1970 (3) TMI 154 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of sales tax on printed materials sold by a printing press.
2. Interpretation of a divisible contract for sales tax purposes.
3. Determination of whether separate payments for paper and printing constitute an indivisible contract for sales tax liability.

Analysis:
The case involved the assessment of sales tax on printed materials sold by a printing press. The Tribunal held that if separate payments were shown for paper and printing on receipts, it indicated a divisible contract, exempting printing from sales tax as a labor contract. The State appealed this decision under the Orissa Sales Tax Act. The primary issue was whether the contract was indivisible or involved separate payments for paper and printing. The evidence presented consisted of receipts showing separate payments for paper and printing. The court emphasized the importance of determining the nature of the agreement when the order was placed. It was noted that if the agreement was to pay for paper separately and then have printing done on it, sales tax would not apply to the printing cost. However, the court found no evidence supporting a divisible agreement, as the printing press supplied paper from its stock and did the printing without distinction in payments.

The court also addressed the argument that the order book indicated separate payments for paper, but found it unreliable. Referring to previous judgments, the court concluded that the contract was indivisible, making the printing press liable to pay sales tax on the entire amount. The court simplified the questions raised and reframed it to whether sales tax is payable on the entire charges when there is an indivisible contract for printed material purchase. The court answered affirmatively, stating that sales tax is applicable to the total charges in such cases. The judgment was unanimous, with all judges agreeing on the outcome. The references were accepted, and no costs were awarded in the circumstances.

In conclusion, the court determined that the contract for selling printed materials by the printing press was indivisible, making the entire amount subject to sales tax. The judgment emphasized the need to establish the nature of the agreement at the time of order placement to determine sales tax liability. The court's decision clarified the application of sales tax in cases involving separate payments for paper and printing in the sale of printed materials.