1. This tax case has been filed by the Revenue questioning the view taken by the Tribunal that in supplying printed materials the assessees had entered into two separate and independent contracts, one for supply of paper and paper boards and the other for supply of labour.
2. The assessees in this case are printers and book-binders. They reported a total and taxable turnover of Rs. 1,44,066.25 for the year 1974-75 and claimed exemption in relation to the said reported turnover on the ground that the same represented the proceeds from works contract. The assessing authority, however, determined the total turnover at Rs. 1,51,270 by making certain additions to the reported turnover for certain defects and omissions noted in the accounts submitted by the assessees. Before the assessing authority the assessees claimed that the entire turnover represented proceeds from works contract and therefore it was not taxable. They also claimed that in any event the transaction of supply of finished products involved two separate and independent contracts, one to supply paper and paper boards and the other to supply labour, and that as sales of paper and paper boards being second sales, the turnover representing these sales was exempt from tax. However, the assessing authority held that the orders placed by customers were for finished goods only and did not consist of two separate contracts, one for supply of paper and paper boards and the other for work and that therefore the entire turnover was to be taken as relating to supply of finished products and as such the same should be brought to tax.
3. The assessees took the matter in appeal to the Appellate Assistant Commissioner but without success. Thereafter the assessees went before the Tribunal. The Tribunal, after perusing the order book, bill books and the invoices, has found that there are two distinct and separate contracts, one for supply of the material and the other for labour charges, that the various clauses found in the order form clearly indicate that the transfer of the property in the printing and binding materials had specifically been contracted to take place from the date of supply of paper and boards for the execution of the work by the assessees, and therefore, it cannot be said that the transfer of property in the finished goods has passed from the press to the customer only after the printing is over. Thus, the Tribunal, after an analysis of the order form and the conditions contained therein, came to the conclusion that there were two separate agreements, one for work and service and the other for sale of materials to be used in executing the work and that therefore the transaction could not be said to be one and indivisible, especially when the parties had deliberately provided for two distinct and separate contracts. It is also found by the Tribunal that two separate bills, one for the cost of material and the other for labour charges, are prepared by the assessees. The Tribunal further found that separate entries were not a make-believe apportionment of the turnover for the purpose of sales tax. In this view, the Tribunal has held that the turnover in dispute has to be separated into two, on the basis of the bills, one relating to work and service and the other relating to sale of paper and paper boards. The Tribunal has stated that since the sales of paper and paper boards by the assessees were second sales, they were exempted from tax under the Tamil Nadu General Sales Tax Act, 1959.
4. The learned counsel for the Revenue challenges the view taken by the Tribunal that there are two separate and distinct contracts, one for sale of paper and paper boards and the other for work and service, on the facts and circumstances of this case. But, as already pointed out, the Tribunal has reached that conclusion after a detailed consideration of the order form as also the bills and invoices made by the assessees. We do not therefore see any reason for disagreeing with the view taken by the Tribunal.
5. The learned counsel for the Revenue then contends that there are no materials in this case from which the Tribunal could come to the conclusion that the sales of paper and paper boards effected by the assessees were second sales, and that in fact those sales were only first sales, as they had purchased paper and paper boards from paper mills outside the State. However, the learned counsel for the Revenue is not in a position to establish, on the materials on record including the assessment file, that the assessees purchased paper and paper boards from dealers outside the State, so as to prove that the sales effected by the assessees were not second sales. On the other hand, we see that ever before the assessing authority the assessees claimed exemption of a turnover of more than Rs. 85,000 on the ground that it represented second sales of paper and paper boards. This claim of the assessees was not doubted or questioned by the assessing authority and he proceeded to bring the sale turnover as also the turnover relating to printing and binding charges to tax on the ground that the aggregate turnover represented sales of finished products. If really the assessing authority was of the view that the sales of paper and paper boards were not second sales, he would have in the assessment order brought the turnover representing the sales of paper and paper boards to tax, on the alternative ground that the sales of paper and paper boards would be liable to tax, even if the turnover in relation to the finished products could not be brought to tax. Thus, we find that there is no material to indicate that the sales of paper and paper boards by the assessees are first sales liable to tax. As already stated, the assessees made a claim even before the assessing authority that their sales of paper and paper boards were second sales and that has been accepted by the assessing authority without question. Under these circumstances, it is not open to the Revenue now to contend that the sales of paper and paper boards were not second sales, but they were fist sales.
6. In this view of the matter, we do not see any justification for interference with the order of the Tribunal. The tax case is therefore dismissed. The assessee will have their costs from the Revenue - Counsel's fee Rs. 250 (Rupees two hundred and fifty only).