# STATE OF TAMIL NADU ETC v. CEMENT DISTRIBUTORS PRIVATE LTD. ETC. ETC

- **Citation:** [1973] 2 S.C.R. 1019
- **Court:** Supreme Court of India
- **Decided:** 1972-11-22
- **Case number:** Civil Appeals Nos. 21842195 of 1969
- **Bench:** K. S. Hegde, P. Jaganmohan Reddy, H. R. Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-tamil-nadu-etc-v-cement-distributors-private-ltd-etc-etc-5754
- **Pages:** 6

## Headnote

'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.

## Text

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1019
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
'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.
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.
A11peJls by certificate from the judgment and order dated
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. Subhashini 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.
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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 :
"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".
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
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 packing 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 :
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TAMIL NADU V. CEMENT DISTRIBUTORS PVT. LTD.
1023
(Hegde, I.)
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"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:
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(i) freight;
(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.
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
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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.
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