Printed labels are taxable sales, not works contracts, and do not qualify as paper for second-sale exemption.

Where a dealer purchases paper, prints labels or wrappers on it, and supplies the finished articles to customers, the transaction is treated as a sale of goods rather than a works contract, because the dominant element is the transfer of finished commercial products, not labour or service. The finished labels are also not regarded as paper in ordinary commercial use after the printing process changes their character, so they do not qualify for exemption as a second sale of paper. On that reasoning, the printed labels remained taxable sales and the claimed exemption was unavailable.

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Issues: (i) whether the supply of printed labels amounted to a works contract or a sale liable to tax; (ii) whether the labels could be treated as paper so as to qualify for exemption as a second sale.

Issue (i): Whether the supply of printed labels amounted to a works contract or a sale liable to tax.

Analysis: The materials on record showed that paper was purchased by the dealer, printing was done on that paper, and the finished labels were supplied to customers. On those findings, the transaction was not one where the dominant element was labour or work for another, but one where goods in their finished form were sold.

Conclusion: The transaction was not a works contract; it was a sale liable to tax, in favour of Revenue.

Issue (ii): Whether the labels could be treated as paper so as to qualify for exemption as a second sale.

Analysis: Although paper is taxable under Entry 143 of the First Schedule, the finished articles supplied were wrappers or labels and not paper in the ordinary commercial sense. The character of the goods had changed after printing, and they could not be identified as paper for the purpose of the claimed exemption.

Conclusion: The labels were not paper and did not qualify for second sale exemption, in favour of Revenue.

Final Conclusion: The tax revisions failed because the printed labels were treated as taxable sales and not as exempt second sales of paper.

Ratio Decidendi: Where paper is purchased, printed upon, and supplied as finished labels or wrappers, the transaction is a sale of the finished goods and not a works contract, and such finished labels are not commercially regarded as paper for exemption purposes.

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