2009 (7) TMI 1159 - HC - VAT and Sales Tax

Whether a particular transaction is an inter-State sale or a works contract? Held that - The assessing officer had no evidence before him to come to a conclusion that the labels printed by the first respondent are marketable, though not actually marketed. There was also no evidence on record to show that the printing of labels is not incidental, but primary. Without any evidence, the assessing officer went on presumptions and hence the Tribunal and the learned single judge, were right in overturning the orders of the assessing officer and the Appellate Assistant Commissioner to conclude that the printed materials supplied by the assessee to their customers constituted a works contract and not outright inter-State sales. No reason to interfere with the order of the learned judge and hence this writ appeal is dismissed

Issues Involved:
1. Whether the transaction in question is an inter-State sale or a works contract.
2. Validity of the exemption claim for inter-State coolie printing works and printing works executed for a single user.
3. Applicability of the concessional rate of tax for inter-State sales against "C" forms.

Detailed Analysis:

1. Inter-State Sale vs. Works Contract:
The core issue raised by the Revenue was whether the transaction in question constituted an inter-State sale or a works contract. The Tribunal, relying on the apex court decisions in State of Tamil Nadu v. Anandam Viswanathan [1989] 73 STC 1 and State of Maharashtra v. Sarvodaya Printing Press Fine Art Printer [1999] 114 STC 242, concluded that the printed materials supplied by the assessee to their customers were works contracts and not outright inter-State sales. The Tribunal's decision was upheld by the learned single judge, who also relied on the Anandam Viswanathan case.

The assessing officer's findings noted that the printed labels were created according to the specifications, designs, and general layout provided by the customers, but were printed on paper owned by the assessee. Despite the specifications, the assessing officer concluded that these labels had commercial value in the open market, thus constituting a sale. However, the Tribunal and the learned judge found that the labels, by themselves, could not be sold in the open market without the product of the customer being packed, indicating a works contract rather than a sale.

2. Exemption Claim for Inter-State Coolie Printing Works and Single User Printing Works:
The first respondent claimed exemptions under the Central Sales Tax Act, 1956, for inter-State coolie printing works and printing works executed for a single user. The assessing officer allowed the exemption for inter-State coolie printing receipts but disallowed the claim for single-user printing works. The Tribunal, however, allowed the appeal, determining that the transactions were works contracts. The State's subsequent writ petition was rejected, and the learned judge upheld the Tribunal's decision.

3. Concessional Rate of Tax for Inter-State Sales Against "C" Forms:
The assessing officer rejected the claim for a concessional rate of tax for inter-State sales against "C" forms. This decision was initially upheld by the Appellate Assistant Commissioner but was overturned by the Tribunal, which found that the transactions were works contracts, not outright sales, thus impacting the applicability of the concessional rate.

Judicial Precedents and Legal Reasoning:
The court reviewed several Supreme Court decisions cited by the learned Government Advocate, including:
- Chandra Bhan Gosani v. State of Orissa [1963] 14 STC 766 (SC): The court found this case inapplicable as it dealt with the sale of bricks, which are distinct products, unlike labels intended for use on other products.
- Patnaik and Company v. State of Orissa [1965] 16 STC 364 (SC): This case involved building bus bodies on supplied chassis, which was deemed a sale of goods, but the context differed significantly from the present case.
- Rollatainers Ltd. v. Union of India [1994] 95 STC 556 (SC) and A.P. State Electricity Board v. Collector of Central Excise [1994] 95 STC 595 (SC): These cases arose under the Central Excise Act and were found inapplicable.
- Metagraphs Pvt. Ltd. v. Collector of Central Excise [1997] 106 STC 180 (SC): The court held that the nature of the product and circumstances determine if it is a product of the printing industry, which did not assist the appellant.
- Associated Cement Companies Limited v. Commissioner of Customs [2001] 124 STC 59 (SC): This case under the Customs Act was deemed irrelevant.

The court concluded that the assessing officer's decision lacked evidence and was based on presumptions. The Tribunal and the learned judge were correct in overturning the orders of the assessing officer and the Appellate Assistant Commissioner.

Conclusion:
The High Court dismissed the writ appeal, upholding the Tribunal's decision that the transactions were works contracts and not inter-State sales. The court found no reason to interfere with the learned judge's order and dismissed the connected miscellaneous petition as well.

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