V. RAMASUBRAMANIAN, J.
A vexed question as to whether a particular transaction is an inter-state sale or a works contract, is the issue raised by the Revenue in the present appeals.
2. We have heard Mr.D.Sasikumar, learned Government Advocate appearing for the appellant/State and Mr.P.Radhakrishnan, learned counsel appearing for the first respondent.
3. The first respondent was assessed under the Central Sales Tax Act, for the year 1997-1998. Their accounts were later called for and checked. The first respondent claimed exemption in respect of (i) inter-state cooly printing works and (ii) printing works executed for a single user.
4. The Commercial Tax Officer passed an assessment order dated 31.8.1999 allowing exemption on inter-state printing cooly receipts. But the claim for exemption in respect of printing works for a single user, was disallowed and the claim for concessional rate of tax in respect of inter-state sales against 'C' Forms was also rejected.
5. The appeal filed by the first respondent was dismissed by the Appellate Assistant Commissioner by an order dated 11.1.2001. Therefore, the first respondent-Assessee filed a Second Appeal in MTA No.469 of 2001 on the file of the Additional Bench of the Tamil Nadu Sales Tax Appellate Tribunal. The Tribunal allowed the appeal by an order dated 31.7.2001, holding that the printed materials supplied by the Assessee to their customers constituted a works contract and not outright inter-state sales.
6. The State filed a writ petition in W.P.No.3770 of 2004 against the order of the Tribunal, but the same was rejected by the learned single Judge by an order dated 8.6.2007. It is against the said order that the State is on appeal.
7. It is seen from the assessment order dated 31.8.1999 that the Assessing Officer accepted the claim of the dealer that they printed and supplied labels as per the specifications, designs and general layout of the customers with their names and addresses prominently printed. However, the Assessing Officer held that since those materials were printed on the paper owned by the Assessee, there was a sale. The Assessing Officer also held that though the materials were printed on the specifications of customers, they had commercial value in open market.
8. The Appellate Authority took note of a few decisions of the Tribunal, wherein it was held that the printed materials supplied to a particular customer need not always be construed as works contract and dismissed the appeal. However, the Tribunal followed the decisions of the Apex Court in Anandam Viswanathan case and Sarvodaya Printing Press Fine Arts case and held that it was a works contract and not outright inter-state sales. The learned Judge relied upon Anandam Viswanathan case and upheld the order of the Tribunal.
9. 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}
10. At the outset, we are of the considered view that there is no necessity for us, to undertake a long and weary journey into the question of law, especially in view of the very findings of fact recorded by the Assessing Officer. The findings of fact recorded by the Assessing Officer, are as follows:-
"It was true that the dealers have printed and supplied labels as per specifications, designs and general layout of the customers with their names and addresses prominently printed. But they have been printed on the own paper of the dealers (i.e.) printers. The customers have not supplied the papers. Even though they have been printed on specifications of customers, they have commercial value in open market. Because, the labels printed announce to the customers that the product is or is not of his choice and his purchase of the commodity would be decided by the printed matter on the 'labels'. The printing of the labels is not incidental to its use but primary in the sense that it communicates to the customer about the product and this serve a definite purpose. But for printing, the labels would serve no purpose and it is the printing on page of paper which communicates the message to the buyer that makes the paper a 'label' and as such 'the labels' are products of printing industry and they have got commercial value in open market as per the judgment reported in 106 STC P.180.
Accordingly the 'labels' printed with the name and address of the customers are sold to the customers who in turn either sold them in open market for price or distributed them for free of cost to the customers in order to promote their sales. Both the activities serve the definite purposes. The name and address of the customers printed on 'labels' serve definite purposes (i.e.) valuable price in the case of sales or sales promotion of the products of the customers in the case of free distribution. So the 'labels' are having commercial value. But for printing, the 'labels' would serve not purpose. So the 'labels' are the products of the printing industry (Printing Industry as per the judgment reported in 106 STC P. 180).
It may be true that both the dealers and their customers are not dealers in blank or standard type of stationery. But on receipt of orders for the supply of 'labels' the dealers (i.e.) the printers use their own paper, ink etc., print the materials and sold them to the customers. The customers while placing orders did not supply papers, ink etc., for printing. But the dealers themselves used their own materials and manufactured the products. Hence the intention of the customer is to purchase the 'labels' only and to get the items printed from them as claimed by the dealers. The use and consequent passing of the property in the paper, ink etc., are primary to the transactions and not incidental as claimed by the dealers. This kind of transactions are only contract of sale of printed materials and not "Works Contract"."
From the portion of the assessment order extracted above, it is clear 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. The labels, by themselves, cannot really be sold in the open market, since without the product of the customer being packed on any package material, there is no use for the labels. It is not and it cannot be the case of the appellants that persons who manufacture spurious goods under the very same brand name, had an opportunity to buy these labels, so as to pass off their goods as that of the customers of the first respondent-dealer. Therefore even on factual findings, the orders of the Assessing Officer and the Appellate Authority, cannot be sustained. Hence the Tribunal and the learned Judge, were perfectly right in their approach.
11. But de hors the above, we shall also deal with the decisions of the Apex court relied upon by the learned Government Advocate.
12. 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.
13. 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.
14. 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".
15. 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.
16. 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)."
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. The other decisions relied upon by the learned Government Advocate, have no application to the issue involved. As rightly pointed out by the learned Judge, the facts of the present case show that the ratio in Anandam Viswanathan case, squarely applies. The Assessing Officer had no evidence before him to come to a conclusion that the labels printed by the first respondent are marketable, though not actually marketed. There was also no evidence on record to show that the printing of labels is not incidental, but primary. Without any evidence, the Assessing Officer went on presumptions and hence the Tribunal and the learned single Judge, were right in over turning the orders of the Assessing Officer and the Appellate Assistant Commissioner.
23. In view of the above, we see 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, Sales Tax Appellate Tribunal (Additional Bench), Madurai-20.