Maharashtra Mudran Parishad And ... vs State Of Maharashtra And Ors.
2004 Latest Caselaw 558 Bom

JUDGMENT

1. Heard Dr. Virendra Tulzapurkar, the learned Senior Counsel for the petitioners and Mr. Rajiv Chavan, the learned counsel for the respondents.

2. The first petitioner claims to be apex body of printers association in the State of Maharashtra. The second petitioner is the printers association. The third petitioner is a company incorporated under the provisions of the Companies Act, 1956 but is also an independent association of printers. The fourth petitioner is a partnership firm registered under the provisions of the Indian Partnership Act and is a member of the second petitioner association. The printers associations are engaged in the business of job-work and it is their case that they carry out the job-works by various methods like offset, screen, letter press, gravure, flexography. It is averred that many members of the printers associations are engaged in the business of printing where they also supply paper and/or other material to their customers. The petitioners seek to impugn the trade circular dated October 8, 2003. They have also prayed that it be declared that the activity of printing on paper supplied by the customers does not constitute or amount to a works contract and that on such activity tax is not payable under the provisions of the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contracts (Re-enacted) Act, 1989 (for short, "the Act of 1989")- The petitioners have also prayed that it be declared that the liability to pay tax retrospectively on the members of the printers associations whose matters are not adjudicated finally before August 11, 1998 is unconstitutional. The assessment notices issued to members of the petitioners associations have also been challenged.

3. Dr. Virendra Tulzapurkar, the learned Senior Counsel for the petitioners heavily relied upon the division Bench judgment of this Court in the case of Commissioner of Sales Tax, Maharashtra State, Bombay v. R.M.D.C. Press Pvt Ltd. [1999] 112 STC 307 and the judgment of the Supreme Court in the case of Rainbow Colour Lab v. State of Madhya Pradesh [2000] 118 STC 9 and submitted that the impugned trade circular is bad in law and the provisions of the Act of 1989 cannot be applied to the printers who carry out the activity of printing on papers supplied by their customers. The learned Senior Counsel submitted that there is no contract of consideration to supply, transfer and/or sell the goods between the printers and their customers. According to the learned Senior Counsel, the activity of printing on the paper supplied by the customers cannot constitute the works contract because the printers (members of the petitioners associations) do not charge any amount of money for the ink consumed in printing, from their customers. The learned Senior Counsel, thus, submitted that the provisions of the Act of 1989 do not apply.

4. In opposition to the writ petition, the reply affidavit has been filed on behalf of the respondents 3 and 4 and, inter alia, it is stated that the trade circular impugned in the writ petition and such other trade circulars have been issued to educate the departmental officers, members of the trade and all concerned on important developments relating to sales tax laws. It is stated that the Act of 1989 can be applied to the printers (the members of the petitioners associations) who carry out the activity of printing on paper supplied by the customers because in this activity the transfer of property in ink takes place on the property of the contractee. It is also stated in the reply affidavit that the nature of the contract between the printers and the customers has to be scrutinised during the assessment proceedings. In the assessment proceedings, the printers are given adequate opportunity of being heard and the objections about the intention of the parties to the contract, and the applicability of the Act of 1989 amongst other objections can be raised in the assessment proceedings.

5. Mr. Rajiv Chavan, the learned counsel for the respondents, in support of the case set up in the reply affidavit relied upon the Full Bench judgment of this Court in the case of Sarvodaya Printing Press v. State of Maharashtra [1994] 93 STC 387, the judgment of the Supreme Court affirming the aforesaid Full Bench decision of this Court , State of Maharashtra v. Sarvodaya Printing Press Fine Art Printer, the judgment of the Supreme Court in Associated Cement Companies Ltd. v. Commissioner of Customs [2001] 124 STC 59 and the division Bench judgment of this Court in the case of Commissioner of Sales Tax v. Matushree Textile Limited [2003] 132 STC 539.

6. Clause (29A) was inserted in article 366 of the Constitution of India by 46th Amendment. By the said amendment it was made possible for the States to levy sales tax on the price of the goods and materials used in works contracts as if there was a sale of such goods and materials.

7. The Full Bench of this Court in the case of Sarvodaya Printing Press [1994] 93 STC 387 held thus:

"3. Following are the uncontroverted salient features pertaining to the transaction : (1) The applicant runs a printing press where only job-work is done. (2) The applicant does not keep ready stock of any material such as paper, ink or standard money receipt books for general use. (3) The MPEB also does not deal in any goods. (4) Charges for supply are one composite amount for the entire job. (5) The applicant could not sell the receipt books to anyone else and was obliged to destroy the excess left over. (6) The receipt books were of no commercial use to anyone else and hence had no marketable value.

