1964 (11) TMI 89 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the preparation and supply of personal technicolour enamelled photographs amount to a contract of sale.
2. Whether such sales are liable to tax under the Bombay Sales Tax Act, 1959.

Detailed Analysis:

Issue 1: Contract of Sale
The applicants argued that the preparation of enamelled photographs on copper plates involved a considerable degree of skill and was an artistic piece of work. They contended that the value of raw materials was negligible compared to the finished product, making the transaction one of rendering services rather than selling goods. They further claimed that the ownership of the photographs remained with the customer under the Copyright Act of 1957, and there was no transfer of title in the finished goods to the customer.

The court examined the process described by the applicants, which involved several steps from receiving a photograph to producing an enamelled photograph on a copper plate. The court noted that although the process required technical skill and aesthetic value, it did not take the transaction out of the category of the sale of goods. The court distinguished this from cases where the essence of the contract was the performance of skilled service, such as in the creation of a painting by an artist.

The court referred to previous judgments, such as D.P. Roy Chowdhury v. The State of Madras and V.K. Baraskar v. State of Madras, which dealt with similar issues. In those cases, the courts held that the transactions in question did not amount to sales of goods because the essence of the contract was the exercise of skill and labour. However, the court found that the present case was different because the applicants were producing finished goods for sale, similar to a photographer producing photographs for customers.

Issue 2: Tax Liability under the Bombay Sales Tax Act, 1959
The court examined the definitions of "dealer" and "sale" under the Bombay Sales Tax Act, 1959. A "dealer" is defined as any person who carries on the business of buying or selling goods in the state, and a "sale" includes any supply of goods for cash or other valuable consideration.

The court found that the applicants were engaged in the business of producing enamelled photographs on copper plates and selling them to customers. The court referred to similar cases, such as D. Masanda and Co. v. Commissioner of Sales Tax and M. Ghosh v. The State of Bihar, where photographers were held liable to pay sales tax on the sale of photographs. The court held that the applicants' transactions were similar to those of photographers and amounted to the sale of goods.

The applicants argued that under section 17 of the Copyright Act, the copyright in the photographs vested in the customer, restricting the applicants from selling the copper plates to anyone other than the customer. The court rejected this argument, stating that such a restriction did not affect the nature of the transaction as a sale of goods. The court held that the applicants were dealers carrying on the business of producing enamelled photographs on copper plates and selling them to customers, making the transactions taxable under the Sales Tax Act.

Conclusion:
The court answered the question in the affirmative, holding that the preparation and supply of personal technicolour enamelled photographs amounted to a contract of sale and were liable to tax under the Bombay Sales Tax Act, 1959. The applicants were ordered to pay the costs of the reference.