiorari that the jurisdiction of this Court was invoked under Article 226 of the Constitution.

2. Acceding to the proposition advanced on behalf of the respondent, that the assessee in this case was not a dealer in gunnies and that, therefore, his turnover was not amenable to tax, Veeraswami, J., allowed the writ petition. It is this conclusion of the learned Judge that is assailed before us.

3. In support of this appeal, it is urged by Sri V. Ramaswami, learned Additional Government Pleader, that the respondent answered the definition of a “dealer” enshrined in section 2(g) of the Madras General Sales Tax Act even in regard to gunnies and that he could not derive the benefit of the exemption granted by the notification mentioned above.

4. On the other hand, the point presented by Sri R.S Venkatachari on behalf of the assessee is that the value of gunnies can be included in the exemption granted by the notification mentioned earlier and that the respondent was not a dealer in respect of the packing materials for the purpose of this Act for the reason that his business was concerned with the sale of potatoes and not gunnies. He seeks to sustain the judgment under appeal by calling in aid some definitions contained in the Central Sales Tax Act, and rule 5 of the General Sales Tax Rules and certain decided cases, the latter of which will be referred to in their proper context.

5. Before we deal with the relative contentions, it is convenient to set out the relevant definitions in the Central Sales Tax Act, which govern this enquiry relating to inter-State sales, and the rules relied on by learned counsel for the respondent.

6. Section 2(b) defines a “dealer” as meaning any person who carries on the business of selling goods, and includes a Government which carries on such business.

7. Section 2(h) runs thus:

“‘Sale price’ means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged.”

8. Section 2(j) runs thus:

“‘turnover’ used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period and determined in the prescribed manner.”

9. It is manifest that, in order to justify the definition of a “dealer”, what is needed is that a person should carry on the business of buying and selling goods. Could it be postulated that the respondent in this case has not either bought or sold goods? If he indulges in the com-mercial activity of buying and selling the goods, he falls within the sweep and range of the definition of “dealer”. The expression “carrying” on the business is one of wide import and is calculated to cover an activity like the present, where, undoubtedly, the respondent has been buying and selling the goods. It could also be gathered from the relevant contents of the affidavit that he was also making a profit out of this business of selling and buying gunnies. It appears that the respondent charges a sum of Rs. 2-4-0 for packing charges, porter, cooly, etc. It is stated from the Bar that these gunnies are bought for less than 12 annas, whereas a sum of Rs. 2-4-0 is charged to the buyer. It may legitimately be inferred that the assessee was charging much more than the price he bought for. Be that as it may, it can be said that the definition is fulfilled the moment it is established that the respondent was buying and selling gunnies. We are not persuaded that this definition of “dealer” lends any countenance to the theory propounded by learned counsel for the respondent.

10. We are not impressed with the argument based upon the definition of “sale price” either. It is true that the “sale price” is the amount payable as consideration for the sale of goods. But the price paid to the respondent in this case comprehends the price of the gunnies also. The price that the respondent received was not exclusively for the potatoes.

11. It is urged by Sri Venkatachari that, there being no distinct and separate contract for the sale of gunnies, we should take it that the price was in respect of potatoes only. We do not think we can assent to this argument. It may be that there was no express contract for the sale of gunnies. But, undeniably, the contract for the sale of accessories like these can be implied. There is no reason why we should not hold that such a contract is implicit in this case. It is clearly stated in the affidavit that the price charged for a bag of potatoes is an all-inclusive one and takes in a sum of about Rs. 2-4-0 generally, as representing the value of the gunny and the charges for packing etc. That being so, it can be properly deduced that there was an implied contract for the sale of gunnies.

12. Nor is there anything in the language of the definition of “turnover”, which renders assistance to the respondent. At the outset, it may be mentioned that it is not the turnover of the business of potatoes that is exempted. The exemption is confined only to the price paid for potatoes as such. Moreover, the turnover in respect of potatoes is different from the turnover of the gunny bags. In fact, the respondent himself drew a distinction between these, and indicated in his return that the sale of gunnies is exigible to tax. It is thus manifest that the turnover in relation to gunny bags is quite distinct and separate from the turnover as regards potatoes. We are, therefore, unable to see how the respondent could derive any help from any of the definitions extracted above.

13. We shall now look at rule 5 of the General Sales Tax (Turnover and Assessment) Rules, 1939, (omitting unnecessary portions). That rule runs as follows:

“5. (1) The tax or taxes under section 3 or 5 or the notification or notifications under section 6(1) shall be levied on the net turnover of a dealer. In determining the net turnover the amounts specified in clauses (a) to (k) shall, subject to the conditions specified therein, be deducted from the gross turnover of a dealer—

(g) all amounts falling under the following two heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold:—

(i) freight;

(ii) charges for packing and delivery and other such like services.”

