1991 (1) TMI 411 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Liability to be assessed to sales tax on the supply of photographic blocks.
2. Nature of transactions as sale and exigibility to levy of tax.
3. Validity and sustainability of the impugned orders.

Issue-wise Detailed Analysis:

1. Liability to be assessed to sales tax on the supply of photographic blocks:

The petitioner, a photographic block-maker, contended that the process of block-making involves technical skill and expertise, thus it should not attract sales tax. However, the assessing authority rejected this plea, asserting that the petitioner, as a registered dealer, purchases materials for manufacturing metal blocks and sells them, collecting Karnataka sales tax at 4 percent. The first appellate authority and the Karnataka Appellate Tribunal upheld this view, confirming that the transactions were sales subject to tax. The Tribunal held that the petitioner is liable to be assessed to sales tax on the supply of photographic blocks to his customers.

2. Nature of transactions as sale and exigibility to levy of tax:

The petitioner argued that block-making is a works contract involving skill and labor, not a sale. However, the court referenced several precedents, including the Supreme Court's decision in the Assistant Sales Tax Officer v. B.C. Kame, which distinguished between contracts of sale and contracts of work and labor. The court noted that the essence of the contract determines its nature: if the substance is the production of something to be sold, it is a contract for the sale of goods. The court concluded that mounting a design on a metal block for sale constitutes a sale, not a works contract. The petitioner's transactions were therefore deemed sales and liable to sales tax.

3. Validity and sustainability of the impugned orders:

The court examined the validity of the orders from the assessing authority, the first appellate authority, and the Karnataka Appellate Tribunal. The petitioner's contention that block-making involves mainly skill and expertise was considered but ultimately dismissed. The court referenced the State of Mysore v. A.C. Made Gowda, which held that contracts for making and selling blocks are contracts for the sale of goods. The court found no reason to depart from this precedent, affirming the validity and sustainability of the impugned orders. The revision petition was dismissed, and the orders were upheld as valid and sustainable in law.

Conclusion:

The court held all three questions in the affirmative and against the petitioner, confirming the liability to sales tax on the supply of photographic blocks, the nature of the transactions as sales, and the validity of the impugned orders. The revision petition was dismissed.