Madras High Court
M/S.M.R.S.Plastic Industries vs The State Of Tamil Nadu on 4 October, 2012
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, K.Ravichandrabaabu
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated :04.10.2012 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice K.RAVICHANDRABAABU Tax Case (Revision) No.2266 of 2008 --- M/s.M.R.S.Plastic Industries 4/99, Ettayapuram Road Tuticorin ...Petitioner -vs- The State of Tamil Nadu rep. By the Deputy Commercial Tax Officer-III Tuticorin ...Respondent Tax Case (Revision) filed under Section 38 of the TNGST Act of 1959 to revise the order of the Sales Tax Appellate Tribunal Madurai Bench dated 20th December, 1993 passed in Appeal No.550/92. For petitioner : Mr.Md.Ibrahim Ali For respondent : Mr.J.Aaditya Reddy Govt.Advocate (Tax) O R D E R
(The Order of the Court was made by CHITRA VENKATARAMAN, J.) The assessee is on revision as against the order of the Sales Tax Appellate Tribunal, Madurai Bench dated 20th December, 1993 passed in Appeal No.550/92 in respect of the assessment year 1987-88 raising the following questions of law:-
"1. Whether the petitioner was doing 'works contract' or sold plastic bags to his customers ?
2. Whether the penalty imposed under Section 12(3) of the Act, is warranted ?"
2. The petitioner is stated to be the manufacturer of plastic bags and after printing the name of the customers, they were sold to the customers. The assessee treated it as "works contract" and not as a "sale" and contended that there is no justification for making the assessment.
3. It is seen from the order of assessment that the assessee purchased HDPE bags from unregistered dealers through bought vouchers. The verification of the records show that the place of business of the assessee was inspected on 12.02.1998, which indicated that the assessee had not maintained stock register for the finished stock goods and not maintained production cum stock account. The sales of waste was recorded too high. The Assessing Officer pointed out to the difference between raw materials and finished products and that the proportion was unexplained. Thus, the Assessing Officer proposed best of judgment assessment. The assessee was granted time to file objections and admittedly, the assessee had filed objections on 02.02.1989. On consideration of the contention of the assessee that the sale of bags carrying the customers name was only "works contract", the Officer held that in the returns filed, no where, such claim was made and there were no records to show that the transaction was only works contract. On the merits of the assessment, the Assessing Officer pointed out that the assessee had not given any material evidence as regards the waste emanating from its manufacture and the assessee had admitted purchase omission; in the absence of stock 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 on appeal before the Appellate Assistant Commissioner, who rejected the assessee's contention. As regards the sale of printed polythene bags as well as on the merits of the assessment, the First Appellate Authority upheld the assessment, but, however, cancelled the penalty to a small extent.
5. Aggrieved by the same, the assessee went on further appeal before the Sales Tax Appellate Tribunal. On a consideration of the materials, the Tribunal held that the bags supplied by the assessee was a marketable commodity having commercial value and it was not works contract. Thus, it confirmed the order. Aggrieved by this, the assessee is on present revision.
6. Learned counsel for the assessee placing heavy reliance on the decision of the Supreme Court in the case of State of Tamil Nadu Vs. Anandam Viswanathan reported in 73 STC 1 as well as unreported decision of this Court in Tax Case Revision No.1969 of 2006 dated 25.03.2010 (State of Tamil Nadu, Deputy Commissioner (CT), Tirunelveli Vs. Alkenes Kraft), contended that given the nature of the contract given by its customers, printed polythene bags supplied by the assessee having no commercial value, the transaction could not be assessed as tax.
