Works contract classification for customised printing excludes sales tax on materials and finished product

A printer undertaking job work for a specific customer was characterised as performing a contract of work and labour, not a sale of goods, because the printed article had utility only to that customer and the substance of the transaction was skill and labour with any transfer of material being merely incidental. The Court applied the test whether the transaction was a transfer of chattel as such or principally a works contract, and concluded that the material consumed did not form the subject of a separate sale. Sales tax was therefore not leviable on either the material used or the total price of the finished article.

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Issues: Whether a printer executing work for a customer on job-contract basis, where the printed article is of value only to that customer, is making a sale of the finished article or entering into a contract of work and labour, and whether sales tax is leviable on the material used or on the total price of the finished article.

Analysis: The governing test is whether the substance of the transaction is a transfer of chattel as such or primarily a contract for skill and labour, with any transfer of material being merely ancillary. Applying that test, printed material prepared specially for a particular customer was treated as having no utility to others, and the printer's undertaking was characterised as job work in the nature of a works contract rather than a sale transaction. The material consumed in the process did not constitute the subject of a separate sale, and the finished article was the product of work and labour predominantly involving skill.

Conclusion: The transaction was held to be a contract of work and labour, not a taxable sale of the material or the finished article. Sales tax was not leviable on either the price of the material used or the total price of the finished article.

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