V. RAMASUBRAMANIAN, J.
The first respondent, who is an assessee under the Central Sales Tax Act, filed Form-I Returns for the year 1992-1993. When their accounts were called for and checked, the first respondent sought exemption on a particular turnover which related to outright sale of biscuit boxes and labels to a particular customer. The claim for exemption was rejected by an order dated 31.3.1994 passed by the Assessing Officer.
2. On appeal, the Appellate Assistant Commissioner found that the transaction was a works contract and hence remitted the matter back to the Assessing Officer, by an order dated 20.1.1998, with a direction to assess the transaction as works contract.
3. The State filed a further appeal before the Additional Bench of the Tamil Nadu Sales Tax Appellate Tribunal in MTSA No.537 of 1999. The Tribunal dismissed the appeal along with three other appeals by a common order dated 30.3.2000. After 4 years of the dismissal of the appeal by the Tribunal, the State filed a writ petition in W.P.No.3835 of 2004, but the same was also dismissed by the learned Judge, by an order dated 8.6.2007. Aggrieved by the said order, the Revenue is on appeal.
4. We have heard Mr.D.Sasikumar, learned Government Advocate, appearing for the appellant and Mr.P.Radhakrishnan, learned counsel appearing for the first respondent.
5. It is seen from the order of assessment dated 31.3.1994, that there is no dispute about the fact that the first respondent printed labels to specifications for a particular customer on biscuit boxes. The labels contained the pictures of cookies and the name and address of the manufacturer. Since the printed empty cartons and labels were made to order with the name and address of the manufacturer printed thereon, the dealer contended that they are not marketable. But unfortunately, the Assessing Officer proceeded on a very curious reasoning that those printed empty cartons could be sold to bogus dealers. The relevant part of the order reads as follows:-
"The dealer's contention that nobody will buy the printed empty cartons or labels is absolutely wrong. Nobody has son much of dare enough to sell such a kind of label of carton printed according to these specifications. If such a kind of labels and cartons have been allowed for sales, the bogus dealers are ready to purchase them well in advance so as to sell their inferior goods at such a higher price. If this is followed even the well established or renowned company or firm will loose their good will and thereby they will be going into deterioration of their business. But, without these labels or cartons the bale commodity cannot enter into the field of public market. Nobody will touch it thinking that it is an inferior commodity. Only when it is wrapped with label or carton suitably made for it, the commercial value arises and it can enter the field of public market. In all the sale bills packing and forwarding charges are calculated separately. If not calculated separately, they fix the price inclusive of the packing materials. Thus, the label or carton (packing materials) is the deciding factor of fixation of price in the public market."
6. Unable to agree with the above reasoning of the Assessing Officer, the Appellate Authority held that for deciding the issue, one has to look into -
(a) the terms of the contract between the parties;
(b) the circumstances of the transaction; and
(c) the custom of the trade.
After indicating the above parameters, the Appellate Authority analysed the trade practice and took into account several decisions including the decision of the Apex Court in State of Tamil Nadu vs. Anandam Viswanathan {73 STC 1}. Consequently the Appellate Authority set aside the order of assessment.
7. The Tribunal also relied upon the decision of the Supreme Court in Anandam Viswanathan case and a few decisions of the Tribunal itself and confirmed the order of the Appellate Authority. This is why the learned Judge thought fit not to upset the concurrent orders of the Appellate Assistant Commissioner and the Sales Tax Appellate Tribunal.
8. Assailing the order of the learned Judge, Mr.D.Sasikumar, learned Government Advocate, invited our attention to the following decisions:-
(i) Chandra Bhan Gosani vs. State of Orissa {(1963) (SC) 014 STC 766}
(ii) Patnaik and Company vs. State of Orissa {(1965) (SCC) 016 STC 364}
(iii) State of Tamil Nadu vs. Anandam Viswanathan {(1989) (SC) 73 STC 1}
(iv) Rollatainers Ltd vs. Union of India {(1994) (SC) 095 STC 556}
(v) A.P. State Electricity Board vs. Collector of Central Excise {(1994) (SC) 095 STC 595}
(vi) Metagraphs Pvt Ltd vs. Collector of Central Excise {(1997) (SC) 106 STC 180}
(vii) Associated Cement Companies Ltd vs. Commissioner of Customs {(2001) (SC) 124 STC 059}
(viii) Sardar Printing Works vs. Sales Tax Commissioner {(1958) (MP) 9 STC 75}
(ix) Saraswathi Printing Press vs. Commissioner of Sales Tax, Nagpur {(1959) (Bom) 10 STC 286}
(x) Commissioner of Sales Tax, UP vs. Haji Abdul Majid and Sons {(1963) (Allaha) 014 STC 0435}
(xi) P.T. Varghese vs. State of Kerala {(1976) (Ker) 37 STC 171}
(xii) M.P. State Cooperative Press Ltd vs. Additional Commissioner Sales Tax {(1988) (MP) 68 STC 245}
(xiii) State of Tamil Nadu vs. Papco Offset Printing Works {(2000) (Mad) 188 STC 160}
(xiv) Palakad District Cooperative Printing Press Ltd vs. State of Kerala {(2004) (Ker) 135 STC 0207}
(xv) Nathan and Company vs. Commercial Tax Officer, Trichy {High Court Madurai Bench W.P.(MD) No.2607 of 2004 dated 18.7.2007}
9. The decision of the Supreme Court in Chandra Bhan Gosani case, arose out of the assessment of bricks manufactured and supplied by the assessee to a particular company. The Supreme Court held that there was a sale, in view of the fact that there was a transfer of property in the earth to the appellant by the company and that there was also a transfer of property in the bricks for a consideration. This decision may not be of any assistance to the State, since what was sold (in that case) namely, the bricks, by themselves, constituted a product manufactured and sold. On the contrary, labels are not products by themselves, but are intended to be used on products manufactured and sold by someone else.
