( 1. ) THE Sales Tax Tribunal (Board of Revenue, M. P.) has made this reference on being required to do so by this Court. The question referred for our decision is : Whether, on the facts and in the circumstances of the case, the assessee could be taxed under the provisions of the C. P. and Berar Sales Tax Act, 1947, on the turnover of hessian cloth and iron hoops utilised by the assessee in the process of pressing the ginned cotton into bales ?

( 2. ) THE assessee, the Nimar Cotton Press, Khandwa, carries on the business of ginning and pressing cotton. After the cotton is pressed and turned into bales, the hessian cloth is wrapped round it and the same is tied down with iron hoops. The Sales Tax Authorities assessed the assessee to sales tax on the price of the hessian cloth and the iron hoops supplied by the assessee. The contention of the assessee was that there was no sale of hessian cloth or iron hoops as such, the hessian cloth and iron hoops were used as an integral part of the works contract of pressing the cotton and no separate charge was made for the said articles. This contention was negatived by the Sales Tax Tribunal, relying on the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa [1961] 12 S. T. C. 313 F. B.

( 3. ) IT is urged by the assessee that in view of the decision of the Supreme Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. [1965] 16 S. T. C. 240 the decision of this Court in Nimar Cotton Press v. Sales Tax Officer, Nimar Circle, Khandwa [1961] 12 S. T. C. 313 F. B, has no longer any binding force. In the case of Nimar Cotton Press1, this Court held : A contract of sale is not constituted merely by reason that the property in the material is transferred to the customer. In addition to the transfer of property in the material, there must be an express or implied agreement between the parties for the sale of the material qua material. It cannot be said that in a contract for work, labour and materials, sales tax can never be imposed on the value of the materials employed in the execution of the. contract. The question whether the material used in the course of carrying out a works contract is liable to sales tax depends On the existence of an express or implied agreement between the parties for the transfer of the material qua material and on proof of an intention to sell the material as such. This Court then proceeded to consider the particular contract in question. This is what was observed by this Court : When cotton is ginned, that is, separated from its seeds, it is in a very loose condition. In that state it cannot be easily dealt with for the purpose of trade, manufacture or transport. It has, therefore, to be pressed into bales. The compressing is not done by the hessian cloth or the iron hoops, but by a machine worked by mechanical or hydraulic power which exerts great and steady pressure on the ginned cotton in a cast and thus compresses it into bales. The packing material is for convenience of transport and to prevent the bales from being unloosened during the course of handling. The necessity of packing compressed cotton varies with the factor of transport and the time within which the pressed cotton is to be spun and used for manufacture in the textile mills. If the pressed cotton is to be taken immediately to an adjoining textile mill and used for manufacture, it may be wholly unnecessary to use any packing material. The necessity would be great if the pressed bales are to be transported over long distances or to overseas. Therefore 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