1996 (7) TMI 482 - SC - VAT and Sales Tax

Whether the making of photostat copies with the use of a xerox or other machine and delivering the copies so taken to the customer on receipt of payment amounts to a sale of goods exigible to tax under the Tamil Nadu General Sales Tax Act, 1959? Held that - Appeal allowed. The contract between the appellant and the payer of the price to him is a contract of work or service, not a contract of sale upon which sales tax is exigible.

Summary

Issues:
1. Whether the making of photostat copies with the use of a xerox or other machine and delivering the copies to the customer amounts to a sale of goods exigible to tax under the Tamil Nadu General Sales Tax Act, 1959.

The Supreme Court dealt with the issue of whether the act of making photostat copies using a xerox machine and providing them to customers constitutes a sale subject to tax under the Tamil Nadu General Sales Tax Act, 1959. The appellant, a photocopying business, was assessed for sales tax for two assessment years based on the premise that selling photocopied documents to customers qualified as a sale of goods. The appellant argued that the transactions were works contracts, not sales. The Karnataka High Court's decision in B. Girija v. State of Karnataka was cited, emphasizing the distinction between a contract of sale and a contract of work or service. The High Court held that the transactions were not sales but contracts of work or service, following the principles outlined in Hindustan Aeronautics Ltd. v. State of Karnataka. The Division Bench's judgment in State of Tamil Nadu v. Everest Copiers was discussed, where it was held that supplying xerox copies for a price constituted a contract of sale. The Supreme Court, concurring with the Karnataka High Court's view, emphasized that the main object of the work was not the transfer of paper but duplicating the document, making it a contract of work or service. The Court allowed the appeals, setting aside the lower judgments and orders, with no costs awarded.

In conclusion, the Supreme Court clarified that the act of providing photostat copies to customers using a xerox machine does not constitute a sale of goods under the Tamil Nadu General Sales Tax Act, 1959. The Court emphasized that the primary purpose of the transaction was duplicating documents, making it a contract of work or service, not a sale. The Court relied on previous decisions to support this interpretation, ultimately allowing the appeals and overturning the lower court's judgments.