10. In Patnaik and Company case, the contract entrusted by the Government of Orissa to the assessee for building bus bodies on the chassis supplied by the Government, was examined to find out if it was a contract for sale of goods or a contract for the execution of any work or performance of any service. By a majority of 4:1, the Supreme Court held the contract to be a contract for sale of goods, though Justice J.C.Shah, as he then was, held that it was not.
11. It should be remembered that both the above decisions of the Apex Court were rendered much before an amendment was brought to the definition of the word "sale".
12. In Anandam Viswanathan, the assessee entered into contracts with Universities and Educational Institutions for printing question papers. A question arose whether the taxable turnover should include the printing and block making charges or not. After considering an earlier decision in Government of Andhra Pradesh vs. Guntur Tobaccos Limited, the Supreme Court reiterated that a contract for work in the execution of which goods are used, may take one of the three forms viz., (i) the contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price (ii) it may be a contract for work in which the use of materials is ancillary or incidental to the execution of the work or (iii) it may be a contract for work and use or supply of materials, though not ancillary, to the execution of the contract.
13. Ultimately, the Supreme Court held in Anandam Viswanathan, that in each case the nature of the contract and the transaction must be found out. Paragraph-27 of the said decision reads as follows:- "27. In our opinion, in each case the nature of the contract and the transaction must be found out. And this is possible only when the intention of the parties is found out. The fact that in the execution of a contract for work some materials are used and the property/goods so used, passes to the other party, the contractor undertaking to do the work will not necessarily be deemed, on that account, to sell the materials. Whether or not and which part of the job work relates to that depends as mentioned hereinbefore, on the nature of the transaction. A contract for the execution of which goods are used may take any one of the three forms as mentioned by this Court in The Government of Andhra Pradesh vs. Guntur Tobaccos (supra)."
14. The decision in Rollatainers Ltd, arose out of the Central Excise Act, where the products of the printing industry were exempt. The Supreme Court held that a printed Carton is the product of the packaging industry and not the product of the printing industry. Therefore that decision is of no avail to the appellant.
15. A.P. State Electricity Board, is also a case which arose under the Central Excise Act and the Supreme Court held therein that what is important is to find out if the goods are marketable or not, irrespective of whether they are, in fact, marketed or not. One cannot apply that analogy to the labels printed by the first respondent for a particular customer. To say that the labels printed and supplied by the assessee to a particular customer are saleable in the open market, is equivalent to saying that there are spurious goods available in the market under the very same brand name and that those indulging in the sale of spurious goods are making use of these labels. It is needless to say that there cannot be a presumption in law about unlawful activities. The argument that these labels are marketable, is like saying that the visiting cards and letter heads supplied to a person are capable of being misused and that therefore they have a market potential. Therefore that decision is also inapplicable.
16. Metagraphs Pvt Ltd case, also arose under the Central Excise Act and the question that came up for consideration was whether printed aluminium labels fastened to Refrigerators are products of the printing industry or not. It is in that context that the Supreme Court held that all products on which some printing is done, are not the products of the printing industry and that it depends upon the nature of the product and other circumstances. Therefore this decision does not assist the appellant.
17. Associated Cement Companies Ltd case, arose under the Customs Act, with particular reference to the definition of the word "goods" under
Section 2(22). We do not think that it has any application to the case on hand.
18. In Papco Offset Printing Press case, the Division Bench of this Court found on facts that the dealer never compiled any books for reading nor effected sales of such reading books. On the contrary, he was found to have collected the cost of paper and printing charges. Thus, the case was decided on facts.
19. The other decisions relied upon by the learned Government Advocate, have no application to the issue involved. Therefore, we find no reason to interfere with the order of the learned Judge and hence this writ appeal is dismissed. No costs. Consequently connected miscellaneous petition is also dismissed.
Svn To
1.The Deputy Commissioner (CT), State of Tamil Nadu, Tirunelveli Division, Tirunelveli.
2.The Secretary, The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai-20.