Madras High Court
Tvl. Kannan Art Calenders, Sivakasi vs The State Of Tamilnadu, Rep. By ... on 18 July, 2002
Equivalent citations: [2002]128STC498(MAD)
Author: V.S. Sirpurkar
Bench: V.S. Sirpurkar
JUDGMENT V.S. Sirpurkar, J.
1. The present appeal under Sec. 37 of the Tamil Nadu General Sales Tax Act (in short "the TNGST Act") challenges the order of the Joint Commissioner of Commercial Taxes-III (SMR), dated 18-10-1994, whereby the Joint Commissioner, under his suo motu revisional jurisdiction under Sec. 34 of the TNGST Act, had upset the order passed by the Appellant Assistant Commissioner (CT), Virudhunagar and restored the earlier order passed by the Assistant Commercial Tax Officer, Sivakasi thereby, the turnover of Rs.2,51,392/- and Rs.98,440/- was restored and the tax thereon with a surcharge levy was ordered to be levied under the TNGST Act and Central Sales Tax Act (in short "the CST Act"). The following facts will highlight the controversy involved:
2. Assessee Tvl. Kannan Art Calenders, Sivakasi was originally assessed under the CST Act for the year 1988-89 by the Assistant Commissioner, Commercial Tax-IV, Sivakasi on a taxable turnover of Rs.7,011/-. Subsequently, it was found that the sales of educational charts such as Alphabet Chart, Number Chart, etc. were not assessed to tax. The entire turnover of Rs.90,440/- was therefore treated by him as a sale of educational charts (printed materials) and was assessed to tax at 10%.
2.1. During the appeal, the assessee urged that the text books, alphabet charts, etc. were exempted from tax as they were only reading material and children's books and, therefore, the turnover was liable to be satisfied. The appellate authority considered the clarification issued by the Department in K.Dis.110999/84 Acts Cell.II dated 24-7-1984 wherein it was stated that all printed materials (other than the reading books including text books, students note books and copy books) were liable to tax. The turnover of the assessee was in respect of the text books, alphabet charts, etc. which were printed and sold by the assessee. He came to the conclusion that those charts and books were "reading books" meant to educate the children. He, therefore, found that they were the "reading books" and as such exempt from the tax liability. He, therefore, allowed the appeal.
2.2. A show cause notice dated 24-5-1994 was thereafter issued to the assessee wherein the Joint Commissioner (RP) Madras took an objection that the assessee-dealer was only a "printer"; that the assessee-dealer was not a dealer in reading books or text books and, therefore, they could not enjoy the exemption. According to the notice, the amount realised on the sale was not for the sale of books but for the work relating to the printing of the books. A further clarification issued by the Commissioner of Commercial Taxes, dated 13-5-1985 was also relied upon wherein it was clarified that such exemption of reading books was not available to the printers and was available only to the actual sellers. On the basis of this show cause notice, the Joint Commissioner came to the conclusion ultimately that the intention of the assessee was to sell only the "printed materials" and not the "reading books" or the "text books". He, therefore, came to the conclusion that the assessee was not entitled to the exemption. According to him, the exemption notification was applicable only to the "reading books" including the "text books". The appellate order was, therefore, set aside. The said order by the Joint Commissioner is in challenge before us.
3. Mr. A. Thiagarajan, learned counsel for the assessee, has taken us through the entries right from the beginning when the "reading books" including "text books" were exempted under Sec. 17 of the TNGST Act. The first such exemption came vide G.O. Ms.976 Rev. Dated 28-3-1959 whereby, with effect from 1-4-1959, the sale of reading books, including the text books, by any dealer was exempted from tax. A "school atlas" was also considered to be a "book" under that head. The next Government Order came vide G.O. No.4725 Rev. Dated 30th April, 1961 whereunder the sale of reading books including text books was exempted from tax. The next Government Order in the line is G.O.Ms. No.40 Rev., dated 6-1-1969 whereunder again the reading books including the text books were exempted from the levy of tax. Learned counsel then pointed out that a number of clarifications came to be issued whereunder even the printer, who prints and sell the reading books like alphabet charts, number charts, table books on places of tourist importance, religious songs, images of Gods, photographs of national leaders, etc. were exempted from tax. Learned counsel also filed the clarification issued in that behalf bearing No. CEL-III 33120/92 dated 16-3-1992. It will be better to quote the three clauses by way of this clarification:
"(i) The printers, who print and sell reading books like Alphabet, Table Books on places of Tourist importance (Kanyakumari, Kancheepuram, etc.), Religious songs, Gods, National Leaders Photos, etc. are not liable to tax in view of the Notification dated 6-1-1979 issued by the Government.
