IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 18/07/2002 Coram The Honourable Mr Justice V.S. SIRPURKAR and The Honourable Mr Justice N.V. BALASUBRAMANIAN T.C. Appeal No.325 OF 1995 Tvl. Kannan Art Calenders :: Sivakasi Appelllant -Vs- The State of Tamilnadu, rep. by Commercial Tax Officer-I :: Respondent Tax Case Appeals under Sec.37 of the TNGST Act against the orders passed by the Joint commissioner (R.P.), Commercial Taxes, Sivakasi !For Appellants :: Mr A. Thiagarajan ^For Respondent :: Mr S.V. Radhakrishnan, G.A. :JUDGMENT
V.S. SIRPURKAR, J.
The present appeal under Sec.37 of the Tamil Nadu General
Sales Tax Act (in short “the TNGST Act”) challenges the order of the Joint
Commissioner of Commercial Taxes-III (SMR), dated 18-10-1994, whereby the
Joint Commissioner, under his suo motu revisional jurisdiction under Sec.34 of
the TNGST Act, had upset the order passed by the Appellant Assistant
Commissioner (CT), Virudhunagar and restored the earlier order passed by the
Assistant Commercial Tax Officer, Sivakasi thereby, the turnover of
Rs.2,51,392/- and Rs.98,440/- was restored and the tax thereon with a
surcharge levy was ordered to be levied under the TNGST Act and Central Sales
Tax Act (in short “the CST Act”). The following facts will highlight the
controversy involved.
2. Assessee Tvl. Kannan Art Calenders, Sivakasi was
originally assessed under the CST Act for the year 1988-89 by the Assistant
Commissioner, Commercial Tax-IV, Sivakasi on a taxable turnover of Rs.7,011/-.
Subsequently, it was found that the sales of educational charts such as
Alphabet Chart, Number Chart, etc. were not assessed to tax. The entire
turnover of Rs.90,440/- was therefore treated by him as a sale of educational
charts (printed materials) and was assessed to tax at 10%.
2.1. During the appeal, the assessee urged that the text
books, alphabet charts, etc. were exempted from tax as they were only reading
material and children’s books and, therefore, the turnover was liable to be
satisfied. The appellate authority considered the clarification issued by the
Department in K.Dis.110999/84 Acts Cell.II dated 24-7 -1984 wherein it was
stated that all printed materials (other than the reading books including text
books, students note books and copy books) were liable to tax. The turnover
of the assessee was in respect of the text books, alphabet charts, etc. which
were printed and sold by the assessee. He came to the conclusion that those
charts and books were “reading books” meant to educate the children. He,
therefore, found that they were the “reading books” and as such exempt from
the tax liability. He, therefore, allowed the appeal.
2.2. A show cause notice dated 24-5-1994 was thereafter
issued to the assessee wherein the Joint Commissioner (RP) Madras took an
objection that the assessee-dealer was only a “printer”; that the
assessee-dealer was not a dealer in reading books or text books and,
therefore, they could not enjoy the exemption. According to the notice, the
amount realised on the sale was not for the sale of books but for the work
relating to the printing of the books. A further clarification issued by the
Commissioner of Commercial Taxes, dated 13-5-1985 was also relied upon wherein
it was clarified that such exemption of reading books was not available to the
printers and was available only to the actual sellers. On the basis of this
show cause notice, the Joint Commissioner came to the conclusion ultimately
that the intention of the assessee was to sell only the “printed materials”
and not the “reading books” or the “text books”. He, therefore, came to the
conclusion that the assessee was not entitled to the exemption. According to
him, the exemption notification was applicable only to the “ reading books”
including the “text books”. The appellate order was, therefore, set aside.
The said order by the Joint Commissioner is in challenge before us.
3. Mr. A. Thiagarajan, learned counsel for the assessee,
has taken us through the entries right from the beginning when the “reading
books” including “text books” were exempted under Sec.17 of the TNGST Act.
The first such exemption came vide G.O. Ms.976 Rev. Dated 28-3-19 59
whereby, with effect from 1-4-1959, the sale of reading books, including the
text books, by any dealer was exempted from tax. A “ school atlas” was also
considered to be a “book” under that head. The next Government Order came
vide G.O. No.4725 Rev. Dated 30th April, 1961 whereunder the sale of reading
books including text books was exempted from tax. The next Government Order
in the line is G.O.Ms. No.40 Rev., dated 6-1-1969 whereunder again the
reading books including the text books were exempted from the levy of tax.
Learned counsel then pointed out that a number of clarifications came to be
issued whereunder even the printer, who prints and sell the reading books like
alphabet charts, number charts, table books on places of tourist importance,
religious songs, images of Gods, photographs of national leaders, etc. were
exempted from tax. Learned counsel also filed the clarification issued in
that behalf bearing No.CEL-III 33120/92 dated 1 6-3-1992. It will be better
to quote the three clauses by way of this clarification:
“ (i) The printers, who print and sell reading books like Alphabet,
Table Books on places of Tourist importance (Kanyakumari, Kancheepuram, etc.),
Religious songs, Gods, National Leaders Photos, etc. are not liable to tax in
view of the Notification dated 6-1-1979 issued by the Government.
