1991 (6) TMI 244 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the transaction of printing and supplying tickets to a corporation constitutes a sale of goods exigible to sales tax under the Kerala General Sales Tax Act.
2. Whether the contract between the parties is for the sale of finished goods or a contract for labor.
3. Whether the finished product supplied can be considered a commercial commodity for the purpose of determining if the transaction amounts to a sale or a works contract.
4. Whether the cost of paper supplied should be assessed separately in determining the tax liability.

Detailed Analysis:
1. The revision before the High Court challenged the order of the Agricultural Income-tax and Sales Tax Appellate Tribunal, which held that the transaction of printing and supplying tickets to the corporation is not subject to sales tax under the Kerala General Sales Tax Act. The Tribunal considered the agreement between the parties as a "mixed contract" for "work and labor" rather than a sale of goods, leading to the revision by the Deputy Commissioner of Sales Tax.
2. The key contention was whether the agreement for printing and supplying tickets constitutes a sale of finished goods or a contract for labor. The court examined the terms of the agreement, which specified that the rates payable by the corporation included all costs of materials, transporting charges, and taxes, indicating a contract for labor rather than a sale of goods.
3. The court referred to precedents, including decisions by the Madras High Court and the Supreme Court, to determine the nature of the transaction. It emphasized that if the finished product supplied cannot be sold in the open market to any other person and has no commercial value, the transaction is considered a works contract rather than a sale. In this case, the printed tickets were intended solely for use by the corporation, supporting the conclusion of a works contract.
4. Regarding the assessment of the cost of paper supplied, the court highlighted the necessity of paper being supplied based on the contract terms to be excluded from the turnover for sales tax purposes. Since there was no evidence that paper was supplied as per the agreement, the court dismissed the argument for assessing the cost of paper separately and upheld the Tribunal's decision.

In conclusion, the High Court dismissed the revision petition, affirming the Tribunal's decision that the transaction of printing and supplying tickets to the corporation constituted a works contract and was not subject to sales tax under the Kerala General Sales Tax Act.