Sale of goods versus works contract: printed plastic bags with incidental branding remained a taxable sale, not a works contract.

Printed plastic bags supplied with the customer's name or logo were held to remain a sale of goods, because the primary object of the contract was supply of a marketable commodity and the printing was only incidental. The Madras HC accepted that there was no material to show a separate works contract, and relied on the settled distinction between contracts for printing itself and contracts where printing is ancillary to sale. The absence of stock accounts and the assessing authority's materials also supported best judgment assessment. The tax and penalty were sustained, and the revision was rejected.

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Issues: Whether printed plastic bags supplied to customers were a works contract or a sale of goods, and whether the tax and penalty sustained by the authorities were justified.

Analysis: The assessee claimed that the bags were manufactured according to customer specifications and that printing of the customer's name converted the transaction into a works contract. The Court found no supporting material to show that the transaction was anything other than a sale of bags, and held that the printing of the name or logo was only incidental to the supply of the goods. Reliance was placed on the settled distinction between a contract for printing itself and a contract where printing is merely ancillary to the sale of a marketable commodity. The absence of stock accounts and the materials noticed by the assessing authority also supported the best judgment assessment.

Conclusion: The transaction was held to be a sale of goods and not a works contract, and the revision was rejected.

Ratio Decidendi: Where the primary object of the contract is the sale of a marketable commodity and printing of the customer's name or logo is only incidental, the transaction remains a sale and does not become a works contract.

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