1960 (1) TMI 27 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the supply of printed material to a customer at an agreed price constitutes a sale of goods or a works contract.
2. Interpretation of relevant provisions of the Madras General Sales Tax Act and Andhra Pradesh General Sales Tax Act.
3. Applicability of judicial precedents to the case.
4. Determination of the nature of the transaction based on the definitions of "sale" and "works contract."

Issue-wise Detailed Analysis:

1. Whether the supply of printed material to a customer at an agreed price constitutes a sale of goods or a works contract:
The central issue in this case is whether the supply of printed materials such as letterheads, bill books, and account books by the respondent's printing press constitutes a sale of goods or a works contract. The respondent argued that the transactions were works contracts, entitling them to a deduction of 30% from the gross turnover, thus exempting them from taxation under section 3(3) of the Madras General Sales Tax Act. The taxing authority and the Deputy Commissioner of Commercial Taxes disagreed, but the Sales Tax Appellate Tribunal sided with the respondent, prompting the State Government to file the revision petition.

2. Interpretation of relevant provisions of the Madras General Sales Tax Act and Andhra Pradesh General Sales Tax Act:
Section 2(h) of the Madras General Sales Tax Act, which corresponds to section 2(n) of the Andhra Pradesh General Sales Tax Act, defines "sale" as every transfer of property in goods by one person to another in the course of trade or business for valuable consideration, including a transfer involved in the execution of a works contract. "Works contract" is defined as any agreement for carrying out work for valuable consideration, involving the construction, fitting out, improvement, or repair of any building, road, bridge, or other immovable property, or the fitting out, improvement, or repair of any movable property.

3. Applicability of judicial precedents to the case:
The Tribunal's decision was influenced by the judgment in The State of Madras v. Vijayaraghavan, which held that supplying printed stationery articles was a works contract. However, the High Court disagreed with this precedent, finding that the transactions in question fell within the definition of "sale" as per the Madras General Sales Tax Act. The Court referenced several cases, including Clay v. Yates, Lee v. Griffin, and Dominion Press Limited v. Minister of Customs and Excise, to support the view that the supply of printed materials constituted a sale of goods.

4. Determination of the nature of the transaction based on the definitions of "sale" and "works contract":
The Court elaborated on the distinction between a sale and work and labour, citing Benjamin on Sale, which states that if the intention and result of the contract are to transfer property for a price, it is a contract of sale. The Court concluded that the transactions in question were sales because they involved the transfer of property in finished goods to the customers. The argument that the goods had no commercial value as they could not be sold to the general public was dismissed, as the decisive factor was whether the contract was for the sale of finished products.

Conclusion:
The High Court held that the supply of printed materials by the respondent constituted a sale of goods and not a works contract. Consequently, the payments made by the customers for the printed material were considered the price of goods sold by the assessee, making the entire turnover subject to tax. The revision petition was allowed, and the order of the Tribunal was set aside, with no order as to costs.

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