1970 (1) TMI 72

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..... ssessee places orders for manufacture of shoes with its members. The members select the raw materials from the market and inform the central co-operative society. The society purchases the raw materials from the market and supplies them to its members. At the time of supply it debits the exact cost of the raw materials in the account of each member to whom the raw material is supplied. The member, after manufacturing the shoes, supplies them to the assessee. The members prepare a bill in which, in addition to the price of the raw materials, Re. 1 to Rs. 2-8-0 per pair are charged. The assesseesociety pays to its members the price mentioned in the bills less the cost of the raw materials. For the assessment years 1959-60 and 1960-61 the as .....

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..... to arrange its supply according to plan and to act as a clearing house for supply and disposal of raw materials, tools, implements and machinery and goods. It has also been found that whenever the raw materials supplied to a particular member remains in surplus with it, it is either returned to the assessee or transferred to some other members at the direction of the assessee. None of the authorities below have found a single instance where the member of the assessee may have disposed of the raw material supplied to it by the assessee, itself. Further, there is no finding that there was any instance where the primary societies after using the raw material supplied by the assessee sold the manufactured shoes in the market or to any person ot .....

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..... raw materials. The difference is between one to two and a half rupees per pair. That would go to suggest that the members were being paid remuneration for the work of manufacturing the shoes. There was no agreement to sell the raw materials. It was stressed that since the assessee itself recorded the transaction as sale in its accounts the sales tax authorities were justified in treating the transaction as such. The manner of recording a transaction in the books would not make the transaction in law a sale. The assessing authority could prima facie treat that transaction as a sale on that basis, but when the facts have been determined the legal character of the transaction would depend upon them and not upon the label put upon it by the par .....

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