V.P. Gopalan Nambiyar, C.J.
1. The revision is by the revenue against the order of the Sales Tax Appellate Tribunal, Additional Bench, Kozhikode. The assessment year is 1971-72. The assessee is a dealer in rubber seals. The question that has been agitated is whether rubber seals are liable to be taxed at the rate of 7 per cent under item 5 of the First Schedule to the Sales Tax Act, or alternatively, at the general rate under Section 5 at 3 per cent; or are not liable to be assessed at all on the ground that the contract for the sale and supply of the rubber seals is really a contract for work and labour and not one for sale of goods. The Sales Tax Officer found that the transaction was liable to be assessed under item 5 of the First Schedule as a sale of rubber products and accordingly assessed the turnover at 7 per cent for purposes of sales tax. He negatived the contention that the contract was one for work and labour. The proceedings had arisen by way of reassessment under Section 19 of the Act. In the pre-assessment notice, the officer had stated that there were several purchases liable to be taxed under Section 5A of the Act, which had not been brought to tax. The officer had indicated in the pre-assessment notice that the purchase turnover under Section 5A proposed to be taxed was Rs. 8,000. The assessee replied that his purchases are supported by bills and produced the bills for scrutiny. It was after scrutiny and consideration that the Sales Tax Officer gave effect to his proposed assessment and assessed the rubber seals at 7 per cent and also added an estimated turnover of Rs. 8,000 by way of purchases under Section 5A of the Act.
2. On appeal by the assessee, the Appellate Assistant Commissioner confirmed the assessment of the Sales Tax Officer, but reduced the estimate of Rs. 8,000 with respect to Section 5A purchases to Rs. 4,000. On further appeal by the assessee to the Sales Tax Appellate Tribunal, the Tribunal held that rubber seals were not assessable under item 5 of the First Schedule to the Act as the same could not be brought under the description of 'rubber products' mentioned under the said item. It was also of the view that the sale and supply of rubber seals was a contract for work and labour and not one for sale of material. Regarding the estimated purchases under Section 5A, the Tribunal was of the view that there was no material to make an estimate and to add Rs. 4,000 to the turnover as sustained by the Appellate Assistant Commissioner.
3. Aggrieved by this order of the Sales Tax Appellate Tribunal, the revenue has filed this tax revision.
4. We will first deal with the question of the addition of an estimated turnover with respect to Section 5A purchases. As stated, the reassessment had been preceded by a pre-assessment notice, which indicated that Section 5A purchases had been effected by the assessee and these were proposed to be estimated at Rs. 8,000. The assessee replied pointing out that his purchases were supported by bills and vouchers and enclosed these bills and vouchers for scrutiny and examination by the officer. It was after such scrutiny and consideration that the officer found that Section 5A purchases were effected and estimated the same, in the absence of acceptable records by the assessee, at Rs. 8,000. This was reduced to Rs. 4,000 by the Appellate Assistant Commissioner. In the circumstances, there was no warrant for the Tribunal to interfere with this estimate on the ground that there was no material at all to warrant the same. We cannot sustain this part of the Tribunal's order.
5. On the other question as to whether the item was assessable under item 5 of the First Schedule at 7 per cent or at the lower rate of 3 per cent under Section 5, or is not assessable at all as a contract for work and labour, we are afraid the Tribunal has not approached the consideration of the question from the correct standpoint. The question for consideration would really be whether there was an intention to transfer the rubber seals as a chattel and to pass property in the same as a chattel. As was pointed out recently by a Division Bench of this Court in John Mathew Bros. v. State of Kerala  42 S.T.C. 140, after examination of all the relevant authorities, the question must depend essentially on the nature and circumstance of the transaction and the intention of the parties. We are afraid, from this point of view, the Tribunal had not approached this question at all. A re-examination of the question is called for, namely, the question as to whether the transaction is assessable as a contract of sale of material or whether it is exempt from taxation as being a contract for work and labour.
6. But even if it was assessable, we think that it cannot be assessed under item 5 of the First Schedule at the higher rate of 7 per cent. We cannot hold that rubber seals are 'rubber products' within the meaning of this item. If assessable at all, they would be assessable only at 3 per cent under Section 5 of the Act. For a proper determination of the question, we would set aside the order of assessment and remand the matter back to the Tribunal for fresh disposal in accordance with law and in the light of the observations contained in this judgment. There will be no order as to costs.