14. Sri Venkatachari lays stress on the terms of sub-clause (ii), viz., charges for packing and delivery, and maintains that all expenses incurred in respect of packing and delivery are to be excluded from the turnover of a dealer, and that, as the gunnies in this case are an integral part of packing and delivery, the assessee is entitled to exclude the cost of gunnies as well. We are unable to give weight to this contention. In our opinion, the charges for packing and delivery mean charges for labour expended in regard to packing and delivery. It does not take in the cost of material supplied for the purpose of packing and delivering the goods. Obviously, what is contemplated is the work and labour in connection with packing and delivering the articles. It is not wrong to suppose that the Government permitted the dealer to deduct this item from the turnover, for the reason that work and labour are not goods which should enter the calculation of price of a commodity. We are, therefore, not convinced that sub-clause (ii) of clause (g) of rule 5(1) enables the assessee to claim a deduction out of his turnover in regard to the sale of gunnies. It is conceded that the value of gunnies enters the price-structure. This is not a case where the property in the gunnies (containing the articles sold) passed without their being paid for. This is clearly a case where there was an agreement for the sale of gunnies as well. These gunnies are sold by the respondent in the course of his business, and, undoubtedly, the sale of gunnies is a commercial activity of his. The fact that the gunnies are an accessory to the respondent's business, far from supporting respondent's case as contended for by him, lends countenance to the argument advanced on behalf of the appellant that the sale of these goods is exigible to tax for the reason that it is also a business activity of his.

15. This view of ours gains support from a long line of authorities. We may begin the citation with Varasuki & Co. v. Province Of Madras [1951] 2 S.T.C 1., which is a leading case on the subject. The point that presented itself there was whether a dealer in salt, a commodity exempted from payment of tax, was liable to pay tax in respect of gunny bags containing the salt. The contention raised by the assessee in that case was that as salt was an exempted commodity under the relevant notification the packing materials could not be subjected to sales tax, since salt was incapable of being sold without being packed in gunnies. This argument did not find favour with the Division Bench of this Court which decided that case; they were of opinion that any exemption of an article must be strictly construed and confined to the exemption itself and not extended, and, if the notification exempted only salt, it could not be extended to the receptacles thereof.

16. In the same trend of thought is a judgment of this Court in Indian Leaf Tobacco Development Co. Ltd. v. The State of Madras (now Andhra). Here again, the subject-matter of the decision was packing material for tobacco, which was also exempted from sales tax. The learned Judges ruled that the value of the packing material in which tobacco was consigned to persons outside the State of Madras fell outside the pale of the notification granting exemption and was amenable to tax.

17. A judgment of another Division Bench of this Court, in Chidambara Nadar Sons and Co. v. State of Madras [1960] 11 S.T.C 321., is in consonance with the above-mentioned doctrine. The learned Judges in that case were concerned with an agreement to purchase cotton to be delivered to the buyers by sellers, and a claim was made on behalf of the assessee that the material in which the cotton was packed, was not liable to be taxed as the cotton was not amenable to sales tax. This claim was negatived by this Court for the reason that there was a contract to pay for and purchase the packing material, and, consequently, the turnover in respect of packing material was amenable to sales tax.

18. Yet another case of this Court which has a bearing on this enquiry is P. Nagarathinam v. State Of Madras [1960] 11 S.T.C 342. decided by a Division Bench. In this case also, the enquiry turned on the provisions of the notification exempting vegetables from payment of sales tax. The learned Judges held that the assessee could not claim exemption in regard to gunny bags and that they were assessable to tax by the department. The cited case is on all fours with the present case, since both are governed by the same notification, and so, the principle formulated there applies with full vigour to the case on hand.

19. A similar view was taken by the erstwhile Hyderabad High Court in Nizam Sugar Factory Ltd. v. Commissioner of Sales Tax, Hyderabad [1957] 8 S.T.C 61.. It was ruled there that gunnies in which sugar was despatched were not within the contemplation of the exemption governing the sale of sugar, and hence, the gunny bags containing sugar were subjected to tax.

20. A decision of the Andhra Pradesh High Court in Hyderabad Deccan Cigarette Factory v. State of Andhra Pradesh, which reviewed the case law on the subject, held that the packing materials, packets, and other containers and goods used for exporting cigarettes outside the State could not claim the benefit of exemption similar to the one in the instant case. It may be mentioned that these exemptions are granted by Madras State under section 6 of the Madras General Sales Tax Act and the Andhra Pradesh Government under section 9 of the Andhra Pradesh General Sales Tax Act.

21. Sri R.S Venkatachari heavily leans upon One decision of this Court in United Bleachers Ltd. v. The State of Madras and upon another of the Andhra Pradesh High Court, viz., The Guntur Tobaccos Ltd., Guntur v. The Government of Andhra (now Andhra Pradesh) and argues that, when a certain class of goods is exempted from sales tax, that exemption equally applies to the packing materials in the absence of distinct contract for the sale of the latter. We feel that neither of these two cases comes to his rescue, since both of them bear on contracts for performance of service.

