The sale of packing material, such as gunny bags, is subject to sales tax even if the goods contained in the packing material are exempt from sales tax.

DR. A. S. ANAND, C.J.

The appellant is the assessee. They are dealers in paddy, rice and manure. The Deputy Commercial Tax Officer, assessing authority, determined the taxable turnover of the assessee at Rs. 44, 632, as against the reported taxable turnover of Rs. 17, 178 for the year 1977-78. The assessing authority found that the assessee had sold gunny bags along with the contents of paddy, rice, manure, etc., to the tune of Rs. 27, 358.15. Being of the view that the gunny bags had been utilised in the course of business for sale of the goods, the assessing authority held the same to be liable to tax. Indeed, the dealer had not in the accounts maintained any separate account for the sale of the gunny bags.

2. Aggrieved, the assessee went up to the Appellate Assistant Commissioner in appeal. The Appellate Assistant Commissioner referred to rule 6(cc) of the Tamil Nadu General Sales Tax Rules, 1959, and opined that the charges for packing whether or not such amount is specified and charged for by the dealer separately in respect of the goods not liable to tax at the hands of the assessee are exempt from tax and he accordingly set aside the order of assessment in so far as it related to the addition for the packing material, that is, gunny bags. Accordingly the appellate authority gave relief in favour of the assessee. The Board of Revenue, on suo motu revision, found that the assessee was not eligible for the deduction of the value of the gunny bags. This conclusion was arrived at by the Board after a reply was received to the notice issued to the assessee. The assessee had, in the reply to the notice, stated that the sale value of the contents included the cost of the gunny bags. The case of the assessee before the Board of Revenue was that since rice and paddy were exempt from tax, the containers in which the same were sold were also to be treated as exempt and would not be liable to be taxed. The plea was negatived by the Board of Revenue and it was held that if the exemption is granted to a particular commodity, it should be confined to that commodity alone and not to packing materials, if the packing material is otherwise subject to tax. The Board of Revenue consequently set aside the order of the Appellate Assistant Commissioner and restored that of the assessing authority in so far as the cost of packing material being included in the taxable turnover was concerned. The assessee has come up in further appeal to this Court.

3. Learned counsel for the appellant submitted that since the assessee had not separately shown the cost of the gunny bags, the same could not be subjected to tax. According to the learned counsel the sale of paddy and rice in the gunny bags was made by the dealer without separately charging for the gunny bags and, therefore, the price of gunny bags could not be added to the taxable turnover of the assessee. The other argument raised on behalf of the assessee by the learned counsel is that since paddy and rice were exempted articles for the purpose of sales tax, the gunny bags which were used as packing material of paddy and rice should also be treated as exempt and the same could not be subjected to sales tax. We have given our consideration to the submissions made at the bar.

4. The exemption under the Tamil Nadu General Sales Tax Act, 1959, is in respect of sale of paddy and rice. However, when those commodities are packed in gunny bags, the gunny bags cannot be said to lose their physical or commercial identity and merge as if they were part of the foodgrains themselves. The argument that since paddy and rice were exempt from sales tax and, therefore, no tax can be levied on the cost of the gunny bags in which they were packed in futile. When bags of paddy or rice are sold for a price which, as in the instant case as borne out from the reply of the assessee to the notice includes price of gunny bags, the turnover in respect of gunny bags would be liable to sales tax under the Act.

5. The S