A.S.ANAND, C.J. - (1.) THE claim of the assessee before the assessing officer, to exemption on a turnover of Rs. 46, 042 claiming the same to be "engineering design fee" collected by the assessee, was disallowed. THE assessee went up in appeal and the Appellate Assistant Commissioner confirmed the assessment on the collection of "engineering design fee" as part of the sale price of the manufactured goods. A second appeal to the Tribunal also failed. THE assessee is in revision.
(2.) THE assessing authority noticed that the specifications were furnished by the buyers and the engineers at Calcutta, designed the special coils and after manufacturing the same accordingly, sold the product. It was found that the manufacturing cost included the expenses incurred for drawing the design for the special coils. THE assessing authority, on the basis of the material on the record, observed : "As for engineering design fees, these are collected from the buyers for designing the special coils according to their specifications and these charges are part and parcel of the total manufacturing cost. THEse are nothing but pre-sale charges and are to be included in the total cost of the products sold. As such they are exigible to tax." THE appellate authority, in appeal, observed that the designing charges charged for before the manufacture of the materials as per the specimen given by the customers were only pre-sale charges and they were liable to tax. THE Tribunal, in the second appeal on this aspect, observed thus: "We find that the appellants have charged the fee for designing a particular type of a special coil, according to the specification given by their customers. THEy have not only designed the special coil, but also manufactured it and supplied it to their customers. Further, while effecting the sales, they have collected the fees for designing the materials. We find that designing is one of the systematic activities of the appellants and not an isolated case of rendering of services." * Despite lengthy arguments at the Bar, nothing has been brought to our notice from which it can be said that the findings of fact as recorded and noticed hereinabove by the assessing authority and the Tribunal were vitiated on any account. No materials were brought to our notice to show that fee for designing the particular type of special coil was not pre-sale expense and included in the manufacturing cost of the special coil. As a matter of fact, it must be said in fairness to the counsel that he did not dispute that the designs of the special coil which were prepared as per specifications given by the customers were retained by the assessee himself and were not given to the customers. It was also not disputed that the designs which were used only for the purpose of manufacture of the special coils were supplied to the customers. The findings of fact which are based on sufficient material, therefore, unmistakably show that while effecting the sales the assessee had collected the fee for designing the special coil and that fee was included in the total cost of the manufacture of the product. The mere fact that the assessee showed, in the invoice, "design and engineering fee" separately would not imply that the same was not included in the cost of manufacture so as to fall within the sale price of the goods sold to the customers. The Tribunal rightly rejected the plea raised by the assessee, which has also been reiterated before us, that the fee charged was for specialised technical service rendered by the assessee for designing the particular type of special coil, that the coil was prepared according to the specifications given by the customers and that the fee could not be included in the sale price. It was not merely the sale of design by the assessee to the customers, but the utilisation of the design prepared on the basis of specifications for manufacture of the coils which were sold to the customers. The authorities were, therefore perfectly justified to hold that the design fee separately shown in the invoices and admittedly collected by the assessee was part of the sale of the product to the customers and was liable to sales tax.
(3.) RELIANCE was placed by the learned counsel for the assessee on Sarma Studio v. State of Madras 1963 (14) STC 784 (Mad.) which was a case where the assessee who held a studio and described himself as a commercial artist, used his skill and energy to produce sketches as per the directions of the customers. It was held that the artist's work, even if it be for remuneration, (sic) is based on an earlier judgment reported in Baraskar v. State of Madras 1963 (14) STC 615 (Mad.) which was also cited before the Tribunal and distinguished. The judgments have no application whatsoever to the facts of the present case. Similarly we find in Commissioner of Sales Tax v. Premier Automobiles Ltd. 1963 (14) STC 784 (Bom) the expenses related to post service charges and were rightly held not to form part of the sale price. So far as Commissioner of Sales Tax v. Studio Ratan Batra Private Ltd. 1975 (35) STC 522 (Bom) is concerned, the substance of the contract in that case was for the preparation and supply of designs and it was in that context held that the material involved in the preparation and supply of the design, namely, the piece of paper upon which the design was drawn and the ink or paint with which it was drawn, were merely incidental and that the real essence of the contract was the skill of the artists who draw the design for the customers. That case has not even the remotest application to the facts and circumstances of the instant case where the products were sold with the materials manufactured as per the specifications based on the designs prepared according to the specifications furnished by the customers. The order of the Tribunal does not suffer from any error whatsoever. The revision, therefore, fails and is dismissed, with costs. Counsel's fee Rs. 200.;