JOHN MAW BROS Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS tax revision is preferred at the instance of the assessee against its assessment to sales tax for the year 1971-72. The nature of the transaction was described by the Sales Tax Officer as consisting of drawing, designing, block-making and printing letter-heads, advertisements and Christmas cards and the like. The accounts which were accepted by the authorities showed the details of the transaction as follows : " Details of sales are as follows : Sale proceeds of bills and Christmas cards : Rs. 1,30,167. 26 Non-taxable turnover claimed : Rs. 13,005. 25 Receipts on advertisements : Rs. 130. 00 --------------------- Rs. 1,43,302. 51 Inter-State sales : Rs. 466. 65 ---------------------- Rs. 1,43,769. 16" ----------------------- It claimed exemption in respect of Rs. 13,005. 25 and in respect of Rs. 466. 65 representing inter-State sales. The amount of Rs. 13,005, for which exemption was claimed, was said to represent the value of work and labour supplied; and it was claimed that this was not a transaction of sale and purchase. The Sales Tax Officer noticed that the order book maintained by the assessee showed that the assessee entered only into a single contract with the customer for printing and supply of the goods. Although it was true that the charge for each process was separately fixed, he was of the opinion that it did not follow that the property in the goods passed on to the customers at each stage. On this ground he negatived the claim for exemption and completed the assessment disallowing the exemption claimed in respect of Rs. 13,005. On appeal, the Appellate Assistant Commissioner reversed this part of the judgment of the Sales Tax Officer holding that the order form and the bills made out by the assessee showed the amounts separately in respect of each of the items. He was of the view that the sum of Rs. 13,000 and odd represented the amount for work and labour; and, therefore, the exemption claimed by the assessee was allowed. On further appeal by the department, the Sales Tax Appellate Tribunal reversed the decision of the Appellate Assistant Commissioner and restored that of the Sales Tax Officer. It rejected the contention of the assessee that the mere fact that the order form and the books of account showed the items separately would entitle the assessee to treat the amount as eligible for exemption from assessment to sales tax, and as representing a contract for work and labour as distinct from a contract for sale and purchase of material. It is the correctness of this conclusion that is questioned in this revision.

(2.) COUNSEL for the revision petitioner invited our attention to the decisions of the Bombay High Court in Camera House, Bombay v. State of Maharashtra ([1970] 25 S. T. C. 354), in Commissioner of Sales Tax v. Durga Khote Productions ([1975] 36 S. T. C. 77), in Commissioner of Sales Tax v. Studio Ratan Batra ([1975] 35 S. T. C. 522) and in Commissioner of Sales Tax v. Lettering Art ([1975] 35 S. T. C. 529 ). We do not think it necessary to examine all those decisions in detail. By way of an example, we might refer to the decision in Camera House, Bombay v. State of Maharashtra ([1970] 25 S. T. C. 354 ). A Division Bench of he Bombay High Court was there concerned with photographers and photographic dealers engaged in three types of business, viz. , (i) preparing enlargements of photographs from the negatives given by the customers; (ii) developing customers' film rolls and taking out prints from them; and (iii) taking photographs of customers and supplying prints to them. It was held that each of those transactions was really composed of two essential parts, namely, for the sale of materials as well as for work and labour to be done; and that the contracts were distinct and easily severable, although they formed parts of one transaction. Having stated the position this way, the Division Bench analysed the transactions and held that in the first type of transaction there were two contracts : (1) for work on the part of the photographer, and (2) for sale of the photograph. In such a transaction, there is an implied agreement that the enlarged photographs should be sold separatim and a clear intention to sell as such; in the second type of transaction there is nothing but a contract for skill and labour, and that in the third, which involved three parts, taking the photograph, developing the film, and furnishing of three prints thereof, only the contract for supply of prints of the particular size amounted to a sale, the other two being contracts for work and labour. It was further ruled that in each of the three types of contracts only such part as amounted to a sale was liable to sales tax; that the primary question that arises for consideration in cases of a composite transaction of the type considered was whether the transaction is entire and indivisible or whether it is severable. On the actual facts found, the principle formulated is understandable. The principle of the distinction between a contract for work and labour and one of sale and purchase has been succinctly stated in Halsbury's Laws of England, 3rd Edition, Vol. 34, page 6, para. 3, as follows : " 3. Contract of sale distinguished from contract for work and labour.- A contract of sale of goods must be distinguished from a contract for work and labour. The distinction is often a fine one. A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of the materials, not the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel. " The passage was approved in State of Rajasthan v. Man Industrial Corporation Ltd. ([1969] 24 S. T. C. 349 at 353 (S. C.) ). The principle is again succinctly stated in Benjamin's Sale of Goods, page 37, paragraphs 38 and 40. We do not think it necessary to cite these passages. The Indian law has also been summarised in Pollock & Mulla's Sale of Goods and Partnership Acts, at page 28.