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of <h1>Court directs reassessment in sales tax dispute, essentiality of contracts to be examined for tax rate determination</h1> <h3>The Sales Tax Officer, Special Circle II, Palghat Versus IV. Somasundaran</h3> The court allowed Writ Appeal No. 206 of 1972 by the assessee, directing the Sales Tax Officer to reassess the petitioner in light of the judgment. Writ ... - Issues Involved:1. Taxability of turnover from job-works.2. Nature of contracts for printing and their classification as sales or works contracts.3. Taxability of printed materials as 'paper products' under the Kerala General Sales Tax Act, 1963.4. Applicable tax rates for different types of printed materials.Issue-wise Detailed Analysis:1. Taxability of turnover from job-works:The court addressed the taxability of turnover from job-works, specifically focusing on whether the turnover related to judgments printed by the assessee should be exempted. The Sales Tax Officer initially taxed the entire turnover at 3%, but the court held that the judgments and other articles produced by the dealer are not 'paper products.' The court directed that the printing charges be deducted from the total receipts to arrive at the taxable turnover, and only the cost of the paper used for printing should be taxed.2. Nature of contracts for printing and their classification as sales or works contracts:The court discussed the complexity of determining when a contract is for work and labour versus the sale of goods. It referenced a previous decision stating that contracts for printing judgments are essentially for work and labour, not for the sale of goods. The court emphasized that the essential nature of the contract should determine its classification. If a contract is primarily for work and labour, it should not be bifurcated into separate contracts for the sale of materials and labour.3. Taxability of printed materials as 'paper products' under the Kerala General Sales Tax Act, 1963:The court reaffirmed that printed materials, such as judgments, letterheads, and ration cards, do not qualify as 'paper products' under item 42 of Schedule I to the Kerala General Sales Tax Act, 1963. It cited previous rulings that printing on paper does not transform the paper into a 'paper product.' The court concluded that the printed materials should not be taxed at the 5% rate applicable to paper products but at the general rate of 3%.4. Applicable tax rates for different types of printed materials:The court differentiated between various types of printed materials. For judgments, it held that the entire turnover should be exempted from taxation. For ration cards, the court determined that the contract was essentially for the sale of finished articles and not for work and labour. However, it held that ration cards are not 'paper products,' and thus, the imposition of a 5% tax was unjustified. Instead, a 3% tax rate should be applied.Conclusion:The court allowed Writ Appeal No. 206 of 1972 by the assessee, directing the Sales Tax Officer to reassess the petitioner in light of the judgment. Writ Appeal No. 205 of 1972 by the department was dismissed. The court ordered that the essentiality of each contract should be examined to determine whether it is for work and labour or for the sale of goods, and the appropriate tax rate should be applied accordingly. The parties were ordered to bear their respective costs.
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