1956 (4) TMI 45 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the turnover of job work such as receipt books, registers, letter heads, and handbills printed to order, when all materials are supplied by the presses, is assessable to sales tax under the U.P. Sales Tax Act.
2. Whether the sale of receipt books, registers, forms, visiting cards, and handbills made or printed to the order of the purchaser constitutes a sale of those articles or a sale of paper.
3. Whether the transactions between the customers and the assessees for job work are contracts for the sale of goods or contracts for work and labor.

Analysis:
1. The reference made by the Revising Authority under section 11 of the U.P. Sales Tax Act questioned the validity of assessing sales tax on the turnover of job work by publishers and printers. The key issue revolved around whether the turnover of such job work is subject to sales tax. The court examined the definition of "paper" under the Act and analyzed the nature of the transactions to determine the taxability of the job work turnover. The court considered relevant notifications exempting certain goods from sales tax and concluded that the sale of job work items as completed articles is not a sale of paper but of those specific articles.

2. The court delved into whether the sale of receipt books, registers, forms, visiting cards, and handbills, made or printed to order, should be considered a sale of those articles or a sale of paper. The judgment highlighted the distinction between selling the completed articles and selling paper, emphasizing that the substance of the transaction determines the nature of the sale. The court provided examples to illustrate this distinction, ultimately concluding that the sale of letterheads constituted a sale of paper, while the other items were considered sales of the specific articles.

3. The court addressed the argument that the transactions between the customers and the assessees for job work were contracts for work and labor rather than contracts for the sale of goods. By applying the test of looking at the substance of the contract, the court determined that if the primary purpose of the contract is the production of an article to be sold to the customer, it constitutes a sale of goods. Conversely, if the main focus is on the skill and labor involved, with the transfer of materials being ancillary, it is considered a contract for work. The court cited relevant case law to support this interpretation and concluded that the transactions in question were contracts of sale.

In conclusion, the court answered the reference affirmatively regarding visiting cards and receipt books, registers, forms, and handbills if sold as completed articles, while answering negatively for letterheads. The judgment clarified the taxability of job work turnover under the U.P. Sales Tax Act, emphasizing the importance of analyzing the substance of transactions to determine the nature of the contracts involved.