State of Tamil Nadu v. Cement Distributors Private Ltd.

1019 A B ##### c D E F G ###### ' H _'Sale' Cement supplied_ _in gunny_ _bags-Price_ _of gc:1111y_ _bags_ _fi.red_ _under_ _control order.-Supply_ _of_ _gunny bags_ _l1'1zether_ _a sale taxable under Madras_ _General Sales Tax_ _Act_ 1959. _Madras General Sales Tax_ _Act_ 1959, _Rules made_ _under-Rule_ 6(/) (ii) _as it_ _stood_ _up to Sept._ 27, 1963 _providing for exemption in respect_ _of_ _'charges for packing_ _atJd_ _delh·ery and other such like serviccs'-Price_ _of_ _gunny bags \1'hetlter conies under_ _exemption._ In appeal by the State of Tamil Nadu against the judgment of the Madras High Court on the questions (i} whether the producers who st1ppli.cd the Ceme,nt to the State Trading Corporation or its agent in gunny bags in pursuance of the directions given by the Government are liable to pay sales-tax on the turnover relating to the price of the gunny bags, and (ii) whether the words 'charges for packing and delivery and other such like services' in r. 6(f)(ii) of the rules under the Madras General Sales Tax 1959 as it stood upto September 1963 had the effect of granting exemption in respect o'f price of packing materi:1ls. HELD : (i) From the relevant control o~dcrs it \Vas clear that the Government of India was purporting to fix th~ price of the gunny bags in which the producers were required to supply cement to the State Trading Corporation. When the price was wholly controllccl the supply of the gunny bags could not be considered as 'sales'. This position \\'a<.; concludeJ by the decisions of this Court in _New_ _India Sugar /'.fills Ltd._ and _Chittar Mal_ _Narain Das._ Accordingly the price of gunny hags could not be included in the taxable tnrnover. [1021 CJ _New_ _India Sugar Mills_ _Ltd._ v. _Co1111nissirJ11t?r_ _of_ _8ales Tax, Bihar_ 14, S.T.C. 316; and _Chittar Mal Narain Das_ v. _Co111111'ssioner_ _of_ _Sale• Tax,_ _U.P._ 26, S.T.C. 344; applied. ##### ' (ii) The charges for packing exempted under Ruic 6(f) as' it stood up to September 1963 included both the price of the packing material as well as the l~!Jour charges relating to the packing. The words "and other ~uch like services' i~ sub-cl. (ii) of th~ rule referred to the word 'delivery' 1mmedzately preceding those words. fhe subsequent charges effected in the rule merely clarified the intention of th~ rule making authority. Therefore the contention _df_ the appellant that the rule as it sood till September 1963, merely provided for exemption of service charges for packing and not the cost of the packing material must be rejected. [1023 FJ _State_ _of Madras and Ors._ v. _Damodaran Chettiar_ & _Co._ 18, S.T.C. 451 disapproved. _Stare_ _of Madras, In_ _re_ : 7, S.T.C. 355, approved and applied. CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 21842195 of 1969, 498 to 502 of 1970 & 884 to 885 of 1971. STATE OF TAMIL NADU ETC. _v._ CEMENT DISTRIBUTORS PRIVATE LTD. ETC. ETC. _November_ 22, 1972 ###### [K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.J 1020 SUPREME COURT REPORTS [1973] 2 S.C.R, Cid _Appeals_ _/\los._ 2184-2195 of 1969 and 498 to 502 of 1970. Appeals by certificate from the judgment and order dated March 25. 1969 of the Madras High Court in W.P. Nos. 41614164 & 4246-4249 _oi_ 1965 and Writ Petitions Nos. 198 & 199 and T. C. Nos. 227 and 228 of 1967 and _Cil'il Appeals Nos._ 884 to 885 of 1971. A 1peJls by certificate from the judgment and order dated 1 i\l•:rch 2. 1970 of the Madras High Court in Tax Case Nos. 21 anJ 22 cf 1970. _S._ _T. Desai._ _A._ _V. Rangam,_ _K._ _Venkataswami_ and _A._ _Subhas-_ _hini_ for the appellants (in C. As. Nos. 2184-2195/69). ###### c,, 1•1111/ Sll'amindadha11, A. V. Rangam, K. Venkataswami and _A._ _Subhashini_ for the appellants (in C. As. Nos. 498 to 502/70). _A._ _V._ _Rangam_ and _A._ _Subhashini_ for the appellants. (in C. As. No~. 