1983 (3) TMI 247 - HC - VAT and Sales Tax

Summary

Issues:
- Whether there were two separate and independent contracts involved in the supply of printed materials by the assessees?
- Whether the sales of paper and paper boards by the assessees were second sales exempt from tax?
- Whether the Tribunal's decision on the existence of two distinct contracts was justified?
- Whether the sales of paper and paper boards were second sales as claimed by the assessees?

Analysis:
The High Court of Madras addressed the issue of whether there were two separate and independent contracts involved in the supply of printed materials by the assessees. The assessees, printers and book-binders, reported a total turnover and claimed exemption on the ground that it represented proceeds from works contract. The assessing authority, however, determined a higher turnover and held that the entire turnover related to the supply of finished products, not separate contracts for supply of paper and paper boards and for labor. The Appellate Assistant Commissioner upheld this view, leading the assessees to appeal to the Tribunal.

The Tribunal analyzed the order book, bill books, and invoices and found that there were indeed two distinct contracts: one for the supply of material and the other for labor charges. The Tribunal observed specific clauses in the order form indicating the transfer of property occurred upon the supply of paper and boards for work execution, not just after printing. Separate bills for material cost and labor charges were prepared by the assessees, and the Tribunal deemed this separation legitimate, leading to the conclusion that the turnover should be divided into two parts: one for work and service and the other for the sale of paper and paper boards, exempt from tax as second sales under the Tamil Nadu General Sales Tax Act, 1959.

The High Court upheld the Tribunal's decision on the existence of two distinct contracts, emphasizing that the Tribunal had thoroughly considered the order form, bills, and invoices before reaching its conclusion. The Court dismissed the Revenue's challenge to this view, noting the lack of evidence to suggest otherwise. Additionally, the Revenue's argument that the sales of paper and paper boards were first sales, not second sales, was refuted. The Court highlighted that the assessees had consistently claimed and been granted exemption for these sales as second sales, and the assessing authority had not questioned this claim. Therefore, the Revenue's attempt to now assert these were first sales was deemed untenable.

In conclusion, the High Court found no justification to interfere with the Tribunal's order, ultimately dismissing the tax case and awarding costs to the assessee.