(ii) In the case of printers who undertake printing and supplying of books for specific customers, the material to be printed is obtained from the customers and after deciding on the type of paper, wrapper, cover design, general layout, etc., with customer, the printer print and supply the books to the customers. The printer uses his own goods including paper, ink, binding materials etc. In such cases, it is only 'works contract' liable to tax in terms of Section 3-B of the Tamil Nadu General Sales Tax Act and in the light of the Supreme Court decision reported in 73 STC 370.
(iii) In the case of the printer undertaking the work of printing from the customer, where the customer supplies paper and other goods required (printing ink, binding/stitching materials, etc.) it will be a pure labour work not liable to tax. But if the printer uses any of his materials, he shall be liable to tax on such materials in the light of the Supreme Court decision reported in 73 STC 370."
Heavily relying on these clarifications, learned counsel argues that firstly the alphabet charts sold by the appellant herein were the "books" or as the case may be "reading books" and it could not be said that they were mere "printed materials". Learned counsel stretches his argument further and says that the exemption granted under G.O.Ms. No.40 could not be held restricted to a dealer in the reading books and text books and thus printed materials like alphabet charts, number charts, etc. were nothing but a "reading material" meant for educating the children. Therefore, they would squarely covered under the entry of "book", "reading book" or "text book" as the case may be. Learned counsel further argues and in our opinion rightly that the entry did not restrict itself only to the dealer. It covered the sale by a printer of these printed materials like alphabet charts.
4. As against this, a decision was cited by the learned counsel appearing for the Department in State of Tamil Nadu v. Papco Offset Printing Works (118 STC 160) wherein this Court held that what was exempted was the sales by the dealer of reading books which included text books. Therefore, if a dealer had simply printed certain material according to the specifications of some publisher, charging them with price with reference to the cost of paper, ink, etc. and had never compiled any books for reading nor effected sale of such reading books such dealer would be outside the umbrella of exemption. In that case, it was held that such sales could not fall under item 22 of the Schedule to the notification.
5. On these rival submissions, it will be for us to decide as to whether the dealer in this case was entitled to the exemption.
6. Two questions would fall for our consideration, viz.:
Are the alphabet charts the books or as the case may be reading books so as to be covered under Entry 22?
Whether the exemption available to the sale of reading books including the text books is available to the printer who prints the alphabet charts and sells them?
7. In so far as the first question is concerned our task has become fairly easy because of the judgment of this Court in State of Tamil Nadu v. Mundran Kala Mandir (46 STC 365). The question which fell for consideration there was whether the guide-map of Greater Bombay having some material to read could be said to be a book. What fell for consideration was a map simpliciter with some information about the city of Bombay and the tourist spots therein on the next page. The learned Judges agree that the earlier judgment in S.R. & Company v. State of Tamil Nadu (42 STC 99) that the entry was not happily worded and that the reading books should be understood as books for reading or books meant for reading. In that case also, the said test was applied and the learned Judges had held that three publications which fell for consideration were books for reading so as to be eligible for exemption. Relying on that decision, the learned Judges in Mundran Kala Mandir case, cited supra, also pointed out that the map contained the description of Bombay, its history, places of interest and various other details which would be of importance to a tourist or to a visitor who visits Bombay for the first time. The learned Judges, therefore, classified the said map as a "book for reading" and, therefore, within the umbrella of exemption. The situation cannot be said to be any different under the present circumstances. In fact, the alphabet chart is a basic first book which the child is taught whereby the child starts recognising the alphabet. The alphabet chart is not only an article like wall-hanging; it is a basic book for reading, knowing and understanding which the child takes the first step towards literacy. It will be therefore a travesty to say that an alphabet chart is not a book. It is in fact the first and basic reading book in the life of a child. It may not be in the form of a book but then the thrust of the entry is on the "reading" material and not on the "form" thereof. In our opinion, therefore, the alphabet chart must be deemed to be a "book" meant for reading. Going a step ahead, we may even say that an alphabet chart is a first text book for a child also because it cannot differ in case of the children who are going to learn the alphabet. The content or the reading material is going to be the same. In our opinion, therefore, the Joint Commissioner has committed an error in not treating the alphabet chart to be a "book". However, the matters do not step here and that takes for the consideration of the second question.
