Joint venture for manufacture and division of goods was not a sale, so the sales tax assessment failed.

The arrangement for manufacturing appalams at Kallidaikurichi was treated as a joint venture for manufacture and division of goods, not as sales to the partnership firm or the individual partners. The court noted that no capital was invested by the partners in the manufacturing unit, raw materials were purchased by the two individuals, and the finished appalams were lifted by the firm and the partners for sale on their own account. Manufacturing expenses were then computed and allocated according to the quantities lifted. On those facts, the distribution of the appalams was not a sale exigible to sales tax, and the assessment could not stand.

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Issues: Whether the distribution of appalams manufactured at Kallidaikurichi among the partnership firm and the individual partners constituted a sale exigible to sales tax, or only a joint venture for manufacture and division of goods.

Analysis: The arrangement showed that no capital was invested by the partners in the manufacturing unit as such, raw materials were purchased by the two individuals, the appalams were manufactured at Kallidaikurichi, and the quantities were then lifted by the firm and the individual partners for sale at their respective business places on their own accounts. The manufacturing expenses were ultimately computed and allocated in proportion to the quantities lifted. On these facts, the arrangement was treated as a joint venture for manufacture and division of the manufactured goods, and not as transactions of sale from the unit to the firm or the partners.

Conclusion: The distribution of the manufactured appalams did not amount to a sale, and the sales tax assessment could not stand.

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