2002 (1) TMI 1241 - HC - Service Tax

Summary

Issues Involved:
1. Imposition of service tax on photography services.
2. Classification of services provided by color laboratories.
3. Competence of Parliament to levy service tax.
4. Definition of "photography studio or agency".
5. Valuation of taxable services and inclusion of material costs.
6. Allegation of double taxation.
7. Allegation of discrimination under Article 14.
8. Allegation of unreasonable restriction under Article 19(1)(g).

Summary:

1. Imposition of Service Tax on Photography Services:
Both Writ Petitions under Article 226 of the Constitution of India challenge the imposition of service tax u/s Finance Act of 1994, as amended by the Finance Act of 2001, on the taxable service provided by a photography studio or agency, in relation to photography, in any manner.

2. Classification of Services Provided by Color Laboratories:
Petitioners argue that the services rendered by color laboratories involve significant material costs, making it erroneous to treat them as rendering "service". They contend that the dominant character of their activity is not "service" due to the high material cost involved.

3. Competence of Parliament to Levy Service Tax:
Petitioners claim that the activities of color laboratories are exigible only to sales tax under the K.G.S.T. Act, and Parliament has no competence to impose service tax. The court, however, holds that service tax is levied on the rendering of service, not on the profession, trade, calling, or employment, thus falling within the legislative competence of Parliament.

4. Definition of "Photography Studio or Agency":
Petitioners argue that color laboratories, which merely process negatives, do not fall under the definition of "photography studio or agency" u/s 65(48). The court rejects this contention, affirming that the definition includes the activities carried out by the petitioners.

5. Valuation of Taxable Services and Inclusion of Material Costs:
Petitioners contend that the valuation of taxable services inclusive of material costs is illegal and would lead to double taxation. The court clarifies that the measure of tax should not be confused with the nature of the tax, and the taxable event is the service rendered.

6. Allegation of Double Taxation:
The argument of double taxation is dismissed by the court, stating that unless the Constitution expressly forbids double taxation, it cannot be a ground for invalidating a fiscal statute. The court cites precedents to support this view.

7. Allegation of Discrimination under Article 14:
Petitioners argue that the tax is discriminative and violates Article 14. The court holds that Parliament has wide discretion in choosing the objects it decides to tax, and the statute is not open to attack on the mere ground that it taxes some persons or objects and not others.

8. Allegation of Unreasonable Restriction under Article 19(1)(g):
Petitioners claim that the levy imposes an unreasonable restriction on their fundamental right to practice their profession. The court finds no substance in this contention, stating that the levy of tax is in the interest of raising revenue and is reasonable.

Conclusion:
The court finds no substance in the Writ Petitions challenging the levy of service tax on the taxable service rendered by photography studios and agencies. The Writ Petitions are dismissed with no order as to costs.