TMI Blog1958 (7) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Hyderabad General Sales Tax Act took accounts of the petitioner press for the years 1950-51, 1951-52, 1952-53 and 1953-54. The Authority found that for the years 1950-51 and 1952-53, the turnover of the press was not of such an amount as to make it chargeable to sales tax. However, the Authority found that the turnover of the press for the years 1951-52 and 1953-54 was chargeable to sales tax. Accordingly, the Authority made an assessment order on 31st March, 1955, charging the petitioner press to sales tax for its turnover for the years 1951-52 and 1953-54. The assessment order was communicated on the same day (31st March 1955) to the petitioner press. The petitioner press appealed from that order to the Deputy Commissioner, Sales Tax. The Deputy Commissioner modified the order of the Authority. The Deputy Commissioner treated the printing work done by the petitioner press as works contract under the Act and allowed a reduction of 30 per cent. on the total turnover on the ground that the said 30 per cent. represented the cost of labour involved in the printing work. Due to this reduction of 30 per cent., the turnover for the year 1953-54 went down so low that it did not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable consideration. Explanation 1, clause (i) at the foot of section 2, clause (m), provides: "Subject to such conditions and restrictions, if any, as may be prescribed in this behalf, the amount for which goods are sold shall, in relation to a works contract, be deemed to be the amount payable to the dealer for carrying out such contract, less such portion as may be prescribed of such amount representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract." Rule 5, sub-rule (3), of the Hyderabad General Sales Tax Rules, 1950, provides: "For the purpose of sub-rule (1) the amount for which goods are sold by a dealer shall in relation to works contract, be deemed to be the amount payable to the dealer for carrying out such contract less a sum not exceeding such percentage of the amount payable as may be fixed by the Commissioner from time to time for different areas representing the usual proportion in such areas, of the cost of labour to the cost of materials used in carrying out such contract, subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss brings into existence such stationery, it produces a commercial commodity which is capable of being sold or supplied. Therefore, when the press sells printed material to its constituents, it sells goods to the constituents upon which sales tax is leviable. The learned advocate Mr. Deshpande also fairly concedes that when the printed material is sold by the press to its customers, there is a sale of finished goods to the customers. What Mr. Deshpande contends for, however, is that the essence of the work done by the press is not production of finished goods, but the printing work. It is in this manner that Mr. Deshpande contends that the transactions done by the petitioner press with its constituents are in the nature of works contracts. Now, the nature of a contract must be determined by the substance of the contract. As the learned Judges of the Allahabad High Court pointed out in Kanpur Journals Ltd. v. Commissioner of Sales Tax, U.P.[1956] 7 S.T.C. 661.: "We think it now to be established that in order to deter- mine the nature of a contract the Court has to look at its substance. If the substance of the contract is the production of something to be sold to the customer-suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pretence of such a power transactions which were wholly outside would be ultra vires and must be declared invalid. Now, it is to be remembered that a building contract is one entire indi- visible contract and in such a contract there is no sale of goods. One fundamental difference between a building contract and the work done by the petitioner press is that in a building contract, the various materials which are used in the process of constructing a building lose their original character, viz., the character of movable property and get converted into parts of immoveable property by being fixed to a build- ing. It is this important aspect of a building contract which distin- guishes it from the work done by the petitioner press. As I have mentioned above, the press purchases stationery and brings into existence a finished product, viz., the printed material, and, therefore, when it supplies that product to its constituents, it sells it to the constituents. We are, therefore, unable to accept the contention of Mr. Deshpande that the provisions of section 2, clause (m), Explanation 1, clause (i), of the Hyderabad General Sales Tax Act and rule 5, sub-rule (3), of the Hyderabad Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed before us is that even in case the Court holds that section 2, clause (m), Explanation 1, clause (i), of the Hyderabad General Sales Tax Act and rule 5, sub-rule (3), of the Hyderabad General Sales Tax Rules were intra vires the legis- lative competence of the Legislature of the former State of Hyderabad, even so the petitioner's case would fall within the ambit of clause (iv) of Explanation I to section 2, clause (m) of the Act. We are unable to agree with Mr. Deshpande. Clause (iv) of Explanation I provides: "Where for accommodating a particular customer, a dealer obtains goods from another dealer and immediately disposes of the same to the said customer, the sale in respect of such goods shall be included in the turnover of the latter dealer but not in that of the former." Mr. Deshpande says that in the present case, for accommodating its customers, the petitioner press obtains goods from other dealers in the market and disposes of the said goods in favour of its own constituents and, therefore, the sale in respect of such goods should be included in the turnover of the constituents and should not be included in the turn- over of the press itself. Mr. Deshpande appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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