SHAH, J.
The appellants are dealers carrying on business in chewing tobacco. They purchase raw tobacco from dealers in the State of Madras and convert it into chewing tobacco and sell it. For the period April 1, 1957 to December 12, 1957, the appellants sold chewing tobacco of the value of Rs. 3, 86, 000 odd. The Deputy Commercial Tax Officer, Thanjavur, assessed the appellants on their turnover from the sale of "chewing tobacco" to tax under the Madras General Sales Tax Act, 1939. The appeals filed by the appellants to the Appellate Assistant Commissioner (Commercial Taxes) and the Sales Tax Appellate Tribunal, Madras, failed. Their contention that the tobacco purchased by them had not undergone any manufacturing process was rejected. The High Court of Madras in revision under section 12B of the Madras General Sales Tax Act, 1939, also confirmed that view.
The appellants had contended before the Sales Tax Authorities and also before the Tribunal that the packing material used for preparing packets of chewing tobacco was exempt from sales tax with effect from December 13, 1957. The Deputy Commercial Tax Officer rejected this contention. It was contended before him that the packing material becomes unfit for any use after "chewing tobacco" is taken out and that it has no resale value because it consists of small bits of paper. The Deputy Commercial Tax Officer rejected the contention observing that "packing material had sale value if it was sold", and even if it had no value after the packet of "chewing tobacco" was purchased, the packing material was still liable to be taxed. The High Court rejected the contention raised by the appellants on the ground that the requirements of Rule 5(1)(g)(ii) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, were not satisfied, since the appellants did not specify the charges for the "chewing tobacco" and charges for packing material separately.It was never suggested that there was any contract - express or implied - of sale of packing material between the appellants and the customer. The value of the packing material as compared to the value of the contents of the packet is insignificant. In the circumstances, an agreement to sell packing material independently of chewing tobacco cannot under the general law be implied. In M/s. Hyderabad Deccan Cigarette Factory v. The State of Andhra Pradesh (C.A. No. 326 of 1965 decided on January 13, 1966; [1966] 17 S.T.C. 624), this Court had to consider the question whether packing material is taxable when preparations of tobacco are sold, and by a Government notification purchases and sales of tobacco are exempt from sales tax. Subba Rao, J., speaking for the Court observed :
"In the instant case, it is not disputed that there were no express contracts of sale of the packing materials between the assessee and its 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 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 by 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 some times 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."
We are in the present case dealing with a statutory rule which renders the value of packing services exempt from taxation.
Rule 5(1)(g) in so far as it is relevant provides
"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 (1) shall, subject to the conditions specified there in, 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."
Counsel for the appellants concedes that the bills issued for sale of "chewing tobacco" did not mention separate prices of "chewing tobacco" and of the packing material. The claim for exclusion of the value of packing material cannot, in the circumstances of the case, be upheld. The appeal therefore fails and is dismissed. There will be no order as to costs.
Appeal dismissed.