1996 (8) TMI 505 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the assessment order.
2. Applicability of Section 6D of the Bengal Finance (Sales Tax) Act, 1941 to photographic activities.
3. Whether the assessment was time-barred under Section 11(2a) of the 1941 Act.

Detailed Analysis:

Legality of the Assessment Order:
The applicant, a proprietor engaged in photographic activities, challenged the legality of an assessment order under Section 8 of the West Bengal Taxation Tribunal Act, 1987. The applicant argued that his activities, including photo taking, supply of prints, enlargements, etc., were essentially contracts for work involving skill and labor, not contracts for the sale of goods. The applicant cited the Supreme Court's decision in B.C. Kame's case [1977] 39 STC 237, which declared similar photographic activities as contracts for work, not sale. The applicant claimed that he mistakenly registered under the Bengal Finance (Sales Tax) Act, 1941 and paid taxes under a misconception. The respondent, however, contended that the applicant was engaged in manufacturing taxable items like cinema slides, translight, bromide prints, and quarter tone prints, and that the applicant never notified the discontinuance of such manufacturing activities.

Applicability of Section 6D of the 1941 Act:
The primary contention was whether the activities of making cinema slides, translight, bromide prints, and quarter tone prints constituted a contract of sale or a contract for work. The Tribunal noted that the processes involved in these activities were similar to those in photographic activities, which were previously exempted from taxation as they involved significant skill and labor. The Tribunal referred to various judgments, including the Supreme Court's decision in B.C. Kame's case, which held that contracts involving significant skill and labor, where the transfer of materials was ancillary, were not contracts for sale. Additionally, the Tribunal cited the Kerala High Court's decision in Sreeni Printers [1987] 67 STC 279, which held that photo block-making was a works contract, not a sale. The Tribunal concluded that the job of making cinema slides, etc., involved similar elements of skill and labor, and thus, could not be regarded as a contract for sale or a works contract under Section 6D of the 1941 Act.

Time-Barred Assessment:
The applicant also challenged the assessment order on the ground that it was made beyond the prescribed period under Section 11(2a) of the 1941 Act. The assessment for the four quarters ending on March 31, 1993, should have been completed within two years, i.e., by March 31, 1995. However, the assessment order was completed on July 18, 1995. The respondent conceded that the assessment was made beyond the permissible time limit. Therefore, the Tribunal held that the assessment was made in contravention of Section 11(2a) and was liable to be quashed.

Conclusion:
The Tribunal quashed the impugned assessment order dated July 18, 1995, for the four quarters ending on March 31, 1993, and declared that Section 6D of the 1941 Act did not apply to the activities involved in making cinema slides, translite, bromide prints, and quarter tone prints. The interim order passed on November 8, 1995, was made absolute, and no order as to costs was issued. The application was allowed.