TMI Blog1960 (1) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the turnover after this deduction falls short of Rs. 10,000 he is exempt from taxation under section 3(3) of the Madras General Sales Tax Act which corresponds to section 5(1) of the Andhra Pradesh General Sales Tax Act. This plea did not prevail with the taxing authority. On appeal, the Deputy Commissioner of Commercial Taxes confirmed the assessment. The further appeal filed by the assessee before the Sales Tax Appellate Tribunal succeeded. The Tribunal accepted the foregoing contention of the respondent following the judgment of Govinda Menon, J., in The State of Madras v. Vijayaraghavan(1). It is to revise this order that the present revision petition is brought by the State Government. In support of the petition, it is urged that transactions such as these have to be regarded only as sales and not as works contracts and that The State of Madras v. Vijayaraghavan[1955] 6 S.T.C. 237. does not embody the correct law and has to be dissented from. Reliance is placed on some decided cases to substantiate this proposition. Before we discuss the rulings cited to us on either side, we will read the material provisions of the Madras General Sales Tax Act, 1939, Section 2(h) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticles like letter paper or visiting cards and the press itself supplies the material, the transaction is nothing but a works contract. In support of this view, he cited Clay v. Yates108 E.R. 461; 25 L.J. Ex. 237. (Vide Benjamin on Sales, 8th Edition, page 159). With great respect, we cannot assent to this proposition. We feel that such transactions fall within the connotation of "sale" as defined in the Madras General Sales Tax Act and are outside the purview of a works contract. We are not persuaded that the rule stated in Clay v. Yates(2) is applicable to the supply of printed material as in this case. That was a case of a contract for printing the second edition of a book and the printer himself had to find the materials including the paper. It was held that it was not a contract for the sale of a thing to be delivered at a future time or a contract for making a thing to be sold when completed, but a contract to do work and labour furnishing the materials. That does not furnish any analogy here. Dealing with this case, this is what Hill, J., said in Lee v. Griffin30 L.J.Q.B. 252; 124 E.R. 555. (Vide Benjamin on Sale, 8th Edition, page 160): "That is a case sui generis. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviously to the completion of the chattel the property in its materials was vested in the workman or in his employer. If the intention and result of the contract is to transfer for a price property in which the transferee had no previous property, then the contract is a contract of sale. Where, however, the passing of property is merely ancillary to the contract for the performance of work, such a contract does not thereby become a contract of sale. 3.. Accordingly. (i) Where the employer delivers to a workman either all or the principal materials of a chattel on which the workman agrees to do work, there is a bailment by the employer, and a contract for work and labour, or for work, labour and materials (as the case may be), by the workman. Materials added by the workman on being affixed to or blended with the employer's materials, thereupon vest in the employer by accession, and not under any contract of sale. (ii) Where the workman supplies either all or the principal materials, the contract is a contract for sale of the completed chattel, and any materials supplied by the employer when added to the workman's materials vest in the workman by accession." It is plain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of section 2(h) of the Madras General Sales Tax Act. Our view that the supply of letter heads, bill books, account books etc., to the order of an individual customer at a price stipulated by the parties comes within the contemplation of section 2(h) of the Madras General Sales Tax Act corresponding to section 2(n) of the Andhra Pradesh General Sales Tax Act is reinforced by the pronouncement of the privy Council in Dominion Press Limited v. Minister of Customs and Excise[1928] A.C. 340. In that case, the controversy raised was whether the supply of pointed bill heads and other commercial stationery to the order and to suit the requirements of individual customers would amount to "sale" within the meaning of the Act of 1922 which imposed a tax of 2 per cent. "on sales and deliveries by Canadian manufacturers or producers and wholesalers or jobbers". Their Lordships ruled that these transactions were sales within the words of that enactment. It is interesting to note that an argument was advanced in that case on the basis of Clay v. Yates108 E.R. 461; 25 L.J. Ex. 237. that the contract was a contract for work and labour done and materials supplied. Their Lordships were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even in cases where the customer advances money for buying the material to be made into garments or other kinds of commercial commodity, it partakes of the same character as the latter category mentioned by the learned Judge. All these cases except the Bombay case are sought to be distinguished on the ground that the Acts that fell to be interpreted by them did not contain the definition of "works contract" as in the present case. In our considered judgment, this does not make any difference because the concept involved in the definition of "works contract" is the same, namely, labour and service. This notion is implicit in the latter part of the definition, which relates to movable property, namely, "fitting out, improvement or repair of any movable property". It could be gathered from these expressions that what is contemplated is doing some work in connection with the property belonging to the customer. This clause could have reference only to work and service or labour to be expended and has nothing to do with the transfer of property in finished goods. In a works contract, there is no intention to sell or buy, the work consisting merely of fitting out, improving or repairin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of a works contract and not independent sales of those materials. This decision shows that the repair of a motor car is a works contract. It is unnecessary for us to multiply examples of works contracts. It is sufficient to say that a transaction which results in the transfer of property in finished goods to a third party cannot be described as a works contract. If there is an agreement between the parties for the sale of any article, it is nothing but a sale within the enacting words of section 2(h). If such a transaction fulfils the definition of "sale" within the purview of that clause, as conceded by the learned counsel for the respondent here, we fail to see how it could equally be governed by the definition contained in section 2(i-1). Nor is there any substance in the argument of the counsel for the respondent that since these goods have no commercial value in the sense that they cannot be exhibited for sale to the general public, the transaction should be regarded as a works contract. It may be that these commodities have no general market in the sense that they could not be exhibited for sale generally. But that is not decisive of the matter. The only test is whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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