2006 (11) TMI 599 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of tax liability on consolidated bills for advertising services u/s 4 of the Karnataka Sales Tax Act, 1957.

Summary:
The appellant, an advertising agency, challenged the order of the authority under section 4 of the Act, which deemed the entire value of consolidated bills as taxable. The appellant contended that their services did not attract sales tax. The authority held that the sale of printed material with concept provision is an indivisible activity subject to tax at four percent. The appellant appealed against this decision.

Upon review, the court noted that the appellant's contracts involved providing advertisement services, including concept, design, and printed material. Referring to relevant case laws, the court emphasized that once information or advice is put on a medium, it becomes a chattel or goods subject to tax. The court cited judgments stating that software programs and intellectual property, once marketed, are considered goods for tax purposes.

In light of these precedents, the court concluded that the appellant's services constituted an indivisible activity liable for tax. The court upheld the authority's decision that the entire activity of the dealer amounted to an indivisible contract for the supply of printed material. The subsequent rectification application by the appellant was also dismissed, as there was no apparent mistake on record.

Ultimately, the court ruled in favor of the Revenue and against the appellant, upholding the impugned orders. No costs were awarded, and the learned Additional Government Advocate was given time to file her memo of appearance.