7. Per contra, learned standing counsel appearing for the Revenue supported the order of assessment and placed reliance on the decision of this Court in the case Tvl.Bharat Offset, rep. By its Partner and others Vs. The Tamil Nadu Taxation Special Tribunal, rep. By its Registrar, Chennai reported in 34 VST 342. While considering the amendment brought to Entry 52 of the First Schedule, Part C to the TNGST Act, relating to enlisting of printed materials as items of taxation, this Court considered a similar question as raised in this Tax Case Revision. Even though the decision of this Court reported in above cited case related to the entry, yet this Court considered the decision in the case of State of Tamil Nadu Vs. Anantham Viswanathan (cited supra) holding that printing of the name in the bags 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 the assessee submitted that the decision cited by the Revenue could not have any application to the present case considering the fact that it dealt with the legal position, thus applicable from 2000-01 onwards.
9. Heard learned counsel appearing for the respective parties and perused the documents available on record.
10. We do not agree with the contention of the assessee that the transaction in question has to be viewed as a works contract. In the decision reported in the case of Tvl.Bharat Offset and others Vs. The Tamil Nadu Taxation Special Tribunal, Rep. By its Registrar, Chennai and another reported in 34 VST 342 (Mds), this Court considered the decisions of the Supreme Court and our High Court on the question of sale of printed material and this Court held that where an assessee sells bags with the customer's name imprinted therein, the subject of the 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 the labels or logos have been printed would not make the transaction into a works contract. It is purely and simply a sale of goods. Thus, printing of the logo or name is incidental to the sale and the transaction between the customer and the supplier is not work charged. Referring to the decision of the Supreme Court in the case of Anandam Viswanathan case (cited supra), this Court in paragraph No.19, held as follows:-
" 19. We have already referred to the tests spelt out in the various decisions. The decision in Anandam Viswanathan's case (supra) cannot be automatically applied to all transactions where printing materials are supplied. There, what was transferred in the transaction was the property in "the questions" which belonged to the University. The white sheets are meaningless without the questions being printed. The question is, whether the property belonged to the Universities. The printer was merely asked to print what is required by the University. The University has no intention to purchase the papers. It places an order for printing of questions. The University required utmost confidence to be maintained, since the questions should not be "leaked" to the students before the actual date of the examination. But the printing of question paper on the request of the University cannot be equated to printing of a name or logo on goods which are purchased. We referred to diary only as an example. There, the subject of the transaction is only purchase of the diary. The printing of name is just incidental. So, what we have to see is whether the word is incidental or the purchase is incidental. The fact that the Legislature has introduced the additional word in Entry-40 will not change the position of law in any manner. The authorities will have to examine each transaction and look at the contract in question and decide whether it is works contract or whether it is only a sale. The mere fact of bearing the logo or name upto the specification to the customer's will not make it a works contract."
We hold that the decision of this Court apply to the facts of the case herein. Except for contending that the transaction is one of works contract, the assessee had not placed any material before any of the authorities.
11. Leaving that aside, as observed in the decision of this Court, when the primary object of the transaction is sale of bags and the printing of the name or logo is only incidental to the sale, we find no justifiable ground to accept the case of the assessee and hold that the transaction is sale alone. It may be noted that mere fact that the Entry was the subject matter of the consideration in the decision reported in 34 VST 342 (Tvl.Bharat Offset and others Vs. The Tamil Nadu Taxation Special Tribunal) cannot in any manner dilute the law declared by this Court applicable to the pre amendment period too.
12. Going by the discussion in the judgment reported in 34 VST 342 (Tvl.Bharat Offset and others Vs. The Tamil Nadu Taxation Special Tribunal), which considered the various decisions of the Supreme Court as well as this Court and other High Courts, we do not have any hesitation in following the said decision and in rejecting the assessee's tax case revision. Accordingly, the Tax Case Revision stands dismissed. No costs.
(C.V.,J) (K.R.C.B.,J) 04.10.2012 Index:No Internet:Yes nvsri To 1. The Deputy Commercial Tax Officer-III, Tuticorin 2. The Appellate Assistant Commissioner of Commercial Taxes, Tirunelveli 3. The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai CHITRA VENKATARAMAN, J. and K.RAVICHANDRABAABU, J. nvsri Tax Case Revision No.2266 of 2008 04.10.2012