TaxTMI 
TaxTMI 
1989 (1) TMI 359
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....lly the same. The assessee in these cases had entered into contracts with the Universities and other educational institutions in the country for printing question papers for the said educational institutions. The assessee in the demand notes prepared, gave the charges for printing, blocks, packing charges, handling charges, delivery charges, postage, value of paper and value of packing materials separately in the relevant assessment years. The question involved is, whether the taxable turnover should also include the printing and block-making charges or not. It appears from the judgment of the High Court that for the assessment year 1966-67, the printing charges amounted to Rs. 99,675.00 and block-making charges amounted to Rs. 2,923.95, totalling Rs. 1,02,598.95. Similarly, so far as the assessment year 1968-69 is concerned, the printing charges amounted to Rs. 1,33,137 and block-making charges amounted to Rs. 5,361.75 totalling Rs. 1,38,498.75. The controversy involved in these appeals was, whether these two amounts were includible in the assessable turnover of the respondent in the respective years in question. The case of the assessee was that the contract entered into be....
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.... sale of the paper. It was contended on behalf of the Revenue that in case of sale of all printed materials, the sales tax was liable on the entire work. In that view of the matter if the liability for sale of printed material would include the entire price then there was no authority, according to the Revenue, to treat the question papers differently. It is, however, clear as the High Court noted, that the printing of question papers of educational institutions was an extremely and highly confidential matter. This is the first aspect of the matter which must be borne in mind. It was emphasised that such printing could not be entrusted to any press of one's choice, and the Universities and other educational institutions were only obliged to enter into such contracts with those in whom they have got the highest confidence so that the printer would not divulge the questions to be printed by him/her and will preserve the confidential nature of the transaction. Therefore, in printing question papers entrusted by educational institutions to the printer, the value included the price of the confidentiality and the confidence reposed in the printer. It has to be borne in mind that t....
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.... the aforesaid position in other matters which are the subject-matters of other appeals where the High Court held accordingly, it dismissed the revision application of the Revenue. Aggrieved thereby, the appellant has come up to this Court by leave. Our attention was drawn by both Mr. Mohan, learned counsel for the appellant and Mr. Ramachandran, counsel for the respondent, to the decision of this Court in Government of Andhra Pradesh v. Guntur Tobaccos Ltd. [1965] 16 STC 240, where this Court laid down that a contract for work in the execution of which goods are used may take one of three forms. The contract may be for work to be done for remuneration and for supply of materials used in the execution of the works for a price; it may be a contract for work in which the use of materials is accessory or incidental to the execution of the work; or it may be a contract for work and use or supply of materials, though not accessory to the execution of the contract, is voluntary or gratuitous. In the last class there is no sale because though property passed it did not pass for a price. Whether a contract is of the first or the second class must depend upon the circumstances; if it is ....
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....t and then supplied the finished product to its constituents, the provisions of clause (iv) of explanation 1 of clause (m) of section 2 were not attracted. The High Court relied on the decision of the Allahabad High Court reiterating the principle that it is necessary to determine the substance of the contract, and as the substance of the contract is that skill and labour that had been exercised for the production of the article and sale of material is only ancillary to that. In our opinion, the principle upon which the High Court relied, is not applicable in case of transactions of printing of question papers. Question papers as such, after being printed are neither available commercially nor available to any community-commercial or otherwise, save under specific circumstances for the candidates appearing at a particular time in an examination. Mr. Mohan also drew our attention to the decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri Krishna Power Press [1960] 11 STC 498. There, the court reiterated that a transaction which results in the transfer of property in finished goods to another person cannot be described as a works contract. It was further....
