Court rules printing work not subject to sales tax, favoring printer in custom articles case

The High Court of Madhya Pradesh ruled in favor of the printer, M/s. Ratna Fine Arts Printing Press, in a case concerning sales tax liability for producing custom articles. The Court held that the printing work done for customers was a contract of work and labor, not a sale of materials, based on precedents. As a result, the material used in producing custom articles and the total price of finished articles were not subject to sales tax. The decision favored the assessee, overturning the initial assessment and penalties imposed.

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Issues involved: Interpretation of sales tax liability for a printer producing custom articles for customers.

Summary:
The High Court of Madhya Pradesh considered a reference u/s 44(1) of the M.P. General Sales Tax Act regarding the liability of a printer producing custom articles for customers. The case involved the assessment of a printing press owner, M/s. Ratna Fine Arts Printing Press, for the period from 1st April, 1968, to 31st March, 1969. The initial assessment imposed tax on the total price of finished articles, penalties u/s 17(3) and u/r 69-A, which was upheld in the first appeal but set aside in the second appeal by the Board of Revenue. The Tribunal concluded that the printing work was done on a job contract basis without any sales taking place.

The Commissioner of Sales Tax sought a reference to the High Court, which was initially rejected but later allowed u/s 44(2) directing the Tribunal to refer the question of law. The Court referred to precedents like B.C. Kame v. Assistant Sales Tax Officer and Rubber Stamp Works v. Deputy Commissioner of Sales Tax to establish that contracts primarily for work and labor, with material transfer being ancillary, do not constitute sales transactions liable to tax. The Court found that the printing press owner's work involved skill and labor in producing custom articles, making it a contract of work and labor rather than a sale of materials.

Therefore, the Court held that the material used in producing custom printed articles for a specific customer is not liable to tax, and the total price of the finished articles will also not be subject to sales tax. The decision favored the assessee, ruling in favor of the printer in this case.

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