BHARAT OFFSET Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) These writ petitions have been filed for a declaration that G.O. Ms. No.66, Commercial Taxes (B1) dated 16.8.2001 of the second respondent herein subjecting all the printed materials executed on specific orders exigible to sales Tax under Section 3 of the Tamil Nadu General Sales Tax (TNGST) Act, 1959 as that of sale, is outside the purview of the powers of the State Legislature and violative of the consistent principles of law laid down by the Hon'ble High Court of Madras reported in A.I.R. 1954 Madras 1130 (Gannon Dunkerley & Co. vs. State of Madras); (1977) 39 S.T.C. 226 (State of Tamil Nadu vs. Anandam Viswanathan); (1982) 51 S.T.C. 28 (Deputy Commissioner (CT), Coimbatore Division, Coimbatore vs. Karthikeya Press); (1983) 54 S.T.C. 382 (The Court Press Job Branch, Salem vs. State of Tamil Nadu); (1995) 97 S.T.C. 489 (State of Tamil Nadu vs. Gunasundari Modern Art Printers) and those by the Supreme Court reported in A.I.R. 1958 S.C. 560 (State of Madras vs. Gannon Dunkerley & Co. (Madras) Ltd.; (1965) 16 S.T.C. 240 (Government of Andhra Pradesh vs. Guntur Tobaccos Ltd.); (1972) 29 S.T.C. 438 (The Commissioner of Commercial Taxes, Mysore, Bangalore vs. Hindustan Aeronautics Ltd.); A.I.R. 1972 S.C. 1131 (State of Punjab vs. Associated Hotels of India Ltd.); (1989) 73 S.T.C. 1 (State of Tamil Nadu vs. Anandam Viswanathan) and (1984) 55 S.T.C. 314 (Hindustan Aeronautics Ltd. vs. State of Karnataka).

(2.) G.O. Ms. No.66, Commercial Taxes (B1) Department, dated 16.2.2001, reads as follows: "TAMIL NADU GENERAL SALES TAX ACT,1959-FIRST SCHEDULE-AMENDMENT Notification G.O.Ms.No.66 CT (B1) dated 16th August, 2001 No.II(1)/CT/45(a)/2001)- In exercise of the powers conferred by sub-section (1) of Section 59 of the Tamil Nadu General Sales Tax Act, 19509(Tamil Nadu Act 1 of 1959) the Governor of Tamil Nadu hereby makes the following amendment to the First Schedule to the said Act. AMENDMENT:- In the First Schedule in Part "C" in item 52, for such items (iv) to (vii) and the entries relating thereto, the following sub-item and entries shall be substituted, namely:-

(3.) Learned counsel for the writ petitioners submitted that the inclusion of the above sub-items in the entry is unconstitutional. Learned counsel submitted that by just amending the entry by an inclusion of a sub-item, the State cannot bring to tax what is otherwise non-taxable. Learned counsel submitted that in a works contract, the transfer of goods is only incidental and, when goods are made to order according to the specifications of the customers and the materials are so printed, there is no transfer of goods. The legislature has attempted to treat as "sale of goods", what is really a transaction in the nature of "a works contract". Learned counsel referred to Article 366(29A) of the Constitution of India and Section 3(B) of the TNGST Act and the definition of "sale" in Section 2 thereof. The learned counsel submitted that the fact that the "works contract" is a 'deemed sale' will not give the State the power to tax it as if it was a contract for sale of goods. The learned counsel submitted that the State cut into the scope of Section 3(B) of the TNGST Act by a mere amendment of the Schedule. The learned counsel submitted that the entries in the Schedule cannot control or prevail over the provisions of the Act. The learned counsel further submitted that the Supreme Court had repeatedly held that it is not open to the State to define a sale in a manner as to make a sale outside its territory into a sale within its territory, similarly, the State cannot by this G.O. enlarge its power to tax what is really a works contract as though it is sale of goods.