1955 (3) TMI 25 - HC - VAT and Sales Tax

Summary

Issues:
- Determination of whether the transaction in question qualifies as a "works contract" under the Madras General Sales Tax Act, 1939.

Analysis:
The case involved a dispute over the classification of a transaction for the refund of sales tax paid by the plaintiff as a "works contract" under the Madras General Sales Tax Act, 1939. The plaintiff supplied stationery articles to customers, including bill books and account books, which were printed on paper provided by the plaintiff. The lower appellate court held that even if the transaction was considered a works contract, the taxable turnover should be calculated based on the cost of labor, manufacture, and supervision, resulting in a lower assessable turnover. Reference was made to a previous judgment where it was held that certain charges, such as printing charges, may not be taxable. The argument presented by the Government Pleader contended that if the plaintiff had separated the cost of paper from charges for labor and supervision, the latter would not be taxable. However, the court rejected this argument, stating that the mixing of items does not automatically render the entire amount taxable under the statute.

The court referred to a Privy Council decision in Dominion Press v. Minister of Customs and Excise, where it was held that contracts for the supply of printed stationery were contracts for sale, without a clear definition of "works contract." Additionally, the court cited Benjamin on Sales, indicating that contracts involving work and labor, with the supplier furnishing materials, qualify as works contracts. Applying this reasoning to the present case, the court concluded that when a press prints stationery using its own materials, it constitutes a works contract subject to the statutory allocation of 70% for goods and 30% for labor and supervision. Consequently, the taxable amount for each year fell below the threshold, leading to the plaintiff being wrongly taxed. As a result, the second appeal was dismissed with costs, without granting leave to appeal further.