2015 (3) TMI 1161 - HC - VAT and Sales Tax

Liability of sales tax and imposition of penalty on supply of printed materials - Printed on the orders received from their customers and according to their specifications without ascertaining the predominant intention of the parties to the transaction - Works contract - Claimed exemption on sales effected on printed materials printed out of his own materials such as paper ink etc. - Held that - by following the decision of this Court in the case of Heritage Printers v. Joint Commissioner (SMR) of Commercial Taxes 2015 (11) TMI 1427 - MADRAS HIGH COURT the assessee is not liable to pay tax on supply of printed materials and printed materials supplied by the assessee have commercial value in the sense that they cannot be marked in the open market and the impugned transactions were purely ones of work and labour. - Decided against the revenue

Summary

Issues:
1. Whether sales tax is payable on the supply of printed materials printed by the assessee on orders received from customers?
2. Whether the impugned transactions were purely ones of work and labor?

Analysis:

Issue 1:
The case involved a dispute regarding the liability of sales tax on the supply of printed materials by the assessee. The assessing authority rejected the exemption claimed by the assessee on the sales effected on printed materials, leading to a penalty being levied under the Tamil Nadu General Sales Tax Act. The Appellate Assistant Commissioner partly modified the order, and the Tribunal confirmed the order, dismissing the appeal filed by the Department. The apex court emphasized the importance of determining the intention of the parties in such transactions to differentiate between works contract and sale. It was highlighted that the property in the goods used in a works contract may pass to the other party without deeming it as a sale. The court referred to previous decisions to support the position that transactions involving printed materials for specific customers may not attract sales tax.

Issue 2:
The court referred to previous judgments where similar transactions involving printing works were held not liable for sales tax. In a previous case, the court ruled that the transaction for printing materials meant for particular customers, which cannot be sold in the open market, does not call for any liability under the Act. The court reiterated that the mere transfer of materials owned by the assessee to the contractee does not necessarily indicate a sale rather than a works contract. Following these precedents, the court answered the questions of law in favor of the assessee and against the Revenue, ultimately dismissing the tax case revision.

In conclusion, the judgment delved into the distinction between works contract and sale concerning the supply of printed materials and emphasized the significance of determining the intention of the parties in such transactions. The court relied on previous decisions to support the position that transactions involving printed materials for specific customers may not attract sales tax.