(ii) In the case of printers who undertake printing and supplying of
books for specific customers, the material to be printed is obtained from the
customers and after deciding on the type of paper, wrapper, cover design,
general layout, etc., with customer, the printer print and supply the books to
the customers. The printer uses his own goods including paper, ink, binding
materials etc. In such cases, it is only ‘works contract’ liable to tax in
terms of Section 3-B of the Tamil Nadu General Sales Tax Act and in the light
of the Supreme Court decision reported in 73 STC 370.
(iii) In the case of the printer undertaking the work of printing from
the customer, where the customer supplies paper and other goods required
(printing ink, binding/stitching materials, etc.) it will be a pure labour
work not liable to tax. But if the printer uses any of his materials, he
shall be liable to tax on such materials in the light of the Supreme Court
decision reported in 73 STC 370.”
Heavily relying on these clarifications, learned counsel argues that firstly
the alphabet charts sold by the appellant herein were the “ books” or as the
case may be “reading books” and it could not be said that they were mere
“printed materials”. Learned counsel stretches his argument further and says
that the exemption granted under G.O.Ms. No.40 could not be held restricted
to a dealer in the reading books and text books and thus printed materials
like alphabet charts, number charts, etc. were nothing but a “reading
material” meant for educating the children. Therefore, they would squarely
covered under the entry of “book”, “reading book” or “text book” as the case
may be. Learned counsel further argues and in our opinion rightly that the
entry did not restrict itself only to the dealer. It covered the sale by a
printer of these printed materials like alphabet charts.
4. As against this, a decision was cited by the learned
counsel appearing for the Department in State of Tamil Nadu v. Papco Offset
Printing Works (118 STC 160) wherein this Court held that what was exempted
was the sales by the dealer of reading books which included text books.
Therefore, if a dealer had simply printed certain material according to the
specifications of some publisher, charging them with price with reference to
the cost of paper, ink, etc. and had never compiled any books for reading nor
effected sale of such reading books such dealer would be outside the umbrella
of exemption. In that case, it was held that such sales could not fall under
item 22 of the Schedule to the notification.
5. On these rival submissions, it will be for us to decide as
to whether the dealer in this case was entitled to the exemption.
6. Two questions would fall for our consideration, viz.:
Are the alphabet charts the books or as the case may be reading books so as to
be covered under Entry 22?
Whether the exemption available to the sale of reading books including the
text books is available to the printer who prints the alphabet charts and
sells them?
7. In so far as the first question is concerned our task has
become fairly easy because of the judgment of this Court in State of Tamil
Nadu v. Mundran Kala Mandir (46 STC 365). The question which fell for
consideration there was whether the guide-map of Greater Bombay having some
material to read could be said to be a book. What fell for consideration was
a map simpliciter with some information about the city of Bombay and the
tourist spots therein on the next page. The learned Judges agree that the
earlier judgment in S.R. & Company v. State of Tamil Nadu (42 STC 99) that
the entry was not happily worded and that the reading books should be
understood as books for reading or books meant for reading. In that case
also, the said test was applied and the learned Judges had held that three
publications which fell for consideration were books for reading so as to be
eligible for exemption. Relying on that decision, the learned Judges in
Mundran Kala Mandir case, cited supra, also pointed out that the map contained
the description of Bombay, its history, places of interest and various other
details which would be of importance to a tourist or to a visitor who visits
Bombay for the first time. The learned Judges, therefore, classified the said
map as a “book for reading” and, therefore, within the umbrella of exemption.
The situation cannot be said to be any different under the present
circumstances. In fact, the alphabet chart is a basic first book which the
child is taught whereby the child starts recognising the alphabet. The
alphabet chart is not only an article like wall-hanging; it is a basic book
for reading, knowing and understanding which the child takes the first step
towards literacy. It will be therefore a travesty to say that an alphabet
chart is not a book. It is in fact the first and basic reading book in the
life of a child. It may not be in the form of a book but then the thrust of
the entry is on the “reading” material and not on the “form” thereof. In our
opinion, therefore, the alphabet chart must be deemed to be a “book” meant for
reading. Going a step ahead, we may even say that an alphabet chart is a
first text book for a child also because it cannot differ in case of the
children who are going to learn the alphabet. The content or the reading
material is going to be the same. In our opinion, therefore, the Joint
Commissioner has committed an error in not treating the alphabet chart to be a
“book”. However, the matters do not step here and that takes for the
consideration of the second question.
