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TMI Blog1984 (11) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... bility will be a useful guide in most of the situations. Mr. Karunakarn Nambiar for the Revenue however contends that the Tribunal should have treated all the transactions as out-and-out sale of printed material or paper. It is alternatively contended in respect of bill books, vouchers, receipt books, letter heads and notices, the Tribunal should have implicitly followed the clear pronounce. ment in P.T. Varghese [1976] 37 STC 171 that they could be regarded only as sale of finished products. 3.. In Srinivasa Printing Works v. Sales Tax Officer 1966 KLT 1139 Govindan Nair, J. (as he then was), held that printing of letter heads, binding of books and supply of journal forms were contracts for sale, as work and labour was not of the essence of the contract. But in Srinivasa Printing Works v. Sales Tax Officer [1967] 20 STC 278; 1967 KLJ 665 Isaac, J., thought that merely because certain transactions involve transfer of property in the printed material, they could not be regarded as sale of paper products or as anything other than execution of a works contract. A suggestion that in all such cases labour charges could be deducted and the balance treated as cost. of paper and taxed ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips explained: "The question as to whether a contract is a contract of work and labour or a contract for sale is not one free from difficulty. The reason for that is that in border line cases the distinction between the two types of contract is very fine. This particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and another for sale. 6.. In Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314 (SC) the Supreme Court noted with approval the following statement of law by Benjamin(1): "1. A contract whereby a chattel is to be made and affixed by the workman to land or to another chattel before the property therein is to pass, is not a contract of sale, but a contract for work, labour and materials, for the contract does not contemplate the delivery of a chattel as such. 2.. When a chattel is to be made and ultimately delivered by a workman to his employer, the question whether the contract is one of sale or of a bailment for work to be done depends upon whether previously to the completion of the chattel the property in its materials was vested in the workman or in his employer. If the intention and result of the contract is to transfer for a price property in which the transferee had no previous property then the contract is a contract of sale. Where, however, the passing of property is merely ancillary to the contract for the performance of work such a contract does not thereby become a contract of sale." But it was added that "whether a given transaction is a works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be entirely made after, and in consequence of, the buyer's order for it. It has also been held that if the property is in existence at the time of the contract for its transfer it is a sale although the seller is to do work thereon to adapt it to a particular use for the buyer; and the fact that work and labour are to be done on, or in connection with, material sold as an incident to, or in connection with, the transfer of title does not rob the transaction of its essential characteristics of a sale if the whole or any measureable part of the consideration for the performance of the contract is compensation for the material." 7.. Tested on the principles noticed above, it is difficult to accept the contention of the Government Pleader that supply of bill books, vouchers, letter heads, visiting cards, etc., by a printer should always be regarded as sale, on the authority of P.T. Varghese [1976] 37 STC 171. The decision cannot be construed as laying down any such inflexible rule. Paragraph (10) of the judgment shows that the distinction between works contract and contract for sale was examined in the proper perspective; and so far as the conclusion on certain transactions was co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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