8. According to the Joint Commissioner, the dealer was merely a printer and he merely printed those charts and sold them. It is really not understandable as to what the Joint Commissioner meant by saying that the intention of this dealer, who was a printer, was not to sell the books but only "printed material". The confusion has cropped in because of not reading the entry in its full potential. Unfortunately, the decision in Mundran Kala Mandir, cited supra, was not cited before the Joint Commissioner. If the entry is to be read in terms of that judgment then, the entry "reading books" would have to be read as the "books for reading". Therefore, it could not be held by the Joint Commissioner that the intention was merely to sell the "printed material" because, in our opinion, that printed material, in this case alphabet charts, was nothing but a "reading book". This premise is further strengthened by the subsequent clarification issued by the Department dated 16-3-1992 wherein the books like alphabet charts, table books on places of tourist importance, religious songs, images of Gods, photos of National leaders, etc. are also considered to be the "books" and the printers of these materials, who sell such articles are also held entitled to the exemption vide the notification dated 6-1-1969. It is for this reason that we ventured to quote all the three clauses of the clarification.
9. There would be one other way of looking at this, that is, merely because a person prints the alphabet charts which are undoubtedly the reading books and sells them could he be said to be excluded from the exemption. In our opinion, the said course would not be open in view of the clarification issued on 23-5-1988 bearing No. Acts Cell-II 51741/88 wherein a clarification was issued to the effect that reading books, including the text books, were exempt from the tax. That would completely delete the "dealer aspect" of the matter. After all, if a person prints reading books and sells them he could be safely called the "dealer" of the books as has happened in this case. In that view, we are of the opinion that the Joint Commissioner has erred.
10. Even without having to take the recourse of going to the clarification dated 23-5-1988 or for the subsequent clarification issued on 16-3-1992 it can be seen that in the judgment in BUILDERS ASSOCIATION OF INDIA AND OTHERS v. UNION OF INDIA AND OTHERS (73 STC 370) while considering the implications of the sales involved in the works contract the Apex Court held in respect of the materials used in the works contract that their transfer would amount to deemed sale. The deeming fiction was based on the Forty-sixth Amendment whereby Art. 366(29A) was introduced and as per sub-clauses (a) to (f) of Clause (29-A), transfer, delivery or supply of any goods was deemed to be a sale of those goods. The Apex Court in that case upheld the constitutional validity of the amendment and came to the conclusion that under sub-clause (b) of clause (29-A) that the goods for construction which ultimately are transferred would amount to a sale and for that purpose the works contract which till then was considered to be indivisible was held to be divisible. Therefore, in a case where a printer supplies the goods on the basis of a contract given to him and recovers the price of the paper and other materials and in addition to it recovers the printing charges at least in so far as the goods are supplied that would amount to a deemed sale. If the actual of the printed material has been exempted then the same exemption would be applicable even to the deemed sales. We have already shown that the printed material concerned in this case, viz. A B C D Alphabet Charts amounted to the books and, therefore, the sale of that material was liable to be exempted for the purposes of sales tax. Therefore, the said exemption would equally apply to the printed material also and the assessee would be entitled to succeed on this count also.
11. Before we close, we have to take the stock of the decision in Papco Offset Printers case, cited supra. We must hasten to add that the learned Judges therein were not called upon to decide the question as to whether the alphabet chart could be said to be a "book". In fact, that question was never argued before the leaned Judges since the matter was decided ex parte as no one appeared on behalf of the assessee. The assessment year in that case was also 1985-86. However, the clarification issued by the Department was not made available to the learned Judges; nor was the judgment in Mundran Kala Mandir case, cited supra, was brought to the notice of the learned Judges. Again what the printed material was also not clear from the judgment. We do not know as to whether the learned Judges were considering the alphabet charts or some other thing because there is no indication in the judgment that they were considering the alphabet charts. In that view, we are of the clear opinion that the judgment in Papco Offset Printers case, cited supra, would be of no help to the State.
12. On the whole, it will have to be held that the Joint Commissioner had erred in upsetting the order passed by the Appellate Assistant Commissioner. The order passed by the Joint Commissioner is, therefore, set aside and the order passed by the Appellate Assistant Commissioner is restored. The appeal is allowed.