The main legal point established in the judgment is the need to examine the nature of the contract as a whole and find out whether the principal object of the work was the transfer of a chattel qua chattel. The distinction between a contract of work and labour and a contract for sale was highlighted, and the court emphasized that there are no absolutes in the area of a mixed question of fact and law.

MENON, J.

When a printer supplies letter heads, visiting cards, bill books, account books, balance sheets, ration cards and the like to a customer in pursuance of orders placed by him, is there a sale of finished goods or printed material to him ? Is their "turnover" exigible to sales tax ? That is the common question in these revisions by the Revenue, against the orders of the Sales Tax Appellate Tribunal.

2. The Tribunal has held, on the basis of the material on record and in the light of decided cases, including the decisions of this Court in P. T. Varghese v. State [1976] 37 STC 171 and John Mathew Bros. v. State [1978] 42 STC 140 that most of the transactions were in the nature of works contract. It has also indicated that marginal instances would require closer scrutiny with reference to the facts and circumstances of each transaction and that the test of market-ability will be a useful guide in most of the situations. Mr. Karunakarn Nambiar for the Revenue however contends that the Tribunal should have treated all the transactions as out-and-out sale of printed material or paper. It is alternatively contended in respect of bill books, vouchers, receipt books, letter heads and notices, the Tribunal should have implicitly followed the clear pronouncement in P. T. Varghese [1976] 37 STC 171 that they could be regarded only as sale of finished products.

3. In Srinivasa Printing Works v. Sales Tax Officer 1966 KLT 1139 Govindan Nair, J. (as he then was), held that printing of letter heads, binding of books and supply of journal forms were contracts for sale, as work and labour was not of the essence of the contract. But in Srinivasa Printing Works v. Sales Tax Officer [1967] 20 STC 278; 1967 KLJ 665 Isaac, J., thought that merely because certain transactions involve transfer of property in the printed material, they could not be regarded as sale of paper products or as anything other than execution of a works contract. A suggestion that in all such cases labour charges could be deducted and the balance treated as cost of paper and taxed accordingly, was rejected in Sales Tax Officer v. Somasundaran [1974] 33 STC 68. The Court there held that the correct approach would be to examine the nature of the contract as a whole, and not to bifurcate it into artificial components. But in P. T. Varghese v. State [1976] 37 STC 171 it was observed that "in the case of a composite contract involving an agreement for sale as well as for labour, the State may be able to bifurcate the contract into two and impose tax on the turnover of the sale". Holding however that no such composite contract could be spelt out in the case of printing bill books, vouchers, etc., the Court held :

"The work of a printer in certain cases may involve more than printing; he may be a producer of finished articles such as bill books, vouchers and the like. When such articles are printed and sold to the customers, what is sold is not paper or paper products but printed materials which are finished products. Such contracts cannot be considered as contracts for the sale of paper coupled with an agreement to render service. The sale of paper had never been the subject-matter of the agreement between the parties. Like in the case of painting which is a finished product being a work of art, the bill books and vouchers are new products being printed materials; and the sale of such goods does not involve a composite contract which can be bifurcated into an agreement for the sale of goods - be they canvas and paint or paper and ink - and an agreement for work."

4. The above decisions were rendered before the pronouncement of the Supreme Court in Assistant Sales Tax Officer v. B. C. Kame [1977] 39 STC 237 (SC). The question in that case was whether a photographer taking a photo, developing the negative, and supplying the print to his client could be regarded as "selling" the photo to the party; and the Court answered it in the negative. It was noticed that there co