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2021 (9) TMI 475 - HC - VAT and Sales TaxProcess amounting to manufacture or not - Works contract - manufacturing and selling the recorded cassettes to the petitioner - First sale or second sale - recording the blank cassettes by utilizing the master copy - cassettes not sold in the open market - Validity of Circular dated 16.05.2003 - Central Excise Act and TNGST Act for levying of Tax for sale, are same or not - HELD THAT:- In the present case, the right was not given to use goods for any purpose and it is given for a particular purpose that recording the songs in blank cassettes and after recording, such recorded cassettes are to be supplied only to the petitioner. Therefore, the cassette manufacturer's services are utilized to process the recording system and after processing the recording system, the recorded cassettes are handed over or sold to the petitioner and the materials utilized for such recording of cassettes cannot be construed as a sale and even in case, an invoice is raised in this regard i.e., part and parcel of the “works contract” and cannot be construed as a sale. In the present case, the master copy was allowed to be utilized only for the purpose of recording of blank cassettes by the cassette manufacturers and after recording, he is not permitted to sell the product in the open market, but to handover the recorded cassettes only to the petitioner company, who in turn, reserve their rights to sell the product in the open market. Thus, such sale by the petitioner in the open market cannot be construed as a second sale, but to be taken as the first sale for the purpose of levying tax under the provisions of the TNGST Act. In the present case, there was a “works contract” between the petitioner and the cassette manufacturers to use the master copy for the purpose of recording the blank cassettes in large scale. Secondly, there is an execution of works contract and such execution is done on certain terms and conditions of the agreement. Thirdly, in the present case, the goods were transferred to the petitioner, who has supplied the master copy and not sold in the open market admittedly. It would have been supplied in the sale form or in any other form. In the present case, it was supplied in the other form by recording the blank cassettes by utilizing the master copy and therefore, all the three conditions stipulated by the Hon'ble Supreme Court of India in the above case has been complied with in respect of the facts and circumstances of the present case. This Court is of the considered opinion that for the purpose of levying tax with reference to the provisions of the tax law, the nature of transactions are of paramount importance for forming an opinion, whether such transaction amounts to sale or “works contract” or otherwise. In the present case, there is no dispute with reference to the transaction between the petitioner and the cassette manufacturers for recording of blank audio cassettes and supply of the recorded cassettes to the petitioner - this Court has no hesitation in forming an opinion that the first sale as claimed by the petitioner cannot be considered as a first sale, but to be construed as “works contract” and the sale by the petitioner in the open market is to be taken as the first sale for the purpose of levy of tax under the provisions of the TNGST Act. The impugned Circular passed by the respondents in Circular No.Acts Cell-I/76234/2002 dated 16.05.2003 is confirmed - Petition dismissed.
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