M/s New Cotton Mills Narwana vs The Sales Tax Tribunal Haryana and others

J.M. Tandon, J.—The petitioner Messrs New Cotton Mills, Narwana, is registered as a dealer under the Punjab General Sales Tax Act (hereinafter the Haryana Act) as also under the Central Sales Tax Act (hereinafter the Central Act). The petitioner has been carrying on the business of ginning and pressing of cotton in their factory at Narwana. The cotton of the customers after ginning and Dressing is compressed into cotton bales and then packed with the baling hoops and hessian cloth. The petitioner charged consolidated charges from the customers. The petitioner purchased iron hoops and hessian cloth on the basis of their registration certificate. The petitioner purchased iron hoops and hessian cloth worth Rs. 31,539/-, Rs. 10,172 68, and Rs. 6,884 56 in 1966-67, 1067-68 and 1968-69 respectively on the basis of registration certificate without payment of sales-tax. The Assessing Authority served notices on the petitioner in respect of the said three years and assessed the petitioner to tax at 6 per cent on the iron hoops and hessian cloth so purchased. The petitioner was assessed to Rs. 1892.34 as tax for 1966-67 vide order Annexure ''C'' to Rs. 610.38 for 1967-68 vide order Annexure ''C I and to Rs. 413.10 for 1968-69 vide order Annexure ''C. 2''. The Assessing Authority also imposed penalty for 1967-68 and 19(58-69 under the Haryana and the Central Acts. The petitioner contested its liability to pay sales-tax on the purchase of iron hoops and hessian cloth on the ground that the same was resold in the course of business. The plea was not accepted by the Assessing Authority. The petitioner having failed on this point before the appellate authority and Sales Tax Tribunal has filed the present writ petition.

The contention of the Learned Counsel for the petitioner is that hessian and iron hoops purchased by the petitioner on the registration certificate were used as packing material for cotton which was being pressed on labour contract basis. The petitioner accepted composite charges both for pressing the cotton and supplying the packing material. The petitioner thereby resold the packing material to the customers whose cotton was pressed. The petitioner thus did not misuse the registration certificate and has been wrongly made liable to pay sales-tax on this account. Reliance has been placed Jaikishan Gopikishan Vs. Commissioner, Sales-tax, and The The Nimar Cotton Press Vs. Sales Tax Officer and Another, . The Learned Counsel for the State has argued that the Assessing Authority has found as a fact that the petitioner did not sell packing material, including the hessian and the iron hoops to the customers. It was within the competency of the Assessing Authority to record a finding on this point. This finding which even otherwise is correct cannot be assailed in writ proceedings. Reliance has been placed on Mewar Sugar Mills Ltd. and Others Vs. State of Rajasthan and Another,

The petitioner submitted revised return for the relevant years showing the sale of hessian and iron hoops to registered dealers. The petitioner furnished five declaration forms in support of this claim. It was admitted that the petitioner charged Rs. 7.50 per bail as labour charges including hessian and iron hoops used in the cotton bales The verbal stand taken on behalf of the petitioner before the Assessing Authority was that the consolidated charge of Rs. 7 50 per hale included Rs. 4.50 as price of hessian and iron hoops per bale and Rs. (sic) on account of labour and electricity charges. The petitioner produced his record in support of this claim. The Assessing Authority held that the petitioner had prepared fresh cash memos to show that separate charges were made in respect of hessian and iron hoops and for labour and electricity. It had been done to dodge the Department by showing the sale of hessian and iron hoops to registered dealers in order to escape the levy of sales-tax under second proviso to section 5(2)(a)(ii) of the Haryana Act. The Assessing Authority consequently held that the business of ginning and pressing of cotton was carried out by the petitioner on labour basis and it did dot make separate sale of hessian and iron hoops to registered dealers.

