G.P Singh, C.J:— This judgment shall also dispose of Misc. Civil Cases Nos. 547 and 778 of 1974.

2. These are three references made by the Salts Tax Appellate Tribunal (Board of Revenue) referring for our answer to two common questions of law which are as follows:

“1. Whether or not, on the facts and circumstances of the case, the assessee is liable for sales tax in respect of the estimated value of the gunny bags which were used when sugar was sold by the assessee and which were in conformity with the standard prescribed by clause (a) of the Order G.S.R 718-Ess. Com./Sugar dated 20-5-1961.

2. Whether or not, on the facts and circumstances of the case, the assessee is liable to pay sales tax on the sale of one truck, one jeep and one car during the accounting period 1964-1965 and one truck during the accounting period 1966-1967.”

3. The periods of assessment covered by these references are from 1st October 1964 to 30th September 1965 and 1st October 1966 to 30th September 1967. The assessee is a manufacturer of sugar which was sold during both the periods packed in gunny bags. Sugar is an exempted commodity. In the assessment in respect of the first period, a sum of Rs. 1,32,248 representing the value of the gunny bags in which the sugar sold by the assessee was packed, was included in the turnover and the assessee was taxed on it under the Madhya Pradesh General Sales Tax Act, 1958. Similarly, in respect of the second period, the assessee was taxed on a sum of Rs. 1,29,555 under the Central Sales Tax Act, 1956 and on a sum of Rs. 9,250 under the State Act, both amounts representing the value of gunny bags in which the sugar sold by the assessee was packed. Besides this, in respect of the first period, the assessee was assessed to sales tax under the State Act on sales of old vehicles i.e one jeep, one car and one truck which were sold respectively for Rs. 7,600, Rs. 3,300 and Rs. 4,700. In respect of the second period, the assessee was assessed to sales tax on the sale of one truck which was sold for Rs. 6,850. The Tribunal maintained the assessment of sales tax on gunny bags for both the periods. The Tribunal also maintained the assessment on the sales of trucks. The assessment on the sales of car and jeep was set aside. The first question in these references has been referred at the instance of the assessee and the second at the instance of the Commissioner of Sales Tax.

4. In stating the case, the Tribunal has clearly stated that there was no evidence on record to show that there was an express or implied contract to sell the gunny bags along with the sugar sold by the assessee. The assessing authority observed in the assessment orders that the assessee did not object to the inclusion of gunny bags as containers of sugar in the category of taxable goods. This observation was disputed by the assessee before the first Appellate Authority as also before the Tribunal. From the case stated by the Tribunal, it cannot be held that the assessee accepted that there was express or implied sale of gunny bags used as packing material or containers of sugar sold by the assessee. The First Appellate Authority and the Tribunal did not maintain the order of the assessing authority on any admission made by the assessee but by relying upon their previous decisions relating to an earlier period.

5. The statement of the case further shows that the price of sugar during whole of the relevant periods was controlled under the Sugar Control Order, 1955. Ex-factory price of sugar was fixed per bag from time to time by the Government. The expression “ex-factory price” is defined under section 2(b) of the Control Order to mean in so far as relevant “the price of sugar inclusive of excise duty, packed as may be prescribed”. The Government issued an order on 20th May 1961 under clause 7 of the Sugar Control Order which provided that unless otherwise permitted by the Central Government, with effect from 1st November 1961 “all sugar manufactured by vacuum pan process shall be sold by the producer packed in new A Twill jute bags, each bag being 112 cm long and 67 cm. wide and weighing 1.2 kg”. This order also required that every such bag shall contain 100 kgs. sugar. The assessee manufactured sugar by vacuum pan process and the price charged by the assessee for sugar was for 100 kgs. net and not for 101.2 kgs. which would be the gross weight of sugar plus the weight of the jute bag. The market value of gunny bag is nearly 1 per cent of the price of the sugar packed in it.

6. As regards the sales of car and jeep, the Tribunal held that the sales were not in connection with or ancillary to or incidental to the main business of the assessee. In regard to the sales of trucks, it was, however, held that trucks were used for the transportation of raw materials, stores, manufactured product or by products and that the use of trucks was intimately connected with the business of manufacture and sale of sugar. The sales of trucks were thus held to be in connection with or ancillary to or incidental to the main business of the assessee and hence taxable.

7. Sales tax on gunny bags can be imposed only on the basis that the assessee sold the bags to the purchasers of sugar. There was no express Agreement for sale of gunny bags. The Tribunal has stated that there was too evidence to show even an implied agreement for sale of gunny bags. The learned Government Advocate who appeared for the Department, however, submitted that the other facts stated by the Tribunal lead to the inference that there was an implied sale of gunny bags. It is this argument which we have to examine. The property in the gunny bags no doubt passed to the purchasers of sugar and the gunny bags did not become useless in the hands of the purchasers. But from this alone it is not possible to hold that there was an implied sale of gunny bags. When goods packed in containers are sold, the property in the containers no doubt is transferred to the purchaser. But before holding that there was an implied sale of containers, one has to exclude the possibility that the containers were used by the dealer as a convenient and cheap mode of transporting the goods to the purchaser without charging any price for them. It has also to be kept in mind that the burden of proof that there was an implied sale of packing material or container is on the department and the assessee is not required to prove the negative. Viewed on these principles, in our opinion, the facts do not warrant the conclusion of implied sale of gunny bags. It is not practicable for a manufacturer of sugar like the assessee to sell sugar in loose and the assessee has to use some form of packing material for transporting the sugar sold by it to the purchaser. Indeed, the mode of packing sugar in gunny bags was prescribed under the Control Order which was binding on the assessee. The assessee did not charge any separate price for gunny bags. The price of 100 kgs. of sugar packed in gunny bag was fixed under the Control Order and it is this price which the assessee charged from the purchasers. May be, that in fixing the price of 100 kgs. sugar packed in gunny bag, the Government took into account the price of the packing material just as it must have taken into account manufacturing cost and other incidental charges and expenses of the producer. But from this alone, it cannot be said that the assessee charged the price of gunny bags from the purchasers or that there was an implied sale of gunny bags to the purchasers. The Sugar Control Order authorises the Government to fix the ex-factory price of sugar and not the price of gunny bags. The price fixed by the Control Order and charged by the assessee was the price of sugar. The cost of gunny bag is insignificant as compared to the cost of sugar packed in it. Having regard to all these circumstances, in our opinion, it is not possible to infer that there was any implied sale of gunny bags.

