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K.P. Radhakrishna Menon, T. Kochu Thommen, JJ.
DEPUTY COMMISSIONER OF SALES TAX (REVENUE)
Versus
SREENI PRINTERS
T.R.C. No. 37 of 1983
Decided On: Decided On : 24-03-1987
Sales Tax - Works Contract - Kerala General Sales Tax Act - [1976-77] - [Kerala General Sales Tax Act] - The court considered whether a contract for preparation of photo blocks was a contract for skill and labour and hence did not involve the sale of materials and as such no tax was leviable under the Kerala General Sales Tax Act on the price of the materials used for making the blocks. The court relied on the decision of the Madhya Pradesh High Court and held that the degree of skill and labour required in the production of the photo block is more than that required for the production of photo prints, thus concluding that the contracts were in the nature of works contracts and the assessee was entitled to the exemption claimed.
Fact of the Case:
The State assessed the turnover of photo blocks supplied by the assessee and disallowed the claim for exemption under the Kerala General Sales Tax Act. The Appellate Tribunal held that the contracts for making and supplying photo blocks were in the nature of works contracts and the assessee was entitled to the exemption claimed.
Finding of the Court:
The court found that the degree of skill and labour required in the production of the photo block is more than that required for the production of photo prints, thus concluding that the contracts were in the nature of works contracts and the assessee was entitled to the exemption claimed.
Issues: (a) Whether the contracts for making and supplying photo blocks were in the nature of works contracts and not liable to be assessed under the Kerala General Sales Tax Act. (b) Whether the decision of the Supreme Court in Assistant Sales Tax Officer v. B. C. Kame was applicable. (c) Whether the view taken by the Tribunal was correct in the light of the decision of the Court in John Mathew Bros. v. State of Kerala. (d) Whether the assessee can dispute the taxability of the turnover even if conceded in the return. (e) Whether an assessee can claim exemption from tax on a transaction for which tax has been collected. (f) Whether the doctrine of estoppel applies in tax law.
Ratio Decidendi: The court held that the degree of skill and labour required in the production of the photo block is more than that required for the production of photo prints, thus concluding that the contracts were in the nature of works contracts and the assessee was entitled to the exemption claimed. The court also rejected the plea of estoppel in tax law.
Final Decision: The tax revision case was dismissed, and the petition was dismissed with no costs.
K.P. RADHAKRISHNA MENON, J.
The State is before us. The year of assessment is 1976-77.
2. Facts lie in a narrow compass. The amount of Rs. 1,18,801.29 representing the turnover of photo blocks supplied by the assessee in the assessment year to various parties though included in the return, was claimed to be not liable to be assessed under the Kerala General Sales Tax Act because the contracts under which the supplies were made did not involve sale of any materials. The contracts were all in the nature of works contracts. The assessing authority did not accept this argument. The claim accordingly was disallowed. The appellate authority disposed of the appeal, the assessee had filed against the order of the assessing authority, with a direction to re-examine the claim afresh. The department challenged the said order of the appellate authority before the Appellate Tribunal. The Appellate Tribunal, relying on a decision of the Supreme Court in Assistant Sales Tax Officer v. B. C. Kame [1977] 39 STC 237 held that in making the photo blocks and supplying them to the customers, there was no element of sale involved; the contracts essentially and undisputably were in the nature of works contract and therefore the assessee was entitled to the exemption claimed.
3. The questions of law raised for decision by the petitioner are :
"(a) Whether the Tribunal is justified in law in holding that the transaction of the assessee in making photo blocks and supplying them to the customers are in the nature of works contract and that there was no sale involved in the said transaction ?
(b) Whether the Tribunal is justified in law in drawing analogy for the decision of the Supreme Court in [1977] 39 STC 237 (Assistant Sales Tax Officer v. B. C. Kame) ?
(c) Is not the decision of the Supreme Court reported in [1977] 39 STC 237 (Assistant Sales Tax Officer v. B. C. Kame) distinguishable on facts ?
(d) Whether the view taken by the Tribunal is correct in the light of the decision of this Honourable Court reported in [1978] 42 STC 140 (John Mathew Bros. v. State of Kerala)?
(e) Whether the Tribunal is justified in law in holding that the assessee can dispute the taxability of the turnover even if he has conceded the said turnover in the return filed by him ?
(f) When an assessee has collected tax on a particular transaction, can he claim exemption from tax in respect of the said transaction ?"
4. The point arising for consideration is whether a contract for preparation of photo blocks was a contract for skill and labour and hence did not involve the sale of materials and as such no tax was leviable under the Kerala General Sales Tax Act on the price of the materials used for making the blocks. It cannot be disputed that for making the photo block, the block-maker should first take a photograph of the subject, develop it and also enlarge it to the corresponding size of the desired block. The block-maker thereafter has to engrave it on a zinc plate. To engrave it on a zinc plate some processing with the aid of chemicals is required. The zinc plate afterwards is affixed on to a hard wooden block. It can thus be seen that the labour and skill a block-maker should put in in making the blocks, are more than the labour and skill a photographer may put in to take a photograph. It is true that the value of the materials contained in the block and the price of the block are also relevant considerations though not conclusive in deciding the issue whether the transaction which results in the supply of the blocks to the customer, partakes the character of a sale, or is only a works contract. Compared to the degree of labour and skill involved in the block-making, the value of the materials will be very negligible. Yet another relevant aspect that should be borne in mind is that the block has use only for the particular customer and not for any other person. It could therefore be seen that the degree of skill and labour required in the preparation of the ph
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