2008 (11) TMI 57 - AT - Service Tax

Photography service - inclusion of the value of materials in the total value of taxable service - Commissioner confirmed demand invoking larger period, on the value of the materials used in relation to photos - order of the Commissioner reversing the decision of the original authority to exclude the value of materials deemed to have been sold for purpose of demanding tax is not sustainable - Orders of the Commissioner are set aside and the orders of the original authority restored

Summary

Issues:
Appeals arising from Order-in-Revision regarding the inclusion of the value of materials in photography services for service tax calculation.

Analysis:
The appeals involved a common issue regarding the inclusion of the value of materials in photography services for the calculation of service tax. The original authority allowed deductions for the value of materials used in photography, but the Commissioner, in the exercise of revision powers, issued notices and decided to include the value of materials for tax purposes. The appellants contested this decision, leading to the appeals.

The advocate for the appellants referenced a Tribunal decision in the case of Deluxe Colour Lab. Pvt. Ltd., which determined that photography services are akin to works contracts involving both sale and service elements. The advocate argued that service tax should not be levied on the sale portion of such transactions. On the other hand, the Departmental Representative supported the Commissioner's findings.

Upon careful consideration, the Tribunal found that the issue in these appeals was covered by the decision in the Deluxe Color Lab. case. The Tribunal highlighted that works contracts involve both sale and service elements, and the sale portion should not be included in the taxable value of the service. The Tribunal emphasized the binding nature of Supreme Court decisions and directed a reconsideration of the matter by the lower authorities.

Regarding the issue of limitation, the Tribunal noted that the extended period of limitation could not be invoked as the appellants had a bona fide belief that the service tax liability related only to the service part of the contract. Since the non-inclusion of the value of materials was in accordance with the law, the Tribunal held that the extended limitation period could not be applied.

Consequently, the Tribunal set aside the Commissioner's orders and restored the original authority's decisions to exclude the value of materials for tax calculation purposes. The appeals were disposed of accordingly.