1. This is a reference made by the Revising Authority under Section 11 of the U.P. Sales Tax Act.
2. The assessees are publishers and printers, and in the course of their business as printers they accept orders from customers for job work such as receipt books, registers, letter heads and handbills which are printed in accordance with the requirements of their customers on paper supplied by the assessees. In the bills submitted by the assessees to their customers the price of the paper and the charges for printing are shown separately. In respect of the assessment year 1948-49 and the first nine months of the year 1949-50 the assessees were assessed to sales tax on the proceeds of sale of such job work. They challenged the validity of such assessments and the question which has been referred by the Revising Authority to this Court is-
Whether the turnover of receipt books, registers, forms, letter heads, visiting cards and handbills printed to order when all materials -paper, ink, etc.-are supplied by the presses is assessable to sales tax ?
3. Section 3 of the U.P. Sales Tax Act, 1948, provides (subject to the provisions of the Act) for the payment by a dealer of sales tax on his turnover, and Section 4 provides that no tax shall be payable on, inter alia, books, magazines and newspapers and such other goods as the State Government may by notification in the official Gazette exempt from time to time. Now by a notification under this section, No. ST. 199-X/928, which came into force on the 1st April, 1948, the State Government directed that the provisions of the Act should not apply to sales of various classes of goods, including as item No. 10 'paper and newsprint'. This Notification however remained in force only for a short time as it was superseded on the 8th June, 1948, by another Notification No. ST. 119-X/928-1948, which exempted from sales tax, again as item No. 10, sales of 'paper meant for writing and printing.
4. Now none of the items specified in the question referred to us will come within the ambit of either Notification unless it is paper ; and 'paper' is a word which is used in more than one sense. It is defined in the New English Dictionary as a substance (usually in the form of a thin flexible sheet) 'composed of fibres interlaced into a compact web, made from various fibrous materials...which are macerated into a pulp, dried and pressed...' It also means, according to the same authority, 'a piece, sheet or leaf of paper.
5. Now what is exempted from the provisions of the Act are sales of paper, and upon the assumption (the validity of which we consider later) that the completed articles, namely the receipt books, registers, forms, letter heads, visiting cards and handbills, are the goods which the assessees sell to their customers, the question is whether each of these items is paper within the meaning of either Notification. The fact that each of these items consists of paper is not, we think, conclusive, for the question which, in our opinion, has to be answered is, what is being sold The purchase by a practising lawyer of the latest edition of Mulla's Transfer of Property Act would not be described by anyone as a purchase of paper but of a book; but the sale of an obsolete edition of the same work might be merely the sale of waste paper. Suppose the sale of copper to be outside the provisions of the Act. If a pot made of copper is sold as an utensil it would not, in our opinion, be a sale of copper but the position would be otherwise if a dealer sells damaged copper pots by weight as copper. Looking at the matter from this point of view we are of opinion that the sale of receipt books, registers, forms, visiting cards and handbills which have been made or printed to the order of the purchaser is a sale of those articles as such and not a sale of paper. The sale of letter heads, by which we understand is meant writing paper with a printed heading, stands we think on a different footing ; it is a sale of paper.
6. So far we have assumed that the articles sold are the completed articles specified in the question. It is however argued that that is not the case, the contention being that the customer entered into two transactions with the assessees, a purchase of paper by the customer being followed by a contract with the assessees for binding and/or printing. There can we think be no doubt that if the purchase of the paper and the labour expended thereon of printing and binding are the subject of distinct contracts then the proceeds of the sales of the paper (subject to the meaning of the qualifying words 'meant for printing or writing' in the second Notification) are exempt from sales tax. Whether there is one transaction or two can be determined only on an examination of the circumstances of each case. If the paper is purchased from a stationer and thereafter delivered to the printer for work to be done thereon no difficulty is likely to arise, but the position in law is in no way different if the printer holds stocks of paper and the purchase is made from him. The contract of sale becomes complete when the property in the paper is transferred from the seller to the buyer, and in the case of ascertained goods the property therein is transferred to the buyer when the parties intend it to be transferred. How that intention is to be ascertained is laid down in Sections 19 and 24 of the Indian Sale of Goods Act. The problem of determining when the property in the paper passed to the customer may not be an easy matter, but we think a useful test question is, on whom will the loss fall if the paper is destroyed by fire while in the hands of the printer
7. In the present case the assessees submitted to their customers bills which showed separately the cost of the paper and their charges for work done. Such bills are of course not conclusive. They may be evidence of the existence of two contracts ; they may also be a device to disguise the real nature of the transaction.
8. The meaning of the phrase 'paper meant for writing and printing', standing by itself, appears to us to be sufficiently clear. It means in our opinion paper which is sold for the purpose of being used as a medium for written or printed matter; and we think it not to be material that the paper at the time of sale had some printed or written matter on it provided that such paper would ordinarily be used for writing or printing purposes.
9. Finally learned counsel for the assessees has argued that, even ii the transaction be one transaction, the orders placed by customers for such job work were not contracts for the sale of goods at all but were contracts for work and labour and were therefore outside the ambit of the Act. We think this argument to be misconceived. We think it now to be established that in order to determine the nature of a contract the Court has to look at its substance. If the substance of the contract is the production of something to be sold to the customer-such as a suit of clothes-then that is a sale of goods. If, on the other hand, the substance of the contract is that skill and labour have to be exercised for the production of the article, and that it is only ancilliary to that that there will pass to the customer some materials in addition to the skill involved-as in the case of an oil painting-the contract will be one of work. This was so laid down in Robinson v. Graves  1 K.B. 597 where the earlier cases including Clay v. Yates 25 L.J. Ex. 237 relied upon by the assessees were considered. Applying this test, and assuming that there be only a single contract, we can entertain no doubt that they were contracts of sale.
10. We accordingly answer the question referred to us in the affirmative as regards visiting cards and in the negative as regards letter heads. As regards receipt books, registers, forms and handbills the answer is in the affirmative if the sale is of these articles as such ; it is in the negative if the sale of the paper of which such goods are composed is a transaction separate from the work of binding and/or printing.
11. We make no order as to costs.