M/s. M.R.S. Plastic Industries v. The State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDated :04.10.2012CoramThe Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Mr.Justice K.RAVICHANDRABAABUTax Case (Revision) No.2266 of 2008---M/s.M.R.S.Plastic Industries4/99, Ettayapuram RoadTuticorin ...Petitioner -vs-The State of Tamil Nadurep. By the DeputyCommercial Tax Officer-IIITuticorin ...RespondentTax Case (Revision) filed under Section 38 of the TNGST Act of1959 to revise the order of the Sales Tax Appellate Tribunal MaduraiBench dated 20th December, 1993 passed in Appeal No.550/92 and appealagainst the order of the Appellate Assistant Commissioner [CT]Tirunelveli in AP 212/89 dt 4/11/1991 and against the Assessmentorder of the Deputy Commerical Tax officer-III, Tuticorin in TNGSTNo.87/1422/8788 dt 15/2/89.For petitioner:Mr.Md.Ibrahim AliFor respondent : Mr.J.Aaditya ReddyGovt.Advocate (Tax) O R D E R(The Order of the Court was made byCHITRA VENKATARAMAN, J.)The assessee is on revision as against the order of the SalesTax Appellate Tribunal, Madurai Bench dated 20th December, 1993 passedin Appeal No.550/92 in respect of the assessment year 1987-88 raisingthe following questions of law:-"1. Whether the petitioner was doing 'workscontract' or sold plastic bags to his customers ? https://hcservices.ecourts.gov.in/hcservices/

2. Whether the penalty imposed under Section 12(3)of the Act, is warranted ?"2. The petitioner is stated to be the manufacturer of plasticbags and after printing the name of the customers, they were sold tothe customers. The assessee treated it as "works contract" and notas a "sale" and contended that there is no justification for makingthe assessment. 3. It is seen from the order of assessment that the assesseepurchased HDPE bags from unregistered dealers through boughtvouchers. The verification of the records show that the place ofbusiness of the assessee was inspected on 12.02.1998, which indicatedthat the assessee had not maintained stock register for the finishedstock goods and not maintained production cum stock account. Thesales of waste was recorded too high. The Assessing Officer pointedout to the difference between raw materials and finished products andthat the proportion was unexplained. Thus, the Assessing Officerproposed best of judgment assessment. The assessee was granted timeto file objections and admittedly, the assessee had filed objectionson 02.02.1989. On consideration of the contention of the assesseethat the sale of bags carrying the customers name was only "workscontract", the Officer held that in the returns filed, no where, suchclaim was made and there were no records to show that the transactionwas only works contract. On the merits of the assessment, theAssessing Officer pointed out that the assessee had not given anymaterial evidence as regards the waste emanating from its manufactureand the assessee had admitted purchase omission; in the absence ofstock register not maintained, the case called for best judgment.Thus, the sale of plastic bags were brought to tax. 4. Aggrieved by the order of assessment, the assessee went onappeal before the Appellate Assistant Commissioner, who rejected theassessee's contention. As regards the sale of printed polythene bagsas well as on the merits of the assessment, the First AppellateAuthority upheld the assessment, but, however, cancelled the penaltyto a small extent. 5. Aggrieved by the same, the assessee went on further appealbefore the Sales Tax Appellate Tribunal. On a consideration of thematerials, the Tribunal held that the bags supplied by the assesseewas a marketable commodity having commercial value and it was notworks contract. Thus, it confirmed the order. Aggrieved by this, theassessee is on present revision. 6. Learned counsel for the assessee placing heavy reliance onthe decision of the Supreme Court in the case of State of Tamil NaduVs. Anandam Viswanathan reported in 73 STC 1 as well as unreporteddecision of this Court in Tax Case Revision No.1969 of 2006 dated25.03.2010 (State of Tamil Nadu, Deputy Commissioner (CT), https://hcservices.ecourts.gov.in/hcservices/ Tirunelveli Vs. Alkenes Kraft), contended that given the nature ofthe contract given by its customers, printed polythene bags suppliedby the assessee having no commercial value, the transaction could notbe assessed as tax. 7. Per contra, learned standing counsel appearing for theRevenue supported the order of assessment and placed reliance on thedecision of this Court in the case Tvl.Bharat Offset, rep. By itsPartner and others Vs. The Tamil Nadu Taxation Special Tribunal, rep.By its Registrar, Chennai reported in 34 VST 342. While consideringthe amendment brought to Entry 52 of the First Schedule, Part C tothe TNGST Act, relating to enlisting of printed materials as items oftaxation, this Court considered a similar question as raised in thisTax Case Revision. Even though the decision of this Court reportedin above cited case related to the entry, yet this Court consideredthe decision in the case of State of Tamil Nadu Vs. AnanthamViswanathan (cited supra) holding that printing of the name in thebags sold is only incidental to the purchase of the bag,consequently, the transaction could not be treated as works contract,but only as a sale. 8. Countering the claim of the Revenue, learned counsel for theassessee submitted that the decision cited by the Revenue could nothave any application to the present case considering the fact that itdealt with the legal position, thus applicable from 2000-01 onwards. 