K JAYARAM MUDALIAR Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) The assessee in this case is a dealer in stationery goods. For the assessment year 1975-76 his total and taxable turnovers were determined at Rs. 11,11,956 (sic) and Rs. 10,72,304 respectively as against the reported turnovers of Rs. 12,78,110.38 and Rs. 9,75,705.78. The assessing officer made certain additions to the reported turnovers, but we are concerned in this case only with the addition of Rs. 73,278.67 as sales turnover of binding materials taxable at 4 per cent multi-point. The assessee questioned the said addition by filing an appeal before the Appellate Assistant Commissioner. The said appeal having been dismissed the assessee went before the Sales Tax Appellate Tribunal.

(2.) Before the Tribunal the assessee contended that there was no sale of binding materials by the assessee to the binders, and therefore the entire addition of Rs. 73,278.67 alleged to be the sales turnover of binding materials was not justified. The Tribunal held that there has been in fact sale of the binding materials by the assessee to the binders, and that the sale is established by the factum of the binders having given deduction in the labour charges payable to them to the extent of the value of the binding materials supplied by the assessee. In that view, the Tribunal sustained the addition of the sum of Rs. 73,278.67 to the turnover returned by the assessee. The decision of the Tribunal is order challenge before us.

(3.) Before we deal with the respective contentions of the parties, it is necessary to state the factual position. The assessee who is a dealer in stationery goods places orders with two binders, namely, Raja Binding Works and Indira Binding Works, for the purpose of binding sold books, stationery books, etc., at agreed labour charges. It is the assessee who supplies paper for the note books and stationery books to be bound by the binders. This is clear from the order placed with the binder, which makes it clear that the paper is supplied by the assessee. In addition to paper, the assessee has supplied the binding materials to the binders to bulk and the approximate cost of binding materials used in relation to a particular work order has been deducted while making out the final bill for the binding charges. Taking note of the fact that the assessee has purchased the binding materials at a particular price which has been passed on to the binders, the assessing authority has proceeded on the basis that there has been a sale of the binding materials from the assessee to the binders, and therefore, the assessee is liable to pay sales tax on his sales of the binding materials. The assessing authority, for its conclusion that there was a sale of binding materials by the assessee to the binders, took into account the following circumstances. The order book and the labour receipts from the binders only show that paper alone is to be supplied by the assessee and not the binding materials. The binding materials had not been supplied against any specific orders placed by the binders. The binding materials such as calico cloth, marble paper, etc., have been supplied to the binders in bulk in consideration of which the binders have allowed a price rebate in their labour bills. Since the binding materials have been supplied to the binders at a specified price, the assessee should be taken to have sold the binding materials for a price. The above reasons given by the assessing authority have been referred to by the Appellate Assistant Commissioner and he has agreed with the view taken by the assessing authority. According to the Appellate Assistant Commissioner, as there is no correlation between the binding materials actually used for a particular work order and the binding materials supplied by the assessee to the binders, the supply of binding materials by the assessee to the binders in bulk for a specified price should be taken to be a sale. When the matter went before the Tribunal, the Tribunal also has taken that view. Since on correlation could be established between the binding materials actually supplied by the assessee and the binding materials actually used in correction with any particular work order and the binding materials were admittedly supplied in bulk by the assessee to the binders, it should be taken to be an independent transaction not connected with any particular work order and as the binding materials have been valued at a particular price it should be taken to be a sale.