1974 (1) TMI 91 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner is a dealer under the Orissa Sales Tax Act.

Issue-Wise Detailed Analysis:

1. Whether the petitioner is a dealer under the Orissa Sales Tax Act:

R.N. MISRA, J.-This court at the instance of the assessee by order dated 24th January, 1972, directed the Orissa Sales Tax Tribunal under section 24(3) of the Orissa Sales Tax Act (hereinafter referred to as the "Act") to state a case and refer the following question for determination of this court:

"Whether, in the facts and circumstances of the case, the petitioner is a dealer under the Orissa Sales Tax Act?"

In compliance with the direction, the Tribunal has stated a case.

Facts and Background:

The reference relates to the quarter ending 30th June, 1963. The assessee, a Professor of Radiology at S.C.B. Medical College, was carrying on private practice as a radiologist and had installed an X-ray plant. He purchased X-ray plates and other chemicals from outside the State and took X-ray photographs of patients, charging a flat rate of Rs. 10 for remuneration and cost of materials. The Sales Tax Officer viewed the turnover from these transactions as liable to tax under the Act. The assessee contended that these transactions were essentially contracts of work and labour and not taxable. The Sales Tax Officer completed the assessment for the quarters ending 30th September, 1962, to 30th June, 1963. The Appellate Assistant Commissioner vacated the assessments for the earlier quarters but sustained the assessment for the quarter ending 30th June, 1963, bifurcating the turnover into two parts and taxing only the supply of the X-ray film. The Tribunal affirmed this assessment. The assessee then applied to this court for stating a case.

Arguments:

The assessee's counsel argued that a radiologist cannot be equated with a professional photographer and that the charge collected was essentially a fee for expert service, not for labour and sale of goods. The standing counsel for the revenue contended that the decisions regarding the liability of photographers to sales tax applied to this case and that the payment was for a composite contract of both sale of goods and labour.

Analysis and Precedents:

The court examined the nature of work done by radiologists, distinguishing it from photography. Photography involves making pictures with a camera, whereas X-ray photography involves expert handling due to the harmful nature of X-rays. Radiographic work requires a team of trained personnel, and the radiologist provides technical advice based on X-ray photographs.

Various precedents were considered, including cases involving photographers and their liability to sales tax. The court noted that the primary object of the transaction and the intention of the parties are crucial in determining whether a transaction is a contract of sale or a contract of work or service. The Supreme Court's decision in State of H.P. v. Associated Hotels of India Ltd. was particularly relevant, emphasizing that mere transfer of property in an article during the performance of a service does not constitute a taxable sale unless there is a distinct contract of sale.

Conclusion:

The court concluded that the transaction between the patient and the radiologist is essentially one of work and labour, with the supply of the X-ray plate being incidental. The primary object is the technical advice provided by the radiologist, not the transfer of the X-ray plate. Therefore, the assessee is not a dealer under the Orissa Sales Tax Act.

12.. In the present case, for the reasons indicated above, our answer shall be that:

"The assessee is not a dealer under the Orissa Sales Tax Act."

13.. The reference is answered in favour of the assessee and against the department. The assessee shall have his costs. Hearing fee, rupees one hundred.

B.K. RAY, J.-I agree.

Reference answered accordingly.