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Issues: Whether the preparation and supply of designs to customers constituted a sale within section 2(13) of the Bombay Sales Tax Act, 1953, or a contract of work and labour.
Analysis: The decisive test is the intention of the parties as gathered from the contract and surrounding circumstances. Where the true bargain is for the exercise of artistic skill and labour, the fact that some materials pass incidentally does not convert the transaction into a sale. Applying that principle, the substance of the transaction was the preparation of designs by artists for the customers' advertising needs. The paper, ink, or paint were merely incidental, and the customer contracted for the design as a work of art and skill, not for a chattel. The fact that the designs were prepared by artists employed by a limited company did not alter the character of the contract, because a contract of work and labour may be executed personally or through employees.
Conclusion: The transactions were not sales within section 2(13) of the Bombay Sales Tax Act, 1953, but contracts of work and labour, and the question was answered in the affirmative in favour of the assessee.
Ratio Decidendi: A transaction is not a sale where its substance is the rendering of artistic skill and labour and any transfer of materials is merely incidental; execution through employees does not change the character of such a contract.
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