The High Court of Madras in the case of M/s Heritage Printers Vs. Joint Commissioner, (SMR) of Commercial Taxes, Chepauk Chennai Vide No. (2015) 60 taxmann.com 288 (Madras) dated 17 February, 2015, observed that the finished product supplied by a dealer to a particular customer was not a commercial commodity in sense that it could not be sold in market to any person, the transaction should preferably be considered as a works contract rather than sale.

The Assessee was a dealer in printing materials. He undertook a work of printing annual reports as per specifications and instructions of the customers on a works contract basis. The Assessee claimed that transaction was a works contract however the Lower authorities disallowed the claim. The reports were printed for their exclusive use on works contract basis. The predominant intention is for printing annual report as per the specification given by the customer, it is, therefore, in the nature of works contract. Although, learned Special Government Pleader appearing submitted that when the order placed before the assessee was for supply of printed materials, it is only a sale of printed materials and not as a works contract.

The nature of the contract and the transaction must be gone into so as to arrive at a conclusion as to whether the transaction is a works contract or sale and this is possible only when the intention of the parties is found out. Having observed so, the court pointed out that in the execution of a contract for work, some materials are used and the property in the goods so used passes to the other party, the contractor undertaking to do the work would not necessarily be deemed on that account to sell the materials. Therefore, in every case of, the assessing officer has to point out which part of the job-work is related to sale.