TMI Blog2015 (1) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... cution of the works contract - in the process of dyeing, the coloured shade passed on to the fabrics constitutes sale of the materials used in dyeing, under the Works Contracts Act. To constitute sale, either under the Sale of Goods Act, or under the BST Act, the intention of the parties to transfer the goods by an agreement, determination of price of the goods to be transferred and the actual transfer of goods as per the agreement is necessary - However, under the Works Contracts Act, the concept of deemed sale has been introduced, as a result, irrespective of the criteria laid down under the Sale of Goods Act or the BST Act, if, in the execution of a works contract, the property of the materials used in the execution of that contract passes either in its original form or in some other form, then, there is deemed sale of those materials under the Works Contracts Act - The definition of 'sale' under the Sale of Goods Act and under the BST Act is materially different from the definition given under the Works Contracts Act - to constitute sale under the Works Contracts Act, the only criteria required to be fulfilled is the transfer of property in goods used in the execution of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king (positive making) out of design supplied by the customers in black and white. (c) In the job-work of plate making the customers of the respondentassessee supplies to the respondent-assessee duly grained zinc or aluminum plates. On receipt, plates are coated by dipping in water wherein gun bio chromate is dissolved. Thereafter positives are exposed on the treated plates by halogen lamps. The image is formed by the positives on the plates and the same is developed in the solution of calcium, lactic acid ferric chloride, cupric chloride and hydrochloride. The plates are thereafter washed in industrial solvent, as a result of which all the chemicals are washed out and only the images remain on the plates. Thereafter, lacquer and ink are applied on the plates. On a specific query, we were informed that lacquer and ink are applied on the plates so as to ensure that the images on the plates do not get disturbed/smudged by constant use. After the above process the plates are dried and again washed with water and returned to the customers. (d) The activity of pure labour job consists of positive making. In this activity, the customer supplies a design to the respondent-assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant-Revenue by the decision of this court in the matter of Commissioner of Sales Tax v. Matushree Textile Limited reported in [2003] 132 STC 539 (Bom). On the other hand Mrs. Bhadeka, counsel appearing for the respondentassessee, submits as under: (i) there has been no deemed sale by way of transfer of property in ink and lacquer while executing the job of plate making as held by the Tribunal. (ii) the decision of this court in the matter of Matushree Textile Limited [2003] 132 STC 539 (Bom) will not apply in view of the subsequent decision of the apex court in the matter of Bharat Sanchar Nigam Ltd. v. Union of India reported in [2006] 3 VST 95 (SC); [2006] 145 STC 91 (SC); [2006] 282 ITR 273 (SC); [2006] 6 RC 276, which holds that there must be a transfer of goods as goods for the Works Contracts Act to be applicable. Similarly, the dominant intention of the transfer, viz., whether to provide services or transfer of goods will be determinative of there being transfer of goods or not as held by the apex court in the matter of Idea Mobile Communication Ltd. v. Commissioner of Central Excise and Customs reported in [2011] 43 VST 1 (SC). In this case there is no transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome other form' used in the definition of 'sale' in the Works Contracts Act apply to the transfer of property in goods in its every form, i.e., physical form or any other form, including the chemical form. In other words, transfer of property in goods used in the execution of a works contract, either in its physical form or any other form including the chemical form constitutes sale under the Works Contracts Act. In the present case, the colored shade is passed to the fabrics due to the chemical reaction of the materials used in the process of dyeing. Coloured shade may be due to the chemical reaction of one or more materials. The coloured shade represents the inherent chemical property of the materials used. Once there is passing of the chemical property of the materials used in the execution of works contract, then under the Works Contracts Act, there is a deemed sale of the materials used in the execution of the works contract. Accordingly we hold that in the process of dyeing, the coloured shade passed on to the fabrics constitutes sale of the materials used in dyeing, under the Works Contracts Act. 34. It is true, that to constitute sale, either under the Sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 539 (Bom) wherein at para 38 it is held as under (page 561 in 132 STC): 38. The ratio laid down by this court in the case of R.M.D.C. Press Pvt. Ltd. [1999] 112 STC 307 (Bom), has no precedential value in view of the decisions of the apex Court in the case of Sarvodaya Printing Press Fine Art Printer [1999] 114 STC 242 (SC) and the Constitution Bench (three-Judge Bench) decision in the case of Associated Cement Companies Ltd. [2001] 124 STC 59 (SC); [2001] 4 SCC 593. In the case of R. M. D. C. Press [1999] 112 STC 307 (Bom), this court took the view that the ink is a tool of the printer and the same is consumed in the process of printing and loses its identity as goods and, therefore, no property can be said to pass in ink used in the execution of the contract of printing. This finding is contrary to the Full Bench decision of this court in the case of Sarvodaya Printing Press v. State of Maharashtra reported in [1994] 93 STC 387 (Bom), wherein it is held that the paper and ink used in printing passes to the customer after printing and become the property of the customer by theory of accretion. The Full Bench decision of this court has been upheld by the apex court which is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Cement Companies Ltd. [2001] 124 STC 59 (SC); [2001] 4 SCC 593, which is a later decision in point of time. As stated hereinabove, the larger Bench of the apex court has held that after the Forty-sixth Amendments to the Constitution, even if the dominant intention of the contract is the rendering of service, it will amount to works contract and in the execution of such contract, if the property of the materials used passes, then, it is a deemed sale and sales tax can be levied. As regards the other decisions relied upon by Mr. Joshi, the same being rendered in the context of the provisions of the Sales Tax Act and not under the Works Contracts Act, the ratio laid down therein are clearly distinguishable. The contention of the respondents that the Revenue has failed to establish the marketability of the chemical solution used for dyeing is also without any merit. As stated hereinabove, what is relevant under the Works Contracts Act is the passing of the property of goods used for dyeing. Once it is established that the property of the goods used in dyeing has passed to the consumer in any form, then under the Works Contracts Act there is a deemed sale of those materials and the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract. Further, so far as the dominant intention is concerned the apex court negatived such a test as applicable in its decision in the matter of Associated Cement Companies Ltd. [2001] 124 STC 59 (SC); [2001] 4 SCC 593 and in particular held therein as under (pages 116 and 117 in 145 STC): 47. In Rainbow Colour Lab v. State of Madhya Pradesh reported in [2000] 118 STC 9 (SC); [2000] 2 SCC 385, the question involved was whether the job rendered by the photographer in taking photographs, developing and printing films would amount to a 'works contract' as contemplated under article 366(29A)(b) of the Constitution read with section 2(n) of the M.P. General Sales Tax Act for the purpose of levy of sales tax on the business turnover of the photographers. 48. The court answered the questions in the negative because, according to the court: 'Prior to the amendment of article 366, in view of the judgment of this court in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC); AIR 1958 SC 560, the States could not levy sales tax on sale of goods involved in a works contract because the contract was indivisible. All that has happened in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment would apply. Mrs. Bhadeka also placed reliance upon the decision of the apex court in the matter of Idea Mobile Communication Ltd. v. Commissioner of Central Excise and Customs, Cochin reported in [2011] 43 VST 1 (SC) wherein according to her the apex court held that when dominant purpose of the transaction was to provide service then in such a case SIM cards which were supplied along with telecommunication service would not be chargeable to sales tax. Relying upon the aforesaid decision, it was her contention that no works contract tax is payable in respect of the use made by the respondent-assessee of ink and lacquer while rendering service to its customers. The case before the apex court in the matter of Idea Mobile [2011] 43 VST 1 (SC) was with regard to the charging of service tax under the Finance Act, 1994. The above case was not dealing with transfer of goods as goods or in any other form in the execution of works contract. Therefore, the above decision would in no manner impact the view of our court in the matter of Matushree Textile [2003] 132 STC 539 (Bom). Mrs. Bhadeka, counsel for the respondent-assessee, contends that lacquer and ink are similar to packi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