22. In the first of these cases, the question raised was whether the price of packing material utilised by the assessee for purposes of bleaching and dyeing could be subjected to sales tax. It was answered in the negative for the reason that this material was necessarily to be used in the process of bleaching and dyeing. The service could not be performed without the use of this material. The packing material was absolutely essential for executing the contract, and an agreement to sell the packing material could not be implied or readily inferred. That the case on hand does not fall within that rule clearly appears from the reasoning adopted by the learned Judges in that very case. The following passage which brings out succinctly the distinction between the two types of cases, furnishes an answer to the argument advanced by Sri Venkatachari:

“Thus, in order that there could be a levy of sales tax, there should be a sale. Whether in regard to packing materials utilised in the performance of a contract between the parties there was a sale, would depend on the agreement between the parties. Such an agreement could be express or implied. Where the main contract was one of sale of goods as packed, such an agreement to sell the packing materials could, having regard to the nature of the contract, be readily implied; but, where the main contract was merely one of service, the fact that in the performance of such service, the packing materials are used and charged for, would not lead to a necessary inference that a sale of the materials was intended. In such a case, the onus would be on the taxing authority to prove that there was an agreement to sell the packing materials and a sale by the passing of property therein.”

23. Indisputably, the case on hand falls under the first category of contracts indicated in the above passage. It is interesting to note that these very learned Judges who decided that case gave the judgment, on the same day, in Chidambara Nadar Sons and Co. v. State of Madras, holding that the material used for packing cotton was amenable to tax, although the cotton contained in the gunnies was exempt from sales tax.

24. Nor is the judgment of the Full Bench of the Andhra Pradesh High Court in The Guntur Tobaccos Ltd., Guntur v. The Government of Andhra (now Andhra Pradesh) of any help to the respondent. The case under citation belongs to the category of United Bleachers Ltd. v. State of Madras. There the Full Bench had to consider whether the waterproof material used for packing re-dried tobacco could be subjected to sales tax. It was held there that, the contract being one for services, viz., re-drying raw tobacco, the material used in the process of re-drying could not be brought to tax. It should be borne in mind that, in this line of cases, the agreement was to pay for service and the material was used as an integral part of the performance of the service and as such incapable of being dissociated from the service. But the situation in cases like the present one is quite dissimilar. The association of the packing material with the potatoes for the purpose of export does not attract the exemption which is confined only to potatoes. These two cases, therefore, do not render any assistance to the respondent.

25. We shall now deal with three other cases cited by Sri Venkatachari. The first two are Commissioner of Sales Tax v. Hindoostan Spinning and Weaving Co. Ltd. and Ambica Mills Ltd. v. State of Gujarat [1964] 15 S.T.C 367.. These two cases are not in point for the reason that they concerned the sale of assets of the business and not goods which were involved in their business. Hence, the principle enunciated in those cases does not throw any light on the question we are called upon to decide. There are observations in Ambica Mills Ltd. v. State of Gujarat, which do definite disservice to the respondent. It was remarked by the learned Judges in the course of discussion on the taxability of the capital assets sold there that, where an assessee had effected sales which are incidental to his normal business or sale of subsidiary products or by-products arising out of his normal business, such sales would be considered as having been made in the course of his business. Undoubtedly, in this case, the sale of gunnies is incidental to his normal business in potatoes, and therefore, attracts liability to tax on the basis of those observations. The proposition is stated in similar terms in The Guntur Tobaccos Ltd., Guntur v. The Government of Andhra (now Andhra Pradesh), on which reliance is placed by learned counsel for the respondent. Thus, neither of these two cases lends any colour to the proposition advanced on behalf of the respondent.

26. West Coast Weaving Establishments…* v. State Of Kerala…. render much service to the respondent. In that case, the argument presented on behalf of the Revenue Department was that the materials used for packing handloom cloth were containers within the meaning of the relevant statutory provision, and, consequently, attracted the tax liability. A Division Bench of the Kerala High Court held that such materials could not answer the description of containers to fall within the scope of the concerned taxing statute. We are unconcerned with the correctness of that opinion. But the statement of the learned Judges that, unless there be a sale of the packing materials directly or indirectly to the consignee, tax cannot be attracted, does not lend any countenance to the argument of learned counsel for the respondent. That statement implies that, if there was a sale of packing material, the tax liability could be attracted. In this case, indisputably, there was the sale of gunny bags. That being so, the packing material is liable to tax even on the basis of the rationale of West Coast Weaving Establishments…* v. State Of Kerala…. these reasons, we express our respectful dissent from the view of our learned brother, and allow this appeal. The appellant will get their costs from the respondent.

27. Appeal allowed.