884-885/71). _F._ _S._ _Nariman, Addi. Solicitor-General_ _of_ _India,_ D. _S. Dang,_ _H._ _K. Puri,_ _S._ _K. Dhingra_ and _Krishna Sen_ for the respondents (in C. A. Nos. 2184-2195/69), Respondent No. 2 (in C.A. Nos. 498-500) and Respondent (in C.A. Nos. 501-502): The Judgment of the Court was delivered by HEGDE, J. These appeals by certificate can be disposed of by one judgment. They raise common questions of law. The material facts are not in dispute. In Civil Appeals Nos. 498,499 to 502 of 1970, the principal question of law that arises for decioion is whether the producers who supplied the cement to the State Trading Corporation or its agents in gunny bags in pursuance of the directions given by the Goverriment are liable to !)ay sales-tax on the turnover relati.1g to the price of the gunny bags. The only other questbn that arises for decision in these appeals relates to the interpretation of Rule 6(f) of the rules framed under the Madras General Sales Tax Act, 1959. This question will be considered while dealing with the other appeals. In the other appeals the question for decision is whether the selling agents of the State Trading Corporation are liable to pay sales tax in respec~ of the price of the gunny bags in which they sold the cement to the consumers. The High Court has decided both these questions in favour of the assessees. Aggrieved by that decision, the State of Tamil Nadu has come up in appeal. B . ## c D> G H # 7.:.:.:.. I A B ### c **r..** E **j/** G **H** TAMIL NADU V. CEMENT DISTRIBUTORS PVT. LTD. 102E _(Hegde._ J.) Taking first ~he case of the transactions between the producers and the State Trading Corporation, there is no dispute that so far as the supply of cement is concerned, the same cannot be considered as "sales .. within the meaning of the Madras General Sales Tax Act, 1959 in view of the Cement Control. Order, 1958. The only question is whether the gunny bags in which the cement in question was supplied can be considered to have been sold. There is no dispute that if the price of the gunny bags is also held to have been wholly controlled then the supply of the gunny bags cannot be considered as "sales ... This position must be held to be concluded by the decisions of this Court-see _New India Sugar Mills_ _Ltd._ v. _Commissioner_ _of_ _Sales Tax, Bihar(_ _[1]_ _)_ and _Chittar Mal_ _Narain Das_ v. _Commissioner_ _of Sales Tax,_ U.P.( [2] ). Therefore all lhat we have to see is whether the price of the gunny bags in which L ' cement was supplied to the State Trading Corporation was coutrolled under cl. 6(4) of the Cement Control Order, 1958. The relevant assessment years with which we are concerned in these appeals are assessment years 1959-60, 1960-1961 and 1961-1962. It is admitted that the Central Government by its order dated March 26, 1959 informed all concerned thus : Again by its order dated June 24, 1959, it stipulated that the packing charges for ce121ent for the period commencing !st July to 30th September 1959 will be Rs. 11.04 per ton, in new gunny bags. The Central Government by its letter dated December 26, ##### t 959 informed the Staff Trading Corporation that it has accepted the Tariff Commission's recommendatiom in respect of the fixaticn of the packing charges and the principle that would be adopted was on the basis of the average of the maximum and minimum market price of the packing material during each week of the 9 mon!hs immediately preceding the quarter for which the charges were to _be_ in force plus Rs. 1.25 oer ton to CQver incidental chargco. By its telegram dated February 17, 1961, the Central {iovernme11t inform~d all the State Governments that having reg~td lo ti1e prevailing jute bag price, the Government was please~ to fix under clause 6(4) of the Cement Control Order, 1958 tht <:barges for packing cement in D.W. as well as serviceable secolll: hand DW Heavy Cases Jute Bags ai Rs. 17 per ton for the periou effective from the 20th of February to the 31st March 1961. F 1:>111 these orders, it is clear that the Government of India was purponh1g to fix the price of the gunny bags in which the producers were i~quir~d 10 supply cement to the State Trading (I) 14, S.T.C. 316. (!l 2G. **S.T.C.** **3ft** "Packing charges for cement for period commencing First April to Thirtieth June Nineteen Fiftynine will be Rupees Eleven Decimal five four per ton in New Gunny Bags". 1022 SUPREME COURT REPORTS [1973].2 S.C.R, Corporation. The learned Advocate-General of Tamil Nadu contended that the Central Government under cl.' 6(4) of the Cement C:ontrol Order, 1958 could have fixed only the maximum price of gunny bags and not the actual price_; that being so, there was scope for bargaining between the prouucers of the cement and the State Trading Corporation. This .contention has not been taken in the High Court; nor in the appeal memo. The Central Government has not put in ·its appearance in this Court. Hence we cannot go irito the question whether the Central Government had power to fix the actual price of the gunny bags. The fact remains, that the Central Government had fixed the actual' price of the gunny bags. Its right to fix the price had not been disputed in the pleadings before the High Court