1989 (8) TMI 322 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax on a photography business, jurisdiction of assessing officer, applicability of sales tax on sale of photographs, validity of recovery proceedings under Orissa Public Demand Recovery Act.

Analysis:
The petitioner, a proprietorship firm engaged in photography business, was assessed to sales tax for the years 1962-63 to 1964-65 under the Orissa Sales Tax Act. The assessment orders were challenged, leading to remand orders for fresh assessment. The assessing officer wrongly assessed sales tax at 30%, whereas finished photographs were taxable at 5%. The certificate officer set aside the recovery certificate, stating the petitioner had paid more than required. The appellate authority remanded the matter, holding the certificate officer lacked authority to challenge assessments under the Sales Tax Act. The petitioner challenged both the assessment orders and the certificate proceedings for lack of jurisdiction.

The main argument presented was that the sale of photographs is not a contract for the sale of goods but an execution of art and skill. The petitioner contended that photography involves skill, labor, and artistic expression rather than a mere sale of goods. Citing a Supreme Court decision, it was argued that photography is primarily a work of art and skill, not a sale of finished products, hence not liable to sales tax. The assessing officer's reliance on a Patna High Court decision was deemed incorrect, as it contradicted the Supreme Court's ruling on the matter.

The Court observed that the assessing officer did not consider the Supreme Court's guidance on the nature of photography business, leading to an erroneous assessment. The petitioner's business was deemed to involve skill and labor, making it ineligible for sales tax as per the Supreme Court's interpretation. The recovery proceedings initiated based on incorrect assessments were declared unlawful and quashed.

The Revenue's argument that the petitioner's appeal against the assessment orders was unknown due to remand was dismissed. The Court noted the Revenue's failure to provide counter-affidavit against the petitioner's claims and emphasized that the case involved a pure question of law based on facts from assessment orders. Consequently, the assessment orders, recovery proceedings, and the appellate order were annulled, and the writ petition was allowed with costs, including a hearing fee.

In conclusion, the Court ruled in favor of the petitioner, emphasizing the artistic and skillful nature of the photography business, which exempted it from sales tax. The judgment highlighted the importance of legal precedence and proper application of law in assessment proceedings to prevent unjust recovery actions.