( 1. ) THIS judgment will govern the disposal of Miscellaneous Civil Cases Nos. 198, 199 and 200 all of 1970.

( 2. ) THESE are three sales tax references made by the Sales Tax Appellate Tribunal (Board of Revenue) at the instance of the dealer referring for our answer the following questions of law :

(1) Whether, on facts and circumstances of the case, the Tribunal was correct in holding that there was an implied sale of packing material, namely, bardana and patti, along with sale of cloth bales, and the packing material was liable to tax under the State Act as well as under the Central Act? (2) "whether, on facts" and circumstances of the case, the Tribunal was correct in holding that coal ash sold by the applicant was not coal for purposes of entry No, 2, Part II of the State Act but should be treated as residuary article for purposes of tax ? Miscellaneous Civil Case No. 198 of 1970 relates to assessment of sales tax payable under the Madhya Pradesh General Sales Tax Act, 1958, for the period 1st January, 1960, to 31st December, 1960 ; Miscellaneous Civil Case No. 199 of 1970 relates to assessment of sales tax payable under the Central Sales Tax Act, for the period 1st January, 1961, to 31st December, 1961 ; and Miscellaneous Civil Case No. 200 of 1970 relates to assessment of sales tax payable under the Madhya Pradesh Act, for the period 1st January, 1961, to 31st December, 1961.

( 3. ) THE dealer M/s. Binod Mills Company Limited is a company which carries on the business of manufacture and sale of textiles. Relevant to the first question, the facts found are that the dealer sold cloth to its customers in accordance with an agreement, a form of which is appendix b to the order of reference. Cloth was sold in bales and the price was charged on meterage of cloth or according to its weight. No price was separately charged for the packing material, which consisted of hessian cloth, i. e. , bardana, and iron hoops. Sale of cloth during the relevant period was tax-free. There was no express agreement for the sale of packing material. But in the opinion of the sales tax authorities, including the Tribunal, as the cloth was sold in bales, there was an implied agreement for the sale of packing material and the price of cloth impliedly included the price of packing material. The turnover in respect of the packing material was determined by fixing Rs. 4 per bale as its value and tax was imposed on this turnover.

( 4. ) SALES tax can be imposed only on the basis that the dealer sold the packing material to the purchasers of cloth. For coming to the conclusion that there was sale of packing material, it has to be found that there was an agreement express or implied for the sale of packing material for a price to be paid by the customers. In the instant case, it is not disputed that there was no express agreement for the sale of packing material and no price was separately charged for its sale. However, as the property in the packing material was transferred to the customers, the taxing authorities came to the conclusion that an implied agreement for the sale of the packing material must be inferred. The error in this reasoning lay in the omission to notice and consider the other alternative that the packing material was used by the dealer as a convenient and cheap vehicle of transporting the goods to the customers without charging any price for it. It was also not taken into account that the burden to prove that there was an implied sale of packing material liable to tax, was on the department.

( 5. ) THE law on the point was laid down by the Supreme Court in Hyderabad Deccan Cigarette Factory v. State of A. P. [1966] 17 S. T. C. 624 (S. C.) In that case, the question involved was whether there was an implied sale of the containers in which cigarettes were sold, which could be subjected to tax. In that connection, their Lordships made the following observations;

In the instant case, it is not disputed that there were no express con