Allahabad High Court
The Commissioner, Trade Tax vs S/S Modern Plastic Packing Product on 24 January, 2005
Author: Rajes Kumar
Bench: Rajes Kumar
JUDGMENT Rajes Kumar, J.
1. These two revisions under Section 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 03.07.1996 relating to the assessment years 1991-92 both under the U.P Trade Tax Act and Central Sales Tax Act.
2. Following questions have been raised:
"Whether the Tribunal is legally justified in holding the sale of printed polythene bags under the category of "Works Contract" and non taxable ?"
3. Dealer opposite party (hereinafter referred to as "Dealer") was involved in the manufacturing of polythene shopping bags. Tribunal referred that these bags are mainly used by various Government undertakings, textile manufacturers and large textile show rooms for their own use as well as for the distribution to their retailers for the purpose of delivering the goods to their customers. Manufacturing process involved are that the polythene granules are used to extrude rolls of polythene lay that tubings which are thereafter mounted on a flexographic printing machine for printing the approved design of the buyer alongwith name, address and telephone number of the buyer. Printed tubing thereafter, is cut and sealed into bags on automatic machine and despatched to the buyer after affixing handles on it. In some cases, no printing is being carried on and the dealer sold the simple bags to its customers on which liability of the tax has been admitted but in some cases, where manufacturing was being carried on the basis of the customers specification and the printing of the design, name, address and telephone number etc. had been done on the bags by the flexographic printing machine during the course of manufacturing itself. The supply of such printed bags against such orders have been treated as works contract and not sale and the liability of tax has not been admitted. Even the liability of the tax on the material used in the manufacturing of bags has not been admitted such works contract was not notified under the notification issued in the exercise of power under Section 3-F of the Act.
4. In the present case, dispute relates to the supply of such printed polythene bags, which were manufactured as per the orders of the customers on which the design, name and telephone number etc. have been printed as. desired by the customers. Tribunal held such supply as works contract on the ground that after printing of design, name, address and telephone number etc. its commercial value ceases, relying upon the decision of the Apex Court in the case of State of Tamil Nadu v. Anandam Viswanathan, reported in 1989 UPTC, 920 and design of this Court in case of Sunder Printing Press v. CST, reported in 1989 UPTC, 1212.
5. Heard learned counsel for the parties.
6. Learned Standing Counsel submitted that the dealer's main business was to sell polythene bags and where it was ordered to be supplied after printing by flexography printing machine as per desire, the main object was to sell the bags and, therefore, manufacturing and the supply of printed polythene bags was the sale and not the works contract. Learned Counsel for the dealer submitted that the issue involved is squarely covered by the decision in the case of Sunder Printing Press v. CST, (Supra) and law laid down by the Apex Court in the case of State of Tamil Nadu v. Anandam Viswanathan, (Supra).
7. I have perused the order of Tribunal and the authorities below.
8. The facts of the case are not in dispute. During the year under consider, dealer sold bogs amounting to Rs. 3,72,823/- and Rs. 85,951.60p. both under the U.P. Trade Tax Act and Central Sales Tax Act respectively. While the alleged receipts towards the works contract for the supply of printed bags in U.P. was to the extent of Rs. 23,61,264/- and Rs. 13,20,232.39p. from the parties of outside the State. This shows that the main business of the dealer was to manufacture this bags on the orders of the buyers, in which the printing of design, name, address and telephone number etc. are also printed. This fact is relevant to show that the dealer was mainly involved in the manufacturing and supplying of printed polythene bags. In the case of State of Tamil Nadu v. Anandam Viswanathan, (Supra), question involved before the Apex Court was whether the printing of question papers and supplying to the universities and other educations institutions amounts to works contract. Apex Court held that it is not a sale but works contract. Apex Court held as follows:
"The primary difference between a contract for work or service and a contract for sale is that in the former there is in the person performing or rendering 'Service no property in the thing produced as a whole, notwithstanding that a part or even the whole of the material used by him may have been his property. Where the finished product supplied to a particular customer is not a commercial commodity in the sense that it cannot be sold in the market to any other person, the transaction in only a works contract. See the observation in Court Press Job Branch, Salem v. State of Tamil Nadu, 54 STC 382 (Mad) and Commissioner of Sales Tax v. Ratna Fine Arts Printing Press, 56 STC, 77 (MP)."
9. In the case of Sunder Printing Press v. CST (Supra) almost similar question was involved. In the said case dealer had manufactured and supplied card board boxes after specified printing thereon. This Court has held as follows:
"The admitted facts are that, the assessee received orders for supply card board boxed with specified printing thereon. There is no dispute that the cardboard boxes supplied by the assessee to the customers after printing can be used only by the customer and by no one else and that is not a commercial or marketable commodity. The printing on card board boxes is admittedly, in the nature of advertisement of the company and that could be used only by the Company, namely: Modi Thread. The cardboard boxes were purchased by the assessee itself and then printing was done by the assessee. Lump sum money was paid to the assessee by the Company that is the purchaser of the cardboard boxes with printed material. The submission of the revenue is that the standing orders are placed by the purchaser company on the assessee and then the latter goes on printing cardboard boxes and they are supplied to the purchasers as and when they are required. On these facts, the revenue submits that the supply of cardboard boxes is under the contract of sale and not under a works contract. I do not see any substance in the submission of the revenue as on the facts of the instant case, the decision of the Supreme Court (supra) is squarely applicable. In the cardboard boxes printed by the assessee, property in the boxes produced as a whole remained in the purchaser and not in the assessee. The purchase of cardboard boxes which are printed by the assessee is merely an incident to the works contract. For the reasons, contention of the assessee that supply of cardboard boxes is not taxable is accepted."
10. For the aforesaid reasons, I do not find any reason to interfere in the order of the Tribunal.
11. In the result, both the revisions fail and are accordingly, dismissed.