ORDINARY ORIGINAL CIVIL JURISDICTION v. Hari and Company

Judgment

(Per Dr.S.Radhakrishnan,J.) ORAL JUDGMENT: (Per Dr.S.Radhakrishnan,J.) ORAL JUDGMENT:

1. The present Sales Tax Reference has been made u/s.61 of the Bombay Sales Tax Act, 1959 at the instance of the Commissioner of Sales Tax of the Maharashtra Sales Tax Tribunal, to this Court for the determination of the question of law which arises out of the order passed by the Tribunal dated 11th October, 1991. in an Appeal filed by the Respondents herein.

2. The question arises under Section 9 of the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contract (Re-enacted) Act 1989, (hereinafter : Works Contract Act), read with Section 6(1) of the Bombay Sales Tax Act, 1959. The corrected question as argued upon by both the parties reads as follows: "In the facts and circumstances of the case and on a true and correct interpretation of Section 2(1)(d) of the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contracts (Re-enacted) Act, 1989 (hereinafter: the Works Contract Act) was the tribunal jusfified in law in holding that the Respondents are not to pay tax under the said Works Contract Act on their transaction of taking out the xerox copies on a xerox machine and that they are not a "dealer" as defined under Section 2(1) (d) of the said Act.?"

3. Hari & Co. the present Respondents are involved in the business of comb-binding, electric or electronic typing, computerised art work and taking out duplicate copies by photocopying. On 10th June, 1988 an application was made by the Respondents u/s.52 of the Bombay Sales Tax Act read with Section 9 of the Works Contract Act to the Additional Commissioner of Sales Tax to decide three questions: i) Whether they fall within the ambit of ‘dealer’ as defined in the Works Contract Act? ii) Whether the transactions described and evidenced in the cash memo are sales within the meaning of "sale" as defined in the Works Contract Act? iii) If the transactions are sales, what is the sale price in each transaction?

4. By an order passed under Section 9 on 25th January, 1989 it was held that the contract price would be the subject matter of sales tax. An appeal was preferred before the Tribunal, which partly allowed the Appeal to the extent of (a) Electric/Electronic typing; (b) Computerised Art Works and (c) taking out copies of xerox. As far as comb-binding was concerned, it was held that it amounted to sale under Works Contract Act and the Respondent was held to be a dealer under the said Act. Reference application filed by the present Applicants was allowed for determination of the above-mentioned question. SUBMISSIONS OF APPLICANTS: SUBMISSIONS OF APPLICANTS: SUBMISSIONS OF APPLICANTS:

5. Mr.Pandit, the learned Counsel for the Applicants relied on the case of Builders Association of India & Builders Association of India & Builders Association of India & Ors. V/s.Union of India & Ors. - (1989) 13 STC 370, Ors. V/s.Union of India & Ors. - (1989) 13 STC 370, Ors. V/s.Union of India & Ors. - (1989) 13 STC 370, (hereinafter the Builders case), to contend that there exists four kinds of contracts: i. Work done by the assessee on the property of the Customer using the assessee’s material (as in construction contracts), ii. Property is given by the customer to the assessee for carrying out improvement thereon (retreading of tyres), iii. No property given by the customer to the assessee for any improvement. Entire raw material of the assessee, out of which goods are produced by the customers. iv. Customer supplies negatives of films for developing and printing of positive copies by the Assessee.

6. Mr.Pandit contended that in the process of photocopying as in the present case, the assessee utilises his own property, i.e.paper and ink and there is a definite transfer of ‘goods’. The learned counsel for the Applicants also referred to the case of Associated Cement Companies Ltd. V/s.Commissioner of Associated Cement Companies Ltd. V/s.Commissioner of Associated Cement Companies Ltd. V/s.Commissioner of Customs - 124 STC 59 Customs - 124 STC 59 (hereinafter: the ACC case). The Customs - 124 STC 59 Hon’ble Supreme Court in the above case supports the proposition that in case of a contract where the transfer of goods take place, it is a contract of sale, notwithstanding the small percent value of transfer. Whether the transfer is incidental to the contract or intentional is immaterial. Mr. Pandit contended that in the light of the scenario post Forty-Sixth Constitution (Amendment) Act, 1989 wherein clause 29A was inserted in Article 366, even composite contracts can be bifurcated to levy sales tax on the value of material involved in the execution of works contract. Hindustan Shipyard Ltd. V/s.State This view, adopted in Hindustan Shipyard Ltd. V/s.State Hindustan Shipyard Ltd. V/s.State