STATE OF TAMIL NADU versus ANANDAM VISWANATHAN

Citation: [1989] 1 S.C.R. 301 · Decided: 24-01-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI, S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

~-
STATE OF TAMIL NADU 
v. 
ANANDAM VISWANATHAN 
JANUARY 24, 1989 
[SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] 
Tamil Nadu General Sales Tax Act, 1959: Assessee entered into 
contract with Universities and educational institutions for printing ques-
tion papers.liability to sales tax-Nature of contract-Contract for work 
and contract for labour and work-Difference between-Ascertainment 
of intention of parties and nature of contract-Need for: 
The respondent had entered into contracts with Universities and 
other educational institutions for printing of question papers for them. 
In the demand notes prepared the respondent gave the charges for 
printing, blocks, packing handling, delivery, postal and also value of 
paper and value of packing materials separately in the relevant assess-
ment years. On re-examination the Assessing Officer noticed that print-
ing charges and block making charges escaped assessment and brought 
them to tax. 
In respect of subsequent assessment also claims for exemption 
towards printing charges and block making charges were disallowed. 
The appeals preferred by the. Respondents were dismissed by the Appel-
late Assistant Commissioner, who reached a finding that the contracts 
were only for supply of printed question paper as a finished product 
and that there was no scope to disintegrate cost of paper with separate 
charges for printing and block making though the bills were made out 
in a different way. 
The respondent preferred appeals to Sales Tax Appellate Tri-
bunal. The Tribunal held that the respondent was assessable only on the 
sale value of paper and that printing and block making charges were 
not to be included in the assessment. 
Against the Tribunal's Orders, the appellant preferred tax cases 
before the High Court. The High Court dismissed the cases and held 
A 
B 
c 
D 
E 
F 
G 
that the contract between the assessee and the Universities is of highly 
confidential nature and that the printing of question papers could be 
entrusted only to those in whom the institutions got_ the highest confi-
dence, and that the price paid for such confidentiality and trust is not 
H 
301 
A 
B 
c 
D 
E 
F 
G 
H 
302 
SUPREME COURT REPORTS 
[1989] I S.C.R. 
the price for the sale of goods. 
I 
The present appeals by Special Leave are against the High 
Court's Orders. 
In this appeal, it was argued on behalf of the appellant that print-
ing charges and block making charges are includible in the assessable 
turnover of the Respondent. On behalf of the Respondent it was argued 
that the contract entered into between her and the educational institu-
!ions was a contract of work and labour and in the performance of the 
contract, indicentally she had to sell paper to them and hence except to 
the extent of the cost of paper she was not liable to pay sales tax in 
respect of the other amounts receive by her. 
Dismissing the appeals, 
HELD: I . I Contract for work in the execution of which goods are 
used may take one of three forms. The contract may be for work to be 
done for remuneration and for supply of material used in the execution 
of works in which the use of materials is accessory or incidental to the 
execution cf the work; or it may be a contract for work and use or 
supply of materials, though not accessory to the execution of the con-
tract, is voluntary or gratuitous. In the last class there is no sale because 
though property passed it did not pass for a price. Whether a contract is 
of the first or the second class must depend upon the circumstances; if it 
is of the first, it is a composite contract for work and sale of goods; 
where it is of the second category, it is a contract for execution of work 
not involving sale of goods. [307H; 308A-B] 
1.2 In each case the nature of the contract and the transaction 
must be found out. And this is possible only when the intention of the 
parties is found out. The fact that in the execution of a 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 on the 
nature of the transaction. [316G-H] 
I .3 Normally, it may be that the goods prepared by the assessee 
which could not be exhibited for sale, would not be decisive of the 
matter and could in certain circumstances be sales liable to sales tax, 
but i

Excerpt shown. Read the full judgment & AI analysis in Lexace.