2013 (12) TMI 1439 - HC - VAT and Sales Tax

Liability to Sales tax - supply of printed materials - Whether the Sales Tax Appellate Tribunal is right in proceeding on the footing that since the printed materials supplied by the assessee have no commercial value in the sense that they cannot be marketed in the open market, the impugned transactions were purely ones of work and labour and not liable to tax - Held that - what was supplied by the dealer was only labels on which certain particulars had been printed to suit the requirements of a particular customer. This Court observed that the labels by themselves could not really be sold in the open market and they had no use since the same were not of any use in the open market. This Court pointed out that on the contractor undertaking to do the work for the particular customer therein, the labels would not necessarily be deemed to sell the materials the fact that in the execution of the contract for work some materials were used and the property / goods so used, passed to the other party would not by itself make the transaction a sale. In other words, the dominant intention was not for sale of labels. Hence, the transaction could not be treated as deemed sale for the purpose of assessing the turnover - Decided against Revenue.

Summary

Issues:
1. Whether sales tax is payable on the supply of printed materials printed on customer orders without ascertaining the dominant intention of the parties?
2. Whether the transactions involving supply of printed materials constitute sales or works contract?

Analysis:
1. The Tax Case Revision was filed by the Revenue against the order of the Tamilnadu Sales Tax Appellate Tribunal for the assessment year 1996-97. The substantial questions of law admitted for consideration were related to the liability of sales tax on the supply of printed materials based on customer orders without determining the dominant intention of the parties involved in the transaction. The Court referred to a previous decision where it was held that the supply of labels with printed particulars, tailored for specific customers, did not amount to a sale as the labels had no commercial value in the open market and were not intended for sale. The dominant intention of the parties was crucial in determining whether a transaction constituted a sale or not.

2. The assessee in this case was a dealer in printing materials. The Assessing Authority initially classified the sale of printed materials under specific entries of the Sales Tax Act. However, the Appellate Assistant Commissioner considered the transactions to be works contracts and remanded the matter back to the Assessing Officer for reassessment. The Tamil Nadu Sales Tax Appellate Tribunal upheld the works contract classification and allowed the assessee's appeal. The Revenue challenged this decision, arguing that the transactions should be treated as sales for tax assessment purposes. The Court, relying on a previous judgment, reiterated that the nature of the transaction, the intention of the parties, and the commercial viability of the goods supplied were essential factors in determining whether a transaction constituted a sale or a works contract.

3. The Court, based on the precedent and the facts of the case, concluded that the transaction involving the supply of printed materials on customer orders did not amount to a sale for tax assessment purposes. Therefore, the Tax Case Revision filed by the Revenue was dismissed, and no costs were awarded. The judgment highlighted the importance of analyzing the nature of transactions, the intention of the parties, and the commercial value of the goods supplied to determine the applicability of sales tax in such cases.