TMI Blog1994 (3) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Sarvodaya Printing Press, Nagpur-the applicant, filed an application under section 52(1)(c) of the Act before the Commissioner of Sales Tax for advance determination of the question as to whether the sales tax was payable in respect of the transaction of supply of such specially tailored receipt books which were of no use to anyone else. The Deputy Commissioner of Sales Tax, Nagpur Division, passed an order holding that the transaction was a works contract and, therefore, not liable to sales tax. The Commissioner of Sales Tax struck a different note and held that the supply amounted to a sale of goods. The Tribunal upheld the view of the Commissioner, and at the instance of the applicant made a reference to the High Court under section 61(1) which was heard by the Division Bench at Nagpur. By an order dated July 27, 1990, the Division Bench referred the question to a larger Bench. 3.. Following are the uncontroverted salient features pertaining to the transaction: (1) The applicant runs a printing press where only job-work is done. (2) The applicant does not keep ready stock of any material such as paper, ink or standard money receipt books for general use. (3) The MPEB also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and supply of question papers of the University. The Supreme Court held that though sale of paper and ink was involved, it was merely incidental. It was not a case of sale but of a works contract having regard to the nature of the job to be done and the confidence reposed for the work to be done for remuneration. Following observations are apposite: "The primary difference between a contract for work or service and a contract for sale is that in the former there is in the person performing or rendering service no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property. Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction is only a works contract. See the observations in Court Press Job Branch, Salem v. State of Tamil Nadu [1983] 54 STC 382 (Mad.) and Commissioner of Sales Tax v. Ratna Fine Arts Printing Press [1984] 56 STC 77 (MP). In our opinion, in each case the nature of the contract and the transaction must be found out. And this is possible only when the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not one free from difficulty. The reason for that is that in border line cases the distinction between the two types of contract is very fine. This is particularly so when the contract is a composite one involving both a contract of work and labour and a contract of sale. Nevertheless, the distinction between the two rests on a clear principle. A contract of sale is one whose main object is the transfer of property in, and the delivery of the possession of, a chattel as a chattel to the buyer. Where the principal object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one of work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration in determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of a chattel." 9.. In the case of Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit. The distinction has been made that, if the property is not such as the seller usually has on hand for sale and in existence at the time of the sale, but is made specially for the buyer and on his special order, the contract is one for work and labour, and not of sale; but that if the property ordered is exactly such as the seller makes and keeps on hand for sale to anyone, and no change or modification of it is made at the buyer's request, it is a contract of sale, even though it may be entirely made after, and in consequence of, the buyer's order for it. It has also been held that if the property is in existence at the time of the contract for its transfer it is a sale although the seller is to do work thereon to adapt it to a particular use for the buyer; and the fact that work and labour are to be done on, or in connection with, material sold as an incident to, or in connection with, the transfer of title does not rob the transaction of its essential characteristics of a sale if the whole or any measurable part of the consideration for the performance of the contract is compensation for the material." 11.. Bombay High Court had occasion to deal with the subject in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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