2014 (11) TMI 1076 - HC - VAT and Sales Tax

Classification - printing and manufacturing of beedi labels - Whether a works contract or sale - Held that - it can be hardly disputed before this Court by the appellant that such labels cannot be sold in open market by themselves. Therefore, where the finished product supplied to a particular customer cannot be sold in the open market to any other person, a transaction is only a works contract. The filing of present appeal is an example of the ritual followed by departments, without any basis only burdening the Court with litigation, despite the professed policy of the Government to not file unnecessary appeals. We thus dismiss the appeal with costs, quantified at ₹ 5000/-. - Decided against the Revenue

Summary

Issues:
1. Classification of transaction as works contract or outright sale for sales tax turnover assessment.
2. Applicability of judgments to determine works contract.
3. Interpretation of Supreme Court judgment in a related case.

Issue 1: Classification of transaction
The case involved the classification of a transaction as a works contract or outright sale for sales tax turnover assessment. The 1st respondent claimed the turnover as a works contract for printing and manufacturing of beedi labels for a specific customer. The Assessing Authority treated it as an outright sale and imposed a penalty. The Appellate Assistant Commissioner set aside the order and directed reassessment as a works contract. The Tribunal upheld this decision after considering the factual position.

Issue 2: Applicability of judgments
The judgment discussed the applicability of two Supreme Court judgments to determine a works contract. The court referred to judgments in cases involving the printing of stationary and concluded that if the finished product supplied to a particular customer cannot be sold in the open market to any other person, the transaction qualifies as a works contract. The court highlighted that the labels in question could not be sold in the open market independently, supporting the classification as a works contract.

Issue 3: Interpretation of Supreme Court judgment
The judgment also analyzed the interpretation of a Supreme Court judgment in a related case involving the construction of bus bodies on chassis. The court noted that the property in the bus body did not pass upon construction on the chassis, indicating a sale of the whole vehicle rather than a works contract. The court determined that this judgment was not applicable to the present case involving the printing and manufacturing of labels for a specific customer.

In conclusion, the High Court dismissed the appeal by the appellant department, emphasizing that the appeal lacked a basis and burdened the court with unnecessary litigation. The court highlighted the government's policy against filing unnecessary appeals and imposed costs on the appellant. The judgment clarified the classification of the transaction as a works contract based on the inability to sell the finished product in the open market, supported by relevant legal precedents.