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Issues: (i) Whether the contract for preparation and supply of blocks was a works contract involving skill and labour, so that the value of materials used in making the blocks was not liable to sales tax. (ii) Whether the sale of the offset printing machine on closure of the printing business was liable to sales tax as a transaction forming part of the assessee's business.
Issue (i): Whether the contract for preparation and supply of blocks was a works contract involving skill and labour, so that the value of materials used in making the blocks was not liable to sales tax.
Analysis: The decisive test applied was the substance of the contract. The preparation of a block was found to require substantial skill and labour, with the materials used forming only an ancillary part of the transaction. The block was also found to have utility only for the particular customer. On that footing, the transaction was treated as one for skill and labour rather than a sale of materials.
Conclusion: The first issue was answered in the affirmative and in favour of the assessee. The block-making turnover was not liable to sales tax.
Issue (ii): Whether the sale of the offset printing machine on closure of the printing business was liable to sales tax as a transaction forming part of the assessee's business.
Analysis: The machine was treated as a fixed asset and not as goods acquired for the purpose of dealing in them. Its sale occurred only upon closure of the relevant branch of business. The enlarged definition of business did not convert a disposal of fixed assets into a taxable trading transaction, because the sale was not shown to have been made in the course of trade, commerce, or an adventure in the nature of trade.
Conclusion: The second issue was answered in the affirmative and in favour of the assessee. The sale of the printing machine was not exigible to sales tax.
Final Conclusion: The reference was decided against the department and the assessee's transactions were held not to attract sales tax.
Ratio Decidendi: Where the substance of a transaction is the provision of skill and labour, with materials being merely ancillary, it is not a taxable sale of goods; similarly, the isolated disposal of a fixed asset on closure of business is not a business sale unless the assessee was dealing in that commodity as part of trading activity.
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