2012 (12) TMI 961 - HC - VAT and Sales Tax

Works contract - assessee transfers property in form of ink and other materials in execution of printing works - Held that - No sale of goods is involved in executing the work of printing merely because the printer has used the ink in the process. The use of ink in the process cannot be held to be transfer of goods by the printer to the person for whom a printing job has been executed. The view taken by the Bombay High Court in R.M.D.C. Press Pvt. Ltd. 1998 (9) TMI 635 - BOMBAY HIGH COURT fully supports the assessee and is in consonance with the view taken by the honourable Supreme Court in Bharat Sanchar Nigam Ltd. v. Union of India 2006 (3) TMI 1 - Supreme court . W.P. allowed

Summary

Issues: Tax liability on transfer of property in the form of ink and other materials in execution of printing work under the Assam Value Added Tax Act, 2003.

Analysis:
The petitioner sought the quashing of an order passed by the Commissioner of Taxes, Assam, under section 105 of the Assam Value Added Tax Act, 2003, regarding the tax liability on the transfer of property in the form of ink and other materials in the execution of printing work. The petitioner, a newspaper publisher, got the newspaper printed on a job-work basis and questioned the tax liability on the ink used in the printing process. The Commissioner held that the transfer of property in the form of ink and other materials during printing work constituted a works contract taxable at 13.5%. The petitioner contended that no transfer of property occurred concerning the ink used in printing as it was consumed in the process and lost its identity as goods. The Revenue argued that the printing job involved a composite contract of work and sale of materials. The High Court considered relevant judgments and concluded that no sale of goods took place during the printing work, as the ink's use did not amount to the transfer of goods. The court referenced judgments emphasizing that the intention and understanding of the parties regarding the subject matter of the transaction are crucial in determining the existence of a sale. The court allowed the petition, setting aside the Commissioner's order and directing a fresh order in accordance with the law.

This case delved into the intricate distinction between a works contract and the sale of goods in the context of printing work involving the transfer of property in the form of ink and other materials. The High Court analyzed the nature of the transaction and the legal principles governing the determination of a sale, emphasizing the importance of parties' intentions and the characteristics of the goods involved. The court's decision was influenced by precedents highlighting that the mere use of materials like ink in a process does not necessarily constitute a transfer of goods, especially when the materials lose their identity and marketability in the process. By referring to relevant judgments and legal principles, the court provided a detailed analysis to support its conclusion that the printing work in question did not involve the sale of goods, warranting the setting aside of the Commissioner's order and a fresh determination in line with the law.