2024 (9) TMI 1546 - AT - Service Tax

Failure to discharge service tax - Photography Services - printing and sale of various stationery items and printing and sale of photo albums, photo books, photo calendars etc; on conducting an investigation - HELD THAT - This Tribunal has already held that the activity undertaken by the appellants amounts to manufacture and is exempt from payment of Central Excise duty and therefore, service tax cannot be demanded - The Bench observed in the case of Venus Albums Co. Pvt. Ltd. 2018 (11) TMI 754 - CESTAT CHANDIGARH held that 'the activity undertaken by the appellant amounts to manufacture and classifiable the Chapter 4911, therefore, no service tax is payable by the appellant.' The impugned order is set aside - appeal allowed.

Summary

Issues:
- Whether the appellants are liable to pay service tax for rendering Photography Services
- Whether the activity undertaken by the appellants amounts to manufacture and is exempt from payment of Central Excise duty, thereby excluding the liability to pay service tax

Analysis:
The case involved M/s Thomson Press India Ltd., engaged in printing and sale of various stationery items, photo albums, photo books, and photo calendars. The Revenue alleged that the appellants were providing Photography Services without discharging applicable service tax, leading to a Show Cause Notice demanding Rs.1,20,66,134/- along with interest and penalty. The Joint Commissioner and Commissioner (Appeals) upheld the demand, resulting in the current appeal. The appellant's Counsel cited precedents like Venus Albums Co. Pvt Ltd. and various other cases to argue that the activity does not attract service tax. The Tribunal examined the process undertaken by the appellants, emphasizing the transformation of soft form photographs into hard-bound photo books, concluding that the activity amounts to manufacture exempt from service tax.

The Tribunal referred to the decision in Venus Albums Co. Pvt. Ltd., highlighting the process of creating photo books involving printing, lamination, stapling, and binding, resulting in a change in the identity and nature of the photographs. The Tribunal also cited the Supreme Court's observations on the distinction brought about by printing processes, leading to a new commercial commodity with distinct character and use. Judicial precedents from Delhi High Court and Madras High Court were referenced to support the view that printing activities resulting in a new commercial product constitute manufacturing, entitling the appellant to claim exemption from service tax.

Further, the Tribunal considered the classification under Chapter Heading 4911 and the GST implications, noting that the activity of printing photographs on paper and binding them as photo books falls under manufacturing activity. The Circular F.No. 332/2/2017-TRU clarified the classification under HS Code 4911, attracting 12% GST. Notifications exempting printing activities from service tax were also highlighted, reinforcing the Tribunal's decision that the appellants are not liable to pay service tax. Consequently, the appeal was allowed based on the finding that the activity undertaken by the appellants amounts to manufacture and is exempt from service tax obligations.

In conclusion, the Tribunal's detailed analysis of the printing process and relevant legal precedents led to the determination that the appellants' activities qualify as manufacturing, exempting them from service tax liability. The decision was supported by the classification under Chapter Heading 4911, GST implications, and specific notifications exempting printing activities from service tax. The judgment allowed the appeal, affirming that no service tax is payable by the appellants due to the manufacturing nature of their activities.