A contract for service or for execution of work, involves a taxable sale of goods must be decided on the facts and circumstances of the case.

Judgment

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 its customers. Its usual course of business may be described thus : A customer gives to the respondent raw tobacco for re-drying. It re-dries it in its factory, packs it in gunny, waterproof paper, bales, etc., and delivers it to the customer. It charges the customer at a consolidated rate for re-drying and for the packing material supplied by it. The proportionate price of the packing material comes to about 25 per cent of the re-drying charges. For the assessment years 1951-52, 1952-53 and 1953-54, the Deputy Commercial Tax Officer assessed the respondent under the Madras General Sales Tax Act, 1939, by different orders, on the sale price of the said packing material. The assessee took the question of his liability through a hierarchy of tribunals, but they all confirmed the assessments made by the Deputy Commercial Tax Officer. It preferred revisions to the High Court of Andhra at Guntur, and the said High Court allowed the revisions. Hence the present appeals.

2. Mr. A. Rangandham Chetty, learned counsel for the Revenue, contended that then was a sale of the packing material for price by the respondent to its customers and, therefore, it was liable to pay sales tax on the said sales.

3. Mr. Thyagarajan, learned counsel for the respondent, argued that packing was part of the process of re-drying and, therefore, there was no question of any sale of the packing material by the respondent to its customers. He further argued that the necessary ingredient of a sale, namely, a contract to sell, was absent in the transactions between the respondent and its customers and, therefore there were no sales within the meaning of the definition of "sale" in the Madras General Sales Tax Act, 1939.

4. The question raised in the appeals mainly depends upon whether packing is an integral part of the re-drying process. No acceptable material was placed before the High Court to show how packing becomes an integral part of the re-drying process. Mr. D. V. Srinivasanm in his affidavit describes the scientific process of redrying found in books, but he does not describe how it is actually done in the factory, He says that

"in order to keep the moisture content at the standardised level of 10 to 12 per cent throughout the process of aging or fermentation the tobacco as it emerges from the re-drying machine is packed in water-proof packing material and stored for the requisite period."

It only means that packing is done to keep the moisture content it a particular level. He is vague and does not commit himself on the crucial question whether after the re-drying and packing, the tobacco bales are kept in the factory for any length of time to undergo further re-drying process. The High Court in its judgment describes the re-drying process thus:

"The process of re-drying tobacco brought to the assessees by their constituents is one, entire and indivisible. The object of the re-drying process is to standardize the moisture content at the required level of 10 to 12 per cent, and when the tobacco leaf emerges from the re-conditioning chamber, it must be packed in water-proof packing material and stored for the requisite period. Unless the packing is done immediately, the tobacco losts its standardized moisture content, and without the packing, the process is not complete. It is clear that the packing of re-dried tobacco and its storage for the requisite period is on integral part of the re-drying process."

The High Court accepted the description of redrying process given by Srinivasan, but did not find that the tobacco, after it is packed, is kept in the assessee s factory for any length of time to undergo further drying process. Indeed, there is no material on the record to give such a finding. Garner in his book on the production of Tobacco describes how