1964 (9) TMI 44 - HC - VAT and Sales Tax

Issues Involved:

1. Assessment of second sales of radios bought from customers.
2. Taxability of photo house studio receipts.

Issue-Wise Detailed Analysis:

1. Assessment of Second Sales of Radios Bought from Customers:

The primary issue was whether the sales of old second-hand radio sets, which the assessee had purchased in exchange for new radio sets sold to customers, should be assessed as first sales in the State. The assessee argued that these transactions should not be considered first sales, and that the authorities wrongly applied the presumption under section 10 of the Madras General Sales Tax Act, 1959. Section 10 stipulates that the burden of proving that any dealer or any of his transactions is not liable to tax under the Act lies on the dealer.

The assessee contended that the department must first establish, with reasonable material or evidence, that the sales in question were actually first sales in the State. Only after this initial burden is discharged by the department can section 10 be applied, requiring the assessee to prove the exemption. The court, however, held that the benefit of assessability only at a single point and non-assessability at other points is in the nature of an exemption, and the burden of proving this exemption is on the dealer. This principle is consistent with section 106 of the Indian Evidence Act, which places the onus on the person in possession of special facts to disclose them when seeking a benefit.

The court found that the assessee was able to substantiate his claim for only a portion of the turnover, amounting to Rs. 4,619, as second sales. For the remaining balance, the assessee failed to provide the necessary facts to prove that his sales were second sales. The court upheld the assessment on the disputed turnover, emphasizing that the assessee could have obtained necessary details from the customers, such as purchase particulars or affidavits regarding the prior purchase history of the radios.

2. Taxability of Photo House Studio Receipts:

The second issue concerned whether the receipts from the photo house studio were contracts for work and labour or sales of goods. The assessee argued that the supply of photos and photo copies by a professional photographer constituted a contract for work and labour, not a sale of goods, and thus should not be subject to tax.

The court examined various English cases to distinguish between a contract for work and labour and a sale of goods. In cases like Robinson v. Graves, the court found that the contract was for work and labour when the essence of the contract was the exercise of skill and labour, with the materials being ancillary. Conversely, in cases like Lee v. Griffin, where the principal subject matter was the supply of goods, the contract was considered a sale of goods.

Applying these principles, the court concluded that a commercial photographer's transaction, where the photographer takes a photograph and supplies multiple copies to the customer, is a sale of goods. The court noted that the end product, i.e., the photographs, are the principal subject matter, and the transaction involves the sale of these finished goods. The court also referred to the Australian case, Federal Commissioner of Taxation v. Riley, which treated the photographer's work as a sale of goods.

The court distinguished this case from others where the primary contract was for the creation of a unique piece of art or where the artist was not in the business of selling such items commercially. Given that the photographer was engaged in a commercial business of studio photography, the receipts were rightly assessed as sales of goods.

Conclusion:

The court confirmed the order of the Tribunal regarding both disputed turnovers. The revision case was dismissed, and no costs were awarded.

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