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....le of the materials. Different tests may be applied in answering such a question as the stage of passing of property, risk and the like. But all these tests converge towards finding out what is the intention of the parties. There, the question was whether the assessee's turnover consisted of the aggregate of labour charges and the cost of materials in printing work or of outright sales of finished commodity. The assessee relied on certain bills which showed the cost of materials and labour charges but he did not produce order books or other documents. The Tribunal found that the separate entries were only a make-believe apportionment for the purpose of sales tax and that what was sold was only a finished product. In those findings the Tribunal justified on the materials to uphold the liability for sales tax. As emphasised by the Division Bench of the Madras High Court, the entire transaction should be viewed and the intention of the parties found out. Our attention was drawn by Mr. Mohan to the decision of the Orissa High Court in the case of State of Orissa v. Ramanath Panda [1971] 27 STC 98. There the High Court held that in the case of an assessee, a printer supplying ....
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....g on paper, as in the cases of printing letter-heads, invitation cards, wedding invitations, judgments of courts, or ration cards, the printed matter does not become "paper products" within the meaning of that expression in item 42 of Schedule I to the Kerala General Sales Tax Act, 1963. The High Court found that in such a case a further question arises as to whether it was sale of goods which could be taxed at all points. In order to spell out a contract of sale there must be an agreement which may be express or inferred from the circumstances. There can be an agreement for work and labour or there can be one for sale of goods. If essentially the agreement is one for work and labour, complete exemption from taxation should be allowed. If, on the other hand, it is a contract for sale, the whole turnover should be taxed. A contract for printing of judgments of courts is essentially a contract for work and labour and there is no justification for bifurcating that contract into two different contracts, one for cost of labour and the other for sale of paper. Imposition of sales tax on the turnover relating to printing of judgments of courts is, therefore, unwarranted. In the case of....
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....been sold. Where a person buys a 'Picasso' or a 'Ravi Varma', he does not intend to buy or pay for the canvas or the paint, although canvas and paint are involved in the production of the painting, and title to such materials is transferred to him. But such transfer of title to the materials is not pursuant to any agreement for the sale of the materials as such. It would never have been in his mind to pay separately for the materials and for the labour. What the buyer buys is a finished product which is a work of art. On the other hand, when a person gets his manuscript printed as an article or a book of verses, the printer does no more than a mechanical or technical job. The printer does not create the article or the poem, but merely renders his services to print which is in the nature of a job-work. The manuscript as such is the result of the skill, industry and scholarship of the author. In such a case, there is no sale of the article or book by the printer; nor would it be possible in such a case to spell out an agreement for the sale of materials such as paper or ink, which may have been incidentally used in the production of the printed work. While the painter....
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....erial at a price. The High Court held that the decision of the Tribunal that the entire receipts in the assessee's business must be held to be sales turnover liable to tax under the Act must be upheld. As mentioned hereinbefore, the High Court was dealing entirely with sample printed materials of order forms of bill books. The Allahabad High Court had to consider this question in Commissioner of Sales Tax v. Uma Art Press [1984] 56 STC 300. The decision in that case rested on the facts of that case and in the nature of the contentions urged before us in this case, it would not be relevant to discuss the said decision in greater details. In Chandra Bhan Gosain v. State of Orissa [1963] 14 STC 766 (SC) at 769, it was reiterated that in case of a composite contract how to determine whether there was sale of goods or there was works to be done depended upon the facts of each case, and the intention of the parties, what was the essence of the contract has to be found out. This Court had to consider in Commissioner of Sales Tax v. Sabarmati Reti Udyog Sahakari Mandali Ltd. [1976] 38 STC 203, whether the contract was a works contract or contract for sale. There the assessee had ....
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....efore us that in view of the principles laid down by this Court in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 and Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314, the High Court was right. He submitted that the contract in essence was for supply of question papers which are not commercial commodities. The blank papers ceased to be the property of the dealer, the moment questions were printed on these. These are the exclusive properties of the University or other educational institutions, and were to be kept secret until the University chose to divulge these at the time of the examinations. The dealer cannot deal with the printed question papers. Upon printing he lost his capacity to contract, ceased to be the sole owner, and could not sell to anybody he chose. He had to hand over the entire question papers to the University. It was a special kind of job entrusted for confidence reposed and for the delicate nature of the job to be performed. The work in connection therewith was predominantly in the transaction. The material and the skill in doing so, both are incidental. In that view of the matter he submitted that the High Court was ri....