4. Having regard to the special type of job-work done and other basic circumstances noticed above, it seems to us that the supply does not represent a transaction of sale but represents a works contact which is not subject to sales tax. The intention of parties is most material and it is obvious. The principal object of the MPEB was to get the material printed and not to purchase the printed material. Charges were composite. The books were specially designed for MPEB as per its specifications as to size, type, colour, format, background, etc. No space was left blank obviously because the books were valuable and upon misuse could cause terrible loss to the MPEB. Under the contract the applicant could not retain or use the printed books and the excess, if any, had to be destroyed. Paper and ink used were no doubt property of the applicant before printing, but thereafter they became the property of the MPEB by theory of accretion. No doubt property in the goods used passed to the MPEB but it was by the very nature of things only incidental or ancillary to the contract of printing. No transfer of chattel qua chattel was involved. The work done was composite or indivisible with separate charges for the material. The applicant was prohibited from selling the books to anyone else or to use them for any purpose. It was the duty of the applicant to see that they are safeguarded and they do not fall in the hands of third parties. Element of heavy responsibility was also involved. In any case they were not standard goods and were not capable of any use to anyone else and thus had no commercial value. Material could not be used even as a scrap if rejected and had to be destroyed."

8. Sarvodaya Printing Press [1994] 93 STC 387 (Bom) [FB] has been affirmed by the Supreme Court. The decision of the Supreme Court as indicated above, is , State of Maharasthra v. Sarvodaya Printing Press Fine Art Printer. The Supreme Court observed thus:

"2. The judgment of the Maharashtra Sales Tax Tribunal is not before us but we find the facts found stated in its order on the reference application. They are that the respondent ran a printing press at Nagpur wherein it carried on printing work for its customers. The respondent entered into an agreement with the Madhya Pradesh Electricity Board for the supply of 'revenue money receipt books' at the rate of Rs. 8.88 per receipt book. The judgment of the High Court, (See [1994] 93 STC 387 (Bom) [FB], Sarvodaya Printing Press v. State of Maharashtra, shows that only job-work was done in the respondent's printing press and that the charge for the supply of the receipts books was of a composite nature. The judgment states that the paper and ink used were the property of the respondent before printing but thereafter they became the property of the Board; while the property in these goods passed to the Board, this was, in the very nature of things, only incidental or ancillary to the contract of printing. The High Court laid stress on this Court's judgment in State of Tamil Nadu v. Anandam Viswanathan where the printing and supply of question papers to a university was involved. This Court held that though there was sale of paper and ink, it was merely incidental. It was not a case of sale but a works contract having regard to the nature of the job to be done. Following this judgment, the High Court held that there was no sale."

9. The division Bench of this Court in Matushree Textile Limited [2003] 132 STC 539 adverted to the legal position in the light of the 46th Amendment to the Constitution. In the case of Matushree Textile Limited 12003] 132 STC 539 (Bom), for the purpose of dyeing, bleaching and printing, the assessee used materials such as colours, dyes and chemicals and these materials were converted into a solution and stored in a tank. Thereafter, the grey fabric was passed through the above solution several times, till the requisite coloured shade was obtained on the fabric as per the specifications of the customers. Then the dyed fabric was washed through a water solution to drain away the chemical solution remaining on the fabric. On completion of the job-work, the dyed/printed fabrics with the requisite coloured shade were returned by the assessee to the respective customers. In the backdrop of these facts and circumstances the question arose whether the activity attracted the provisions of the Act of 1989. In the facts and circumstances of the case this Court held that in a dyeing/printing contract, the dominant intention of the parties is to transfer the requisite coloured shade/print on the fabrics supplied by the customers and, therefore, the provisions of the. Act of 1989 were attracted.

10. In Rainbow Colour Lab [2000] 118 STC 9, the Supreme Court held thus:

"13. Thus, it is clear that unless there is sale and purchase of goods, either in fact or deemed, and which sale is primarily intended and not incidental to the contract, the State cannot impose sales tax on a works contract simpliciter in the guise of the expanded definition found in article 366(29A)(b) read with Section 2(n) of the State Act. On facts as we have noticed that the work done by the photographer which, as held by this Court in Kame's case is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the respondent-State cannot be sustained."

11. It goes without saying that in each case the nature of the contract and transaction has to be seen. This is possible only when the intention of the parties that too dominant intention is found out. The fact that in the execution of the contract for work some materials are used, and the property/goods so used, passes to the other party, the contractor undertaking to do the work will not necessarily be deemed, on that account, to sell the materials. Whether or not and which part of the job-work relates to that depends as mentioned hereinbefore, on the nature of the transaction and what is the dominant intention has to be found in each case in the light of its own facts. Since the respondents themselves have stated in their reply affidavit that the nature of contract between the printers (the members of the petitioners associations) and the customers shall have to be scrutinised during the assessment proceedings and any order shall only be passed after hearing the concerned party, we are of the view that the diverse contentions raised in the writ petition including the challenge to the trade circular need not be gone into by us in the present writ petition. The concerned members of the petitioners associations whose assessment proceedings have been initiated or likely to be initiated on the basis of trade circular, shall be free to raise all contentions including the applicability of the Act of 1989 and/or otherwise also whether the judgment of this Court in Matushree Textile Limited [2003] 132 STC 539 could be attracted or not in the facts of the concerned case. Obviously, in the said assessment proceedings, the concerned officer shall scrutinise the nature of contract and find out the dominant intention between the contractor and the customer and on the basis of that finding pass an appropriate order. If the assessee is aggrieved by such order, he shall be at liberty to challenge the assessment order in the statutory remedy of appeal as provided under the Act of 1989.

12. In view of what we have said above, we are satisfied that this is not fit case for invocation of writ jurisdiction under article 226 of the Constitution of India and each case shall be decided by the assessing officer in the light of its own facts and in accordance with law.

13. Dismissed in limine.