It has been held, in Jaikishan Gopikishan''s case (supra) that the owner of a ginning and pressing factory carrying on the business of baling and processing cotton supplied by the customers and of delivering the pressed cotton in the form of bales covered with hessian cloth and secured by iron hoops, and making a consolidated charge for pressing as well as packing is a dealer within the meaning of the Madhya Bharat Sales tax Act. The hessian and iron hoops used in the baling process are goods and there is a sale in regard to them when the assessee transferred the property in these goods.

In The Nimar Cotton Press''s case (supra), it was held that a contract for pressing cotton and delivery of the compressed cotton in a certain kind of packing is really divisible into two distinct contracts; (i) one of labour and work, namely, the pressing of the cotton and (ii) the other of packing the compressed cotton which is partly of material and of labour. In the packing part of the contract the substance of the agreement is not the skill and labour but it is the material. It has been further held that even in the absence of an express agreement for the sale of packing material as such there would he a sale of the material, for in a contract of pressing cotton and delivery of compressed cotton in bales covered with hessian cloth and iron hoops for a consolidated charge of pressing and packing, it is implicit that there would be a sale of the packing material and the parties are impliedly ad idem on the passing of the property in the material qua material and the addition of its price to the pressing charges. If the property in the extraneous packing material vests in the owner of the cotton on payment of a consolidated price and the vesting is not succession, then it can only be under an implied contract of sale of the material, and such a sale would be liable to sales-tax.

In Mewar Sugar Mills Limited''s case (supra), it has been held that in the ease of goods sold in a packed condition, the question whether the value of the materials used for packing the goods is liable to sales tax will depend upon whether there is an agreement, express or implied, to sell the packing materials by the seller to the buyer. Whether and in what circumstances an implied agreement is to be inferred is determined by the taxing authorities on the facts of each case keeping in view the meaning of the expression ''sale''. The question cannot be resolved by stating any abstract proposition of law In such an investigation, the question whether the value of the packing materials was significant or not cannot be made the sole basis for finding that there has been an implied sale of the material. It has been further held that having regard to the provisions of the Cotton Ginning and Pressing Factories Act 1925 (as amended by the Rajasthan Amendment Act 10 of 1927) the use of hessian cloth and iron hoops for packing the pressed cotton, is an integral part of the work of pressing of cotton and it cannot be said that there is a sale of such material and that it is a severable part of the contract for pressing cotton The fact that such materials can be sold by the buyers after the cotton has been used does not affect the question.

After having carefully considered the views expressed in the authorities cited above, I am of the opinion that the point whether in a particular case there has been a separate sale of packing material used for making cotton bales cannot be determined by setting any abstract proposition of law. The decision on such a point shall have to be given by the Assessing Authority in each case. In the instant case, the Assessing Authority has found that there has been no separate sale of packing material including hessian and iron hoops used for making cotton boles to the registered dealers. It has also been found that the documentary evidence led by the petitioner for this purpose is fake. The finding of the Assessing Authority on this point which even otherwise appears to be correct cannot be assailed in writ proceedings. In the absence sale of the packing material used in making cotton bales to registered dealers the petitioner has rightly been held to have misused the registration certificate and is thus liable to pay sales-tax.

The Learned Counsel for the petitioner has contended that the petitioner will not be liable to pay sales-tax on the hessian and iron hoops purchased on registration certificates because the same were used in the manufacture of cotton bales. This contention is also without force Assuming that the petitioner used hessian and iron hoops purchased on registration certificates for the manufacture of cotton bales in terms of the requisite declaration it will still be liable to pay sales-tax in case the sale of manufactured product is not made to a dealer on a registration certificate Faced with this difficulty, the Learned Counsel for the petitioner contended that the petitioner may be allowed an opportunity to lend evidence before the Assessing Authority that the sale of manufactured product had been made to dealers on registration certificates. I see no justification to allow this prayer. The petitioner had led evidence before the Assessing Authority regarding the sale of the picking material use J for making cotton bales on registration certificates The Assessing Authority found that the documentary evidence produced by the petitioner was fake. The impugned orders, therefore, cannot be quashed on this ground as well.

In the result, the writ petition fails and is dismissed with no order as to costs.