8. The law on the point was laid down by the Supreme, Court in Hyderabad Deccan Cigarette Factory v. State of A.P . 1966 17 STC 624. in the following words:

“In the instant case, it is not disputed that there were no express contracts of sale of the packing materials between the assessee and the customers. On the facts, could such contracts be inferred? 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 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? It is 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 and buy the container also. Many cases may be visualized 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 cases the agreement to pay an extra price for the container may be more readily implied………

Whether there was an agreement to sell the packing materials is a pure question of fact and that question cannot be decided on fictions or surmises. That is what has happened in this case. The Commercial tax Officer invoked a fiction; the Assistant Commissioner of Commercial Taxes relied upon the doctrine of ‘finished product’; the Appellate Tribunal relied upon surmises; and the High Court, on the principle of implied agreement. But, none has tackled the real question. The burden lies upon the Commercial Tax Officer to prove that a turnover is liable to tax.”

The Hyderabad Deccan Cigarette Factory's case was followed by the Supreme Court in Commissioner of Taxes v. Prabhat Marketting Co. Ltd. . 1967 19 STC 84.

9. Having regard to the principles stated by the Supreme Court in the aforesaid cases, it is not possible to hold that the Department was successful in discharging the onus, that lay on it, that there was any implied sale of gunny bags. The conclusion reached by us is supported by a decision of the Allahabad High Court in Burhwal Sugar Mills Co. Ltd. v. Sales Tax Officer . 1969 23 STC 241.. In that case, it was held that when the sugar was sold in gunny bags, there was no express or implied sale of gunny bags to the purchasers.

10. Learned counsel for the Department referred to us the case of Patel Volkart Private. Ltd. v. Commissioner of Sales Tax . 1972 29 STC 515.. This case related to the sale of cotton bales. The Tribunal in this case held that there was implied sale of packing material and the High Court observed that there were facts and circumstances from which the Tribunal was justified in drawing that conclusion. Another case on which reliance was placed is Bhagwandas Shobhalal Jain v. Commissioner of Sales Tax . 1978 41 STC 387.. In this case the High Court on the special facts of the case came to the conclusion that the Tribunal was justified in drawing the conclusion that the crates in which bidis were packed were impliedly sold to the purchasers. These cases were decided on their special facts and no general principle can be drawn from them. This would be clear from the fact that in Ishaq M. Gulam Bidi Merchants, Katni v. Commissioner of Sales Tax, M.P . Misc. Civil Case No. 179 of 1970, decided on 21st September 1971. a Division Bench had taken the view that when bidis were sold packed in crates there was no implied sale of packing material. The question whether there is an implied sale of packing material depends upon the facts and circumstances of each case. We would, however, again like to emphasize that before drawing the conclusion that there was any implied sale of packing material, the Court must be aware that it is necessary to exclude the other alternative that the packing material was used as a cheap and convenient mode of transporting the goods to the purchasers and that the burden is on the Department to show that the facts and circumstances justify the inference of implied sale of packing material.

11. In our opinion, having regard to the facts and circumstances of the instant case, it is not possible to hold that there was any implied sale of gunny bags.

12. Now coming to the second question, the point to be decided is whether the sales of trucks, car and jeep were “in connection with or incidental or ancillary” to main business of the assessee which was manufacture and sale of sugar. In this connection, it has to be taken notice of that section 2(bb) of the Madhya Pradesh General Sales Tax Act, 1958, as amended by Act No. 13 of 1965, has widened the definition of business. This amended definition was considered by a Division Bench of this Court recently in Commissioner Of Sales Tax, Madhya Pradesh v. Project Automobiles . 1978 42 STC 279.. It was held in that case that the sale by the assessee who was a dealer in cars of an Ambassador car purchased for its office use was incidental or ancillary to and connected with the business that it carried. In holding so, the Division Bench relied upon the Supreme Court rulings in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India . 31 STC 426. and District Controller of Stares v. Assistant Commercial Taxation Officer . 37 STC 423. which distinguish the earlier ruling in State of Gujarat v. Raipur Manufacturing Co. Ltd. . 19 STC 1.. As the matter has been elaborately discussed in Project Automobiles' case, it is not necessary for us to cover the ground over again. It is not disputed that the car, jeep and the trucks were purchased by the assessee for its business. The sales of these vehicles after they ceased to be useful are necessarily sales incidental to the business of the assessee. Applying the ruling in Project Automobiles' case, we hold that the sales of these vehicles were taxable.

13. For the reasons given above, we answer the questions as follows:

(1) The assessee was not liable for sales tax in respect of the estimated value of gunny bags used as packing material of sugar sold by it.

(2) The assessee was liable to pay sales tax on the sales of trucks, jeep and car.

There will be no order as to costs.

Reference answered accordingly.