nor does it appear from the judgment of the High Court that that question was urged before it. It is raised for the first time at the hearing. In the result, for the reasons mentioned above the contention lhat supplies of gunny bags by the producers amounted to '"£ales" must be rejected. Now coming to the contention raised in the other appeals which also arises in some of the appeals earlier considered, it relates to the interpretation of rule _6(f)_ of the rules framed under the Madras General Sales Tax Act, 1959. That rule as it stood upto September 1963 read thus : "Ail amounts falling under the following two heads, when specified and charged for by the dealer 'eparntely, without including them in the price of the goods sold: (i) freight. (ii) charges for packing and delivery and other such like services." ()n September 27, 1963, this rule was recast thus: "All amounts falling under the following three heads, when specified and charged for by the dealer separately, without including them in the price of the goods sold: (i) freight; (ii) charges for packing, that is to say, cost of pack ing materials and cost of labour; (iii) charges for delivery and other such like **services."** This rule was again recast on March 9, 1964. The rule as )l'eframed reads thus : A B ##### c **D** E F G H TAMIL NADU _V._ CEMENT DISTRIBUTORS PVT. LTD. 1023 _(Hegde,_ _I.)_ A "All amounts falling under the following three heads when specified and charged for by the dealer separately, without including them in the price of the goods sold: (i) freight; B ### c 0 E F G (ii) charges for packmg, that is to say, cost of pack· ing materials and cost of labour and other such like services; (iii) charges for delivery." Jn the above group of appeals, some relate to the assessment years 1962-63, and 1963-64. Mr. S. T. Desai, learned Counsel appearing for the State of Tamil Nadu in this group of appeals contended that the rule as it stood till September 1963, merely provided for exemption of service charges for packing and not the cost of packing material. It is not disputed that the price of the packing materials was separately charged in the bills issued. Jn support of his contention that price of packing material is not covered by the rule in question, Mr. Desai relied on the decision of the Madras High Court in _State_ _of_ _Madras and_ _Ors._ v. _K._ _Damodaran Chettiar_ _&_ _Co._ (1) This decision undoubtedly supports Mr. Desai's contention; but the learned judges who decided that case overlooked an earlier decision of that High Court in _The State of Madras. In re(_ _[2]_ _);_ Jn that case Rajagopafan .and Rajagopala Ayyangar JJ. had taken the view that a rule identical in terms with rule 6 ( f) as it stood till September, 1963 exempted the price of the packing material as well. We are entirely ijl agreement with tfie view taken by the learned judges in that case. The charges for packing include both the price of the packing material as well as the labour charges relating to packing. The words in sub. cl. (ii) of rule 6(f) "and ###### other such like services" in our opinion refer to the word "delivery" immediately preceding those words. The subsequent changes effected in the rule merely clarified the intention of the rule making authority. We hold that _Damodaran Chettiar's_ case (supra) was not correctly decided. 1 At the hearing a new contention was sought to be raised by Mr. S. T. Desai. He sought to urge that the exemotion given for #### packing material must bi held to be not available in re~oect of the cases arising under the Central Sales Act (some of the anneals relate to assessments under the Central Sale~ Tax Act) in view of H certain amendments made in the Central Sales Tax Act in 1969. with retrospective effect after the disposal of the petitions by the rt) 18, S.T.C. 451. (2) 7, S.T.C. 355. 1024 SUPREME COURT REPORTS [1973) :l S.C.R. High Court. We did not permit him to raise that totally new contention as the same was not raised either in the petitions .:if appeal . or by any special application. Further the appelant did not serve any notice on the respondents informing them of its intention to raise that question at the hearing. In the result these appeals fail and they are dismissed with costs; but there will be only three sets of hearing fee, one set for the counsel appearing for the State Trading Corporation a!'d its agents; one tor the counsel appearing for Dalmia Cement Baharat Ltd.; and one for the counsel appearing for Thiruvalargal India Cement Ltd, G.C. _Appeals dismissed._ I 8 #### c