Everest Copiers Through R.A. Partner Vs. State of Tamil Nadu  INSC 860 (25 July 1996)
S.P. (J) Bharucha S.P. (J) Thomas K.T. (J)
JT 1996 (7) 40 1996 SCALE (5)535
APPEAL NO. 5339 OF 1992
O R D
appellant runs a photocopying business. It has been assessed to sales tax for
the Assessment Year 1978-79 (in Civil Appeal No. 5339/92) and the Assessment
Year 1979-80 (in Civil Appeal No.2672/92) on the basis that there was sale by
it of the photocopied or xeroxed document to the customer. The question that we
are concerned with, therefore, is whether the making of photostat copies with
the use of a xerox or other machine and delivering the copies so taken to the
customer on receipt or payment amounts to a sale of goods exigible to tax under
the Tamil Nadu General Sale Tax Act, 1959.
2(n) of the Tamil Nadu General Sales Tax Act, 1959 read as under at the
'Sale' with all its grammatical variations and cognate expressions means every
transfer of the property in goods by one person to another in the course of
business for cash or for deferred payment or other valuable consideration, but
does not include a mortgage, Hypothecation, charge on pledge." It is the
case of the appellant that no sale tax is involved in that the contract that he
enters into with the customer is only a works contract. It is the case of the
respondents that the contract is of sale of the photocopies.
of Karnataka, (1984) 56 STC 297, considered the question that arises in these
appeals and observed that the turnover of the assessee was made up of amounts
collected from customers as labour charges towards developing and printing of photostat
copies and the cost of the material used for taking such copies. It was matter
of common experience that persons went to a xerox establishment not with a view
to by supplicates of their documents but to get copies made of their documents.
It was no less true in the case of the assessee. The assessee utilised her own
paper and ink and, by the use of the xerox machine, turned out copies of
documents brought to her. The assessee charged for the service rendered in
addition to the cost of the material used. On these facts, it had to be found
what the primary object of the transaction was and the intention of the
parties, namely, whether it was a contract purely of work or service or a
contract of sale. The High Court noticed the Tate of karnataka,(1984) 55 STC
314 =(1984) 2 SCR 248, wherein it was held:- ".........Mere passing of
property in an article or commodity during the course of performance of the
transaction in question does not render the transaction to be transaction of
sale. Even in a contract purely of work or service, it is possible that
articles may have to be used by the parson executing the work, and property in
such articles or materials may pass to the other party. That would not
necessarily convert the contract into one of sale of those materials. In every
case, The would have to find out what was the primary object of the transaction
and the intention of the parties while entering into it......." As has
been noticed, the High Court stated that no person went to the assessee for
buying duplicates of his documents.
went to ask whether the could get xerox copies of his documents. The assessee
undertook to get the documents duplicated and collected a certain charge. This
was essentially a contract of work or labour or service and not a contract of
sale. The distinction had been explained in the Hindustan Aeronautics's case
(supra) thus:- "...........A contract of sale is a contract whose main
object is the transfer of the property in, and the delivery of the possession
of, a chattel as a chattel to the Buyer. Where however the main object of work
under taken by the payee of the price was not the transfer of chattel qua
chattel, the contract is one of work and labour,. The test is, whether or not
the work and labour bestowed and in anything that can properly become the
subject of sale; neither the ownership of the materials, nor the value of the
skill and labour as compared with the value of the materials, is conclusive,
although such matters may be taken into consideration in determining, in the
circumstances of a particular case where the contract was in substance one for
work and labour and one for the sale of a chattel".
High Court, therefore, held that what was involved was not a contract of sale,
but a contract of work or service.
principles enunciated in Hindusan Aeronautics case (supra), quoted by the High
Court, also find expression in the earlier decision of this Court in Assistant
Sales Tax Officer & Ors,, vs. B.C. Kame. (1977) 39 STC 237 = (1977) 2 SCR
435. In Kame's case the respondent carried on the business of supplying
Photographs to those who got themselves photographed at his studios. It was
held that he did not enter into a contract of Sale.
judgment of the Karnataka High Court was cited before the Division Bench that
wrote the Judgment and order under appeal (reported in 83 STC 420). It was
distinguished on the ground that it "Proceeded upon an erroneous under
standing of the nature of the transaction and was apparently carried away by
the corporeal rights over the contents or subject-Matter of the copies with the
material turned out, namely, the duplicate copies made. If an author or a
publisher of a text orders for the printing and supply of a specified number of
copies of the literature concerned, it could not be said that the work merely
is a contract for work and labour or service and not a contract for sale.
or making out copies does not get its character altered merely on account of
the proprietory ownership of the material which was sought to be duplicated or Multiplied".
The Division Bench held that the supply of a xerox copy manufactured by the use
of a xerox machine for a price consisted of a an indivisible contract of sale
and, consequently, the turnover relating to the same had rightly been subjected
to tax by the assessing authority.
see it, the view taken by the Karnataka High Court is right and is based upon
the decisions of this Court. Where the main subject of the work under taken by
the person to whom the price is paid is not the transfer of a chattel as a
chattel, the contract is one of work and labour. The main object of the work
undertaken by the operator of the photocopier or xerox machine is not the
transfer of paper upon which the copy is produced; it is to duplicate or the
price wants duplicated. The paper upon which the Duplication takes place is
only incidental to this transaction. The object of the payment of the price is
to get the document duplicated, not to receive the paper. The payer of the
price has not interest in the bare paper upon which his document is duplicated.
He is interested in it only if it bears such Duplication.
case is very similar to Kame's case. The tests laid down by this Court as aforestated
are satisfied; the contract between the appellant and the payer the price to
him is contract of work or service, not a contract of sale upon which sale tax
result, the appeals are allowed and the judgments and orders under appeal are
shall be not order to costs.
South Indian Photographic and Allied Trades Association. V. The State of Tamil Nadu
O R D
counsel for the appellants seeks leave to withdraw these appeals. He states
that in an appropriate case where the judgment under appeal is relied upon in
assessment proceedings or proceedings subsequent thereto a challenge to the judgment
shall be made.
appeals are dismissed as withdrawn.
APPEAL NO. 11903 OF 1995 ------------------------------ Learned counsel for the
appellant seeks leave to withdraw this appeal. He states that in a appropriate
case where the judgment under appeal is relied upon in assessment proceedings
or proceedings subsequent thereto, a challenge to the judgment shall be made.
Learned counsel adds that in this matter the agreement of inapplicability of
the statute to the commodities used by the appellants was urged before the High
Court, But was not considered in the judgment.
is dismissed as withdrawn.
APPEAL NO 11294 OF 1995:
counsel for the appellant sees leave to withdraw this appeal. He states that in
an appropriate case where the judgment under appeal is relied upon in
assessment proceedings or proceedings subsequent thereto, a challenge to the
judgment shall be made. The appeal is dismissed as withdrawn.