9. Heard learned counsel appearing for the respective partiesand perused the documents available on record. 10. We do not agree with the contention of the assessee that thetransaction in question has to be viewed as a works contract. In thedecision reported in the case of Tvl.Bharat Offset and others Vs. TheTamil Nadu Taxation Special Tribunal, Rep. By its Registrar, Chennaiand another reported in 34 VST 342 (Mds), this Court considered thedecisions of the Supreme Court and our High Court on the question ofsale of printed material and this Court held that where an assesseesells bags with the customer's name imprinted therein, the subject ofthe transaction being the sale of bag or diary as the case may be,the printing of the name is just incidental. The mere fact that thelabels or logos have been printed would not make the transaction intoa works contract. It is purely and simply a sale of goods. Thus,printing of the logo or name is incidental to the sale and thetransaction between the customer and the supplier is not workcharged. Referring to the decision of the Supreme Court in the caseof Anandam Viswanathan case (cited supra), this Court in paragraphNo.19, held as follows:-" 19. We have already referred to the testsspelt out in the various decisions. The decision https://hcservices.ecourts.gov.in/hcservices/ in Anandam Viswanathan's case (supra) cannot beautomatically applied to all transactions whereprinting materials are supplied. There, what wastransferred in the transaction was the property in"the questions" which belonged to the University.The white sheets are meaningless without thequestions being printed. The question is, whetherthe property belonged to the Universities. Theprinter was merely asked to print what is requiredby the University. The University has no intentionto purchase the papers. It places an order forprinting of questions. The University requiredutmost confidence to be maintained, since thequestions should not be "leaked" to the studentsbefore the actual date of the examination. But theprinting of question paper on the request of theUniversity cannot be equated to printing of a nameor logo on goods which are purchased. We referredto diary only as an example. There, the subject ofthe transaction is only purchase of the diary. Theprinting of name is just incidental. So, what wehave to see is whether the word is incidental orthe purchase is incidental. The fact that theLegislature has introduced the additional word inEntry-40 will not change the position of law in anymanner. The authorities will have to examine eachtransaction and look at the contract in questionand decide whether it is works contract or whetherit is only a sale. The mere fact of bearing thelogo or name upto the specification to thecustomer's will not make it a works contract."We hold that the decision of this Court apply to the facts of thecase herein. Except for contending that the transaction is one ofworks contract, the assessee had not placed any material before anyof the authorities. 11. Leaving that aside, as observed in the decision of thisCourt, when the primary object of the transaction is sale of bags andthe printing of the name or logo is only incidental to the sale, wefind no justifiable ground to accept the case of the assessee andhold that the transaction is sale alone. It may be noted that merefact that the Entry was the subject matter of the consideration inthe decision reported in 34 VST 342 (Tvl.Bharat Offset and others Vs.The Tamil Nadu Taxation Special Tribunal) cannot in any manner dilutethe law declared by this Court applicable to the pre amendment periodtoo. 12. Going by the discussion in the judgment reported in 34 VST342 (Tvl.Bharat Offset and others Vs. The Tamil Nadu Taxation SpecialTribunal), which considered the various decisions of the Supreme https://hcservices.ecourts.gov.in/hcservices/ Court as well as this Court and other High Courts, we do not have anyhesitation in following the said decision and in rejecting theassessee's tax case revision. Accordingly, the Tax Case Revisionstands dismissed. No costs. Sd/ Assistant Registrar /True Copy/ Sub Assistant Registrar nvsriTo 1. The Deputy Commercial Tax Officer-III, Tuticorin2. The Appellate Assistant Commissionerof Commercial Taxes, Tirunelveli3. The Tamil Nadu Sales Tax Appellate Tribunal(Additional Bench), Madurai + 1 C.C. TO Special Government Pleader Sr.62676 Tax Case Revision No.2266 of 2008KJI[CO]KS 03/12/2012