2014 (9) TMI 919 - HC - VAT and Sales Tax

Exemption from tax - whether the title covers published under the directions of the Pathya Pustak Adhikari, U.P. Lucknow, which is printed for Nationalized Text Books, fall under the category of Pathya Pustak and will be exempted from tax or not - Held that - In 1998 (8) TMI 512 - SUPREME COURT OF INDIA , State of Maharashtra vs. Sarvodaya Printing Press Fine Art Printer the Supreme Court held that where Sarvodaya Printing Press entered into an agreement with the Madhya Pradesh Electricity Board for the supply of revenue money receipt books at the rate of ₹ 8.88 per receipt book, the charge for the supply of the receipt book was of a composite nature and that only job work was done in the respondent's Printing Press and that the paper and ink used were the property of the respondent before printing but thereafter they became the property of the Board. The Supreme Court, therefore, held that it was not a case of sale but a works contract having regard to the job. - on a conspectus facts and law discussed above, the order of the Tribunal dated 7.7.2010 cannot be sustained and the title cover of the Pathya Pustak as printed by the revisionist must necessarily be held to be a part of the Pathya Pustak Nationalised Text Books to be used for Class I to VIII and the same would fall within Entry 7 of Schedule-1 of the U.P. VAT Act and would not be liable to be tax. - Decided in favour of assessee.

Summary

Issues:
1. Whether title covers of Nationalized Text Books printed by the revisionist are taxable under Entry 100 of the U.P. VAT Act, 2008 or exempted under Entry 7 of Schedule-1.

Analysis:

The revisionist, an approved printer, printed title covers of Nationalized Text Books under a contract with the Pathya Pustak Adhikari, U.P., Lucknow. The Commissioner of Commercial Tax opined that title covers fall under Entry 100 of the U.P. VAT Act, subject to 4% tax. The Tribunal upheld this view. The revisionist argued that title covers are integral to books, exempted under Entry 7 of Schedule-1. The dispute centered on whether title covers are standalone goods or part of books.

The revisionist contended that a book is incomplete without its cover, emphasizing that covers printed under contract terms are not for open market sale. The Revenue argued that the revisionist prints only covers, not complete books, justifying taxation under Entry 100. The court noted that the revisionist's contract restricts cover sales to the government, indicating covers' specific use for Nationalized Text Books.

Citing legal precedents, the court differentiated between goods and works contracts. Referring to the Punjab & Haryana High Court and Supreme Court decisions, the court highlighted that transactions involving items not for general market sale may not constitute goods sale but works contracts. Considering these precedents and the nature of the revisionist's work, the court concluded that the title covers are integral to Nationalized Text Books and exempt under Entry 7 of Schedule-1, not taxable under Entry 100.

In light of the above analysis, the court quashed the Tribunal's order, ruling in favor of the revisionist. The judgment allowed the revisions, holding that the title covers printed by the revisionist are part of Nationalized Text Books and exempt from taxation under Entry 7 of Schedule-1 of the U.P. VAT Act, 2008.