2013 (12) TMI 1384 - 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 by the assessee on orders from customers without ascertaining the dominant intention of the parties?
2. Whether the printed materials supplied by the assessee, having no commercial value in the open market, constitute transactions of work and labor exempt from sales tax?

Analysis:

1. The Tax Case Revisions were filed by the Revenue against the Tamilnadu Sales Tax Appellate Tribunal's order for the assessment years 1983-84 and 1987-88. The substantial questions of law admitted for consideration were related to the liability of sales tax on the supply of printed materials based on the dominant intention of the parties involved in the transaction.

2. The Court referenced a previous decision in the case of STATE OF T.N. v. PREMIER LITHO WORKS, where it was held that the supply of labels with printed particulars, tailored to a specific customer's needs, did not constitute a sale for tax assessment purposes. The Court emphasized that the labels themselves had no market value and were not intended for general sale, highlighting the importance of the dominant intention behind the transaction.

3. The assessee, a dealer in printing materials, had their sales assessed by the Assessing Authority. Upon appeal to the Appellate Assistant Commissioner, the order of assessment was set aside in favor of the assessee. Subsequently, the Revenue appealed to the Tamil Nadu Tax Appellate Tribunal, which upheld the decision of the Appellate Assistant Commissioner. The Revenue then brought the matter before the High Court for further review.

4. Citing the precedent set in the earlier case, the High Court determined that the transaction involving the supply of printed materials by the assessee could not be subjected to sales tax. The Court reiterated that the absence of market value for the materials and the focus on customized production for specific customers indicated a nature of work and labor rather than a sale transaction.

5. Consequently, the High Court dismissed the Tax Case Revisions filed by the Revenue, emphasizing that the transaction in question did not warrant tax assessment. No costs were awarded in this matter.