1998 (3) TMI 665 - AT - VAT and Sales Tax

Summary

Issues:
1. Disallowance of claim of exemption on the supply of printed materials under the T.N.G.S.T. Act for the assessment year 1984-85.
2. Discrepancies in the order passed by the first respondent despite previous judgments and orders.
3. Interpretation of legal precedents regarding the taxable turnover and the nature of contracts for printing services.
4. Applicability of judgments related to the marketability of goods and the distinction between works contract and sales in the context of printed materials.

Analysis:
1. The case involves the disallowance of exemption claimed by the petitioner for supplying printed materials under the T.N.G.S.T. Act for the assessment year 1984-85. The petitioner, a registered dealer, sourced raw materials from local dealers and provided customized printed products to customers. The first respondent disallowed the exemption claim and levied tax on a portion of the turnover, leading to an appeal and subsequent orders.

2. Despite previous judgments and orders, the first respondent passed an order in 1997 for the assessment year 1984-85, raising concerns about the lack of evidence regarding paper purchases and returns. The petitioner objected to this order, citing the apex court's clear directives on taxable turnover and the incidental nature of paper supply in printing contracts.

3. Legal precedents, including judgments by the Supreme Court and the Madras High Court, were crucial in analyzing the nature of contracts for printing services and the treatment of paper supply in determining taxable turnover. The Supreme Court's ruling emphasized that the entire price for printed materials should be excluded from taxable turnover if the supply of paper was incidental to the contract for work and labor.

4. Further examination of judgments highlighted the distinction between marketable goods and works contract in the context of printed materials. The Madras High Court and the Supreme Court rulings emphasized that certain printed materials, like cinema tickets and photostat copies, should not be subjected to tax as they constitute works contract rather than sales. The judgments clarified that the main objective of such contracts is work and service, not the transfer of chattels.

In conclusion, the Tribunal found the first respondent's order to be flawed due to errors of law, leading to the quashing of the order without requiring the petitioner to file an appeal. The decision was based on the clear legal principles established by previous judgments and the correct interpretation of the nature of contracts for printing services and the treatment of printed materials under taxation laws.