2014 (5) TMI 133 - HC - VAT and Sales Tax

Nature of activity - Whether the assessee was doing works contract or sold plastic bags to his customers - Held That - The contention of the assessee cannot be accepted that the transaction in question has to be viewed as a works contract Relying upon Tvl.Bharat Offset and others Vs. The Tamil Nadu Taxation Special Tribunal, Rep. By its Registrar, Chennai and another 2010 (4) TMI 969 - MADRAS HIGH COURT - where an assessee sells bags with the customer s name imprinted therein, the subject of the transaction being the sale of bag or diary as the case may be, the printing of the name is just incidental. The mere fact that the labels or logos have been printed would not make the transaction into a works contract - It is purely and simply a sale of goods - Therefore, printing of the logo or name is incidental to the sale and the transaction between the customer and the supplier is not work charged - Except for contending that the transaction is one of works contract, the assessee had not placed any material before any of the authorities - When the primary object of the transaction is sale of bags and the printing of the name or logo is only incidental to the sale, there was no justifiable ground to accept the case of the assessee and hold that the transaction is sale alone decided against assessee.

Summary

Issues:
1. Whether the petitioner was doing 'works contract' or sold plastic bags to his customers?
2. Whether the penalty imposed under Section 12(3) of the Act is warranted?

Issue 1: Whether the petitioner was doing 'works contract' or sold plastic bags to his customers?
The petitioner, a manufacturer of plastic bags, claimed the sale of bags with customer names as "works contract," not a sale. The Assessing Officer found discrepancies in records, proposed a best judgment assessment, and taxed the sale of plastic bags. The Appellate Assistant Commissioner upheld the assessment but reduced the penalty. The Sales Tax Appellate Tribunal confirmed the order, stating the bags were marketable goods, not works contract. The petitioner cited legal precedents to support their claim, while the Revenue relied on a court decision regarding taxation of printed materials.

Issue 2: Whether the penalty imposed under Section 12(3) of the Act is warranted?
The Appellate Assistant Commissioner reduced the penalty imposed under Section 12(3) of the Act. The petitioner challenged the penalty reduction, arguing the transaction should be treated as a works contract. The High Court analyzed previous court decisions on the sale of printed materials and works contracts. The Court held that the primary object of the transaction was the sale of bags, with printing names as incidental, not constituting a works contract. The Court dismissed the Tax Case Revision, following precedent and rejecting the petitioner's claim.

In conclusion, the High Court ruled against the petitioner, determining that the transaction involving the sale of plastic bags with printed names was not a works contract but a sale of goods. The Court upheld the assessment and penalty reduction decision, citing legal precedents and emphasizing the incidental nature of printing names on bags.