GOVERNMENT OF ANDHRA PRADESH versus GUNTUR TOBACCOS LTD.

Citation: [1965] 2 S.C.R. 167 · Decided: 18-11-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

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Judgment (excerpt)

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167 
GOVERNMENT OF ANDHRA PRADESH 
v. 
GUNTUR TOBACCOS LTD. 
November 18, 1964 
[K. SUBBA RAO, J. C. SHAH ANDS. M. SIKRI, JJ.] 
Madras General Sales Tax Act (9 of 1939), s. 2(h)-Redrying of 
tobacc<>-Packing of tobacco, if an integral part of process-Packing mate-
rial-Passing of property in-If sale. 
The respondent-company was carrying on the business of redrying 
tobacco entrusted to it by its customers. The process involved the keeping 
of the moisture content of tobacco leaf at a particular level, and in 0rder 
to ensure that level, the leaf was packed in bales, in water-proof packing 
material, as it emerged from the reconditioning plant. 
The tobacco was 
then returned, packed in the costly packing material, to the constituent. 
In the company's charges for redrying each bale of tobacco, no separate 
charge was made for the value of the packing material used. The Deputy 
Commercial Tax Officer was of the vie'N that the packing material must 
be regarded as sold to the constituent and that tax \Vas exigible, under 
the Madras General Sales Tax Act, 1939, on the value of the packing 
material used. 
The order was confirmed by the Deputy Commissioner 
of Commercial Taxes and by the Sales Tax Tribunal. The High Court, 
in revision, set aside the order. 
It was held that the packed tobacco 
was stored by the assessee for the requisite period, before it was returned 
to the customer, and that _packing formed an integral part of the re-
drying process. The State appealed to the Supreme Court and contended 
that, packing of tobacco was not an integral part of the process of re-
drying, and that, since there was transfer of property in the packing 
material from the respondent to its customers, there was sale of the pack-
ing material for the purpose of the Act. 
HELD (Per Shah and Sikri, JJ.) : The redrying process could not be 
completed without the use of the packing material, and on the finding 
recorded by the High Court, that tobacco was stored for the requisite 
period, the intention of the assessee and its customers was that the material 
should from an integral part of the process. 
Since there was no indepen-
dent contract for the sale of packing material, _the fact that tobacco delivered 
by the constituent was taken away with the packing material would not 
justify an inference that there was an intention to sell the material. [184 H; 
185 A-CJ 
In order that there should be a sale of goods which is liable to sales 
tax as part of a contract for work, there must be a contract in which 
there is not merely transfer of title to goods as an incident of the contract, 
but there must be a contract, express or implied, for .11ale of the ,-ery 
goods which the parties intended should be sold for a money consideration. 
From the mere passing of title to goods, whether as an integral part of 
or independent of goods, it cannot be inferred that the goods were agreed 
to be sold and that the price was liable !o sales tax. [181 G-H; 183 CJ 
Case law reviewed. 
Per Subba Rao, J. (dissenting) : There was nothing on the record to 
show that after packing the packed tobacco was retained in the factory for 
the completion of the redrying process. 
Packing, therefore. was not 
an integral part of the redrying process. Once the idea of packing being 
a part of the redrying process is eliminated, the tronsaction qua the 
168 
SUPREME COURT REPORTS 
[1965] 2 S.C.ll. 
·packing material involved either a contract of agency, gift or sale, and 
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on the facts, a contract of s:!lt! was necessarily implied. 
As all the 
ingredients of the charging section read with the definition of "sale", v.ere 
satisfied, the sales tax authorities rightly assessed the turnover in regard 
to the packing material. 
[171 D; 174 F-H; 177 A, CJ 
Case law reviewed. 
CrvrL APPELLATE JURISDICTION: Civil Appeals Nos. 2-4 of B 
1964. 
Appeals by special leave from the judgment dated the April · 
21, 1961, of the Andhra Pradesh High Court in Tax Revision 
No. 20, 21 and 22 of 1957. 
A. Ranganadham Chetty and B. R. G. K. Achar, for the appel- c 
!ant (in all the appeals). 
R. Thyagarajan, for the respondent (in all the appeals). 
The Judgment of Shah and Sikri JJ. was delivered by Shah J. 
Subba Rao J. delivered a dissenting Opinion. 
Subba Rao, J. I regret my inability to agree. The facts may 
be briefly stated. The respondent-Company is a dealer· carrying 
on the business of re-drying in its factory raw tobacco entrusted 
to it by it

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