1999 (3) TMI 590 - HC - VAT and Sales Tax

SALE OR WORKS CONTRACT PHOTOGRAPHY PHOTOGRAPHER TAKING PHOTOGRAPHS FOR CUSTOMER AND SUPPLYING PRINTS NO PROCESSING CARRIED

Issues Involved:
1. Whether the activities carried on by the appellants in photographic work constitute a "works contract" under the Kerala General Sales Tax Act, 1963.
2. The applicability of the 46th Constitutional Amendment to the Kerala General Sales Tax Act concerning photographic work.
3. The constitutionality of clause (6) of the Table appended to section 5C of the Act as it pertains to photography.
4. The interpretation of Explanation 3B to section 2(xxi) of the Act concerning the processing of photographic films.
5. The applicability of prior judicial pronouncements to the current case.

Issue-wise Detailed Analysis:

1. Whether the activities carried on by the appellants in photographic work constitute a "works contract" under the Kerala General Sales Tax Act, 1963:
The appellants argued that their activities, including taking photographs, developing negatives, and supplying prints, do not constitute a "works contract" as defined under the Act. They contended that these activities are primarily skill and labor-oriented and do not involve the transfer of property in goods. The court examined the definition of "works contract" in section 2(xxix-a) of the Act, which includes agreements for various activities such as construction, fitting out, improvement, repair, manufacture, processing, fabrication, erection, installation, modification, or commissioning of any movable or immovable property. The court concluded that the second and third categories of activities (developing exposed films and taking positive prints from negatives) fall within the definition of "works contract" as they involve processing goods supplied by the customer.

2. The applicability of the 46th Constitutional Amendment to the Kerala General Sales Tax Act concerning photographic work:
The appellants argued that the 46th Constitutional Amendment did not alter the taxability of photographic work. However, the court noted that the amendment introduced clause (29A) to article 366, which defines "tax on the sale or purchase of goods" to include the transfer of property in goods involved in the execution of a works contract. The court referred to the Supreme Court decisions in Builders Association of India v. Union of India and Gannon Dunkerley & Co. v. State of Rajasthan, which upheld the state's power to levy tax on the transfer of property in goods in works contracts. The court held that the appellants' activities fall within the ambit of the amended constitutional provision.

3. The constitutionality of clause (6) of the Table appended to section 5C of the Act as it pertains to photography:
The appellants challenged the constitutionality of clause (6) of the Table appended to section 5C of the Act, which includes photography as a deemed sale for tax computation purposes. They argued that this provision is ultra vires the charging section and does not cover photography as a specified item of works contract. The court rejected this contention, stating that the provision is consistent with the constitutional amendment and the legislative intent to tax the transfer of property in goods involved in works contracts.

4. The interpretation of Explanation 3B to section 2(xxi) of the Act concerning the processing of photographic films:
The appellants argued that Explanation 3B to section 2(xxi) of the Act, which deems the transfer of property in goods involved in the execution of a works contract as a sale, does not cover the processing of photographic films. The court disagreed, stating that the explanation is broad enough to include the activities of developing exposed films and taking positive prints from negatives, as these involve processing goods supplied by the customer.

5. The applicability of prior judicial pronouncements to the current case:
The appellants relied on the decisions in Jacob Cherian v. Union of India and Everest Copiers v. State of Tamil Nadu, arguing that these cases support their contention that photographic work is not a works contract. The court distinguished these cases, noting that the Supreme Court in Everest Copiers dealt with photocopying, which does not involve processing goods supplied by the customer. The court also noted that the division bench in Jacob Cherian's case had already addressed the issue and held that the activities of developing exposed films and taking positive prints fall within the definition of "works contract."

Conclusion:
The court dismissed the writ appeals, holding that the appellants' activities in the second and third categories constitute a "works contract" under the Kerala General Sales Tax Act, 1963, and are exigible to sales tax. The court upheld the constitutionality of clause (6) of the Table appended to section 5C of the Act and the applicability of Explanation 3B to section 2(xxi) of the Act to the processing of photographic films. The court also found that prior judicial pronouncements did not support the appellants' contentions.

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