8. According to the Joint Commissioner, the dealer was merely
a printer and he merely printed those charts and sold them. It is really not
understandable as to what the Joint Commissioner meant by saying that the
intention of this dealer, who was a printer, was not to sell the books but
only “printed material”. The confusion has cropped in because of not reading
the entry in its full potential. Unfortunately, the decision in Mundran Kala
Mandir, cited supra, was not cited before the Joint Commissioner. If the
entry is to be read in terms of that judgment then, the entry “reading books”
would have to be read as the “books for reading”. Therefore, it could not be
held by the Joint Commissioner that the intention was merely to sell the “
printed material” because, in our opinion, that printed material, in this case
alphabet charts, was nothing but a “reading book”. This premise is further
strengthened by the subsequent clarification issued by the Department dated
16-3-1992 wherein the books like alphabet charts, table books on places of
tourist importance, religious songs, images of Gods, photos of National
leaders, etc. are also considered to be the “books” and the printers of these
materials, who sell such articles are also held entitled to the exemption vide
the notification dated 6 -1-1969. It is for this reason that we ventured to
quote all the three clauses of the clarification.
9. There would be one other way of looking at this, that is,
merely because a person prints the alphabet charts which are undoubtedly the
reading books and sells them could he be said to be excluded from the
exemption. In our opinion, the said course would not be open in view of the
clarification issued on 23-5-1988 bearing No.Acts CellII 51741/88 wherein a
clarification was issued to the effect that reading books, including the text
books, were exempt from the tax. That would completely delete the “dealer
aspect” of the matter. After all, if a person prints reading books and sells
them he could be safely called the “dealer” of the books as has happened in
this case. In that view, we are of the opinion that the Joint Commissioner
has erred.
10. Even without having to take the recourse of going to the
clarification dated 23-5-1988 or for the subsequent clarification issued on
16-3-1992 it can be seen that in the judgment in BUILDERS ASSOCIATION OF INDIA
AND OTHERS v. UNION OF INDIA AND OTHERS (73 STC 370) while considering the
implications of the sales involved in the works contract the Apex Court held
in respect of the materials used in the works contract that their transfer
would amount to deemed sale. The deeming fiction was based on the Forty-sixth
Amendment whereby Art.366(2 9A) was introduced and as per sub-clauses (a) to
(f) of Clause (29-A), transfer, delivery or supply of any goods was deemed to
be a sale of those goods. The Apex Court in that case upheld the
constitutional validity of the amendment and came to the conclusion that under
sub-clause (b) of clause (29-A) that the goods for construction which
ultimately are transferred would amount to a sale and for that purpose the
works contract which till then was considered to be indivisible was held to be
divisible. Therefore, in a case where a printer supplies the goods on the
basis of a contract given to him and recovers the price of the paper and other
materials and in addition to it recovers the printing charges at least in so
far as the goods are supplied that would amount to a deemed sale. If the
actual of the printed material has been exempted then the same exemption would
be applicable even to the deemed sales. We have already shown that the
printed material concerned in this case, viz. A B C D Alphabet Charts
amounted to the books and, therefore, the sale of that material was liable to
be exempted for the purposes of sales tax. Therefore, the said exemption
would equally apply to the printed material also and the assessee would be
entitled to succeed on this count also.
11. Before we close, we have to take the stock of the
decision in Papco Offset Printers case, cited supra. We must hasten to add
that the learned Judges therein were not called upon to decide the question as
to whether the alphabet chart could be said to be a “book”. In fact, that
question was never argued before the leaned Judges since the matter was
decided ex parte as no one appeared on behalf of the assessee. The assessment
year in that case was also 1985-86. However, the clarification issued by the
Department was not made available to the learned Judges; nor was the judgment
in Mundran Kala Mandir case, cited supra, was brought to the notice of the
learned Judges. Again what the printed material was also not clear from the
judgment. We do not know as to whether the learned Judges were considering
the alphabet charts or some other thing because there is no indication in the
judgment that they were considering the alphabet charts. In that view, we are
of the clear opinion that the judgment in Papco Offset Printers case, cited
supra, would be of no help to the State.
12. On the whole, it will have to be held that the Joint
Commissioner had erred in upsetting the order passed by the Appellate
Assistant Commissioner. The order passed by the Joint Commissioner is,
therefore, set aside and the order passed by the Appellate Assistant
Commissioner is restored. The appeal is allowed. No costs.
Index:Yes
Website:Yes
(V.S.S., J.) (N.V.B., J.)
Jai
18-07-2002
To:
1. The Assistant Commercial Tax Officer IV, Sivakasi
2. The Commercial Tax Officer-I, Sivakasi
3. The Appellate Assistant Commissioner (CT)
Virudhunagar
4. The Joint Commissioner-III(SMR) of Commercial Taxes
Office of the Special Commissioner and Commissioner
of Commercial Taxes, Chepauk, Chennai-5
5. The Assistant Commercial Tax Officer-IV, Sivakasi
6. The Principal Commissioner and Commissioner
of Commercial Taxes, Madras
7. The Joint Commissioner (RP)
Office of the Principal Commssioner and
Commissioner of Commercial Taxes, Madras
V.S. SIRPURKAR, J.
And
N.V. BALASUBRAMANIAN, J.
JUDGMENT in
T.C.(A) No.325 of 1995