1969 (11) TMI 89 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of sales tax on the petitioner for the entire amount received for the sale of paper and printing charges.
2. Interpretation of item 42 of schedule I of the Kerala General Sales Tax Act of 1963.
3. Determination of whether the printed material supplied by the petitioner constitutes a "paper product."

Analysis:
1. The petitioner, owning a printing press and a paper section, was assessed for sales tax on the total amount received for paper sales and printing charges. After a remand, the Tribunal concluded that the material supplied by the petitioner was a paper product, leading to the current challenge. The Tribunal's reasoning was based on the belief that any paper undergoing a process, like printing, becomes a paper product. However, the High Court pointed out that not all processed paper necessarily transforms into a paper product, citing examples of paper undergoing processes for durability. The Court emphasized the need to understand the common parlance meaning of "paper" and "paper product" in the context of the Sales Tax Act.

2. The Court delved into the interpretation of item 42 of the Sales Tax Act, which covers "paper (other than newsprint), cardboards, straw boards, and their products." The Act specifies that goods mentioned in the first schedule are taxable at rates specified against each item. The Court analyzed the transaction between the petitioner and customers, considering whether it constituted a works contract or two separate contracts for paper supply and printing. The Court clarified that since the petitioner's sale was not the first sale point for paper, it could not be taxed. Additionally, the payment received for printing services did not involve the sale of goods, further supporting the non-taxable nature of the transaction.

3. The key issue revolved around whether the printed material supplied by the petitioner qualified as a "paper product" under the Act. The Tribunal argued that any paper undergoing a process, like printing, became a paper product. However, the Court disagreed, citing examples of paintings and literary works on paper not being considered products of paper. The Court referred to a previous decision where the concept of "paper product" was discussed concerning exercise books and ledger books. Ultimately, the Court concluded that the printed material supplied by the petitioner, even using his paper, did not fall under the definition of a paper product under the Act. Consequently, the assessment was set aside, and the petitioner was awarded costs.

In conclusion, the High Court ruled in favor of the petitioner, setting aside the assessment for sales tax on the grounds that the printed material supplied did not qualify as a "paper product" under the Sales Tax Act. The judgment emphasized the common parlance understanding of terms like "paper" and "paper product" and clarified the tax implications of transactions involving paper supply and printing services.