2007 (7) TMI 167 - HC - Service Tax

Photography service Valuation - no element of sale of goods - Impugned contract are nothing but service contracts - contention to bifurcate the gross receipt of the photographic service between the price of the goods supplied & services rendered are rejected, assessee is not entitled to any relief

Summary

Issues:
1. Computation of value of taxable service for determining Service Tax.
2. Challenge to circulars issued by the Board regarding service tax on photography service.
3. Claim for bifurcation of gross receipts of processing of photographs.

Analysis:
Issue 1: The case involved a dispute regarding the computation of the value of taxable service for determining Service Tax payable by an association engaged in running Photo and Colour Labs. The contention was raised regarding the inclusion of the cost of material supplied while rendering services in the taxable value. The petitioner argued that circulars specifying the exemption of goods and material supplied should not control the substantive provisions defining the taxable service value. However, the Supreme Court had already settled this issue in previous judgments, upholding the amendment in the Finance Act related to the valuation of services, thereby rejecting the claim for deduction of the value of photographic materials from the gross receipts.

Issue 2: Two circulars issued by the Board in relation to the computation of the value of service for service tax on photography services were challenged in the writ petition. The validity of these circulars was questioned, but the Court referred to previous decisions, including one by the Supreme Court, which rejected the claim for bifurcation of gross receipts of the photographic service between goods supplied and services rendered. The Court held that contracts in such cases are service contracts and not works contracts involving the sale of goods, thereby dismissing the challenge to the circulars.

Issue 3: The claim for bifurcation of gross receipts of processing of photographs between goods supplied and services rendered was rejected by the Court based on previous judgments. The Court emphasized that contracts in the photography business are service contracts without any element of sale of goods. Consequently, the petitioner's claim for relief was denied, and the writ petition was dismissed with no order as to costs.