TMI Blog1969 (11) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... the concession asked for. The appeal by the petitioners to the Appellate Assistant Commissioner was unsuccessful. Before the Tribunal in second appeal the appellant brought out in full the nature of the dealings between them and Messrs E.I.D. Parry Limited, hereinafter referred to as the company, and urged that there was a contract between themselves and the company, whereunder certain raw material such as rosin, shellac etc., were supplied by the petitioners to the company and the company in turn manufactured varnish with the methylated spirit supplied and sold by them to the petitioners, and ultimately what was transferred by the company to the petitioners was a finished product of varnish. They also referred to the various invoices raised by the company and the course of conduct of the business indulged in by the company, to establish that in the ultimate analysis what was done by the company was to sell varnish as a finished product, raised invoices as such and supplied such finished varnish to the constituents nominated by the petitioners. One factor, however, has to be noticed that in the invoices raised by the company the value of shellac and rosin supplied by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transaction between the company and the petitioners, did not suffer a tax. He would expand his argument by stating that in the invoices raised by the company the price of shellac and rosin was not included and therefore the tax paid by the company at the time when the varnish was subject to a first sale was not the total tax payable in law. In this sense he would say that the sale is not a first sale. His other contention is that the petitioners are not entitled to the benefit, because the contract in question would disclose that the intention of the parties was that there should be no sale but merely a supply of a finished product with the assistance of materials supplied by the petitioners and also methylated spirit used by the company in the manufacture of varnish. We shall now consider the respective contentions. Before it is undertaken, it is necessary to state what according to us is the history of the assessment in the instant case. When the petitioners supplied rosin and shellac to the company during the assessment years 1959-60, 1960-61 and 1961-62 the assessing authority did not subject them to tax but later on by an order dated 21st January, 1965, the Deputy Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r constituted under the enactment. Whilst one Tribunal would say on 20th May, 1966, that the sales are to be deemed as second sales, another Tribunal on 9th July, 1965, while dealing with the assessment year 1962-63, would come to the conclusion that they are first sales. Even the assessing authority, when it issued the notice on 24th February, 1969, seems to have ignored the findings of the Tribunal, and it is doubtful whether it could do; but it has happened. Coming to the facts in the instant case the petitioners entered into a contract with the company, known as a varnish contract. It provides for the price to be paid by the petitioners to the company at 0.87 np. f.o.r. Nellikuppam inclusive of gallonage fee and Central excise duty. Clause(3) of the said contract uses the word "purchase". The payment is against documents at Madras. A rebate also is provided for in clause (6), provided the petitioners satisfactorily discharge their obligations under the contract. The argument is that the word "purchase", the terms of payment and the details as to price are all a camouflage to cover up what according to the revenue is merely a contract to manufacture varnish and supply the fini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taken by you to Nellikuppam and mixed there at your cost." This, according to the counsel, militates against the transaction being a sale. In our opinion, it is not. The revenue has treated such supplies by the assessee to the company as sales and the company had to suffer a penalty, for not including such sales in their assessable turnover. It is one of the innocuous terms mentioned in the contract to fix the petitioners with notice of their obligation to supply certain raw materials for the manufacture of varnish. This appears in clause (2) of the contract which deals with the price of varnish. Apparently this was introduced to work out the correct price. Taking all the circumstances into consideration we have no hesitation to hold that the transactions in question between the petitioners and the company were indeed sales, as is popularly and statutorily understood, and, therefore, the goods in question were subject to a first sale in the hands of the company. It is not in dispute that the company paid the tax payable in respect of such first sales effected by them. The contention, however, is that the tax paid by the company was not full and complete. This argument is base ..... X X X X Extracts X X X X X X X X Extracts X X X X
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