2015 (4) TMI 526 - HC - VAT and Sales Tax

Levy of sales tax on chemical used in development of photographs - whether the chemical which is being used for developing photos by processing the chemical is not transferred through which the resultant photos came into existence and it is not a sale - Held that - Tax Board has rightly come to the conclusion that there is no justification in levy of sales tax on the two items namely; (i) chemical (ii) photographic paper left over/cuttings of photographic paper. In so far as the chemical is concerned, it has rightly been held that whatever chemical was purchased, was duly tax paid and the chemicals having been used in the printing/developing the photograph cannot be said that it was a sale as such to the consumer of chemicals and what was sale, was a photograph duly developed and not chemical. It is an admitted fact that the photographs are developed primarily on account of the chemicals being used and either it was used in entirety or if some chemical remained after certain time, it had to be destroyed or could not have been re-used after certain processes. One cannot hold that chemical has been sold to the consumers. Similarly the paper cuttings which remained after proper sizing as such no new item came to existence, a paper would remain a paper whether after cutting of the corners or otherwise and thus no new item can be said to be produced merely because photographs are prepared in different shapes and sizes according to the direction of the consumer. - The contract is to be seen as one of work and labour and in my view, whatever chemical has been used, cannot be said to be sale directly or indirectly to the customers by the assessee. Paper cuttings even after the paper being cut to size, remain a paper may be out of a full sized paper only some cuttings remain after the photograph being cut according to size. Therefore, a paper would remain a paper even after making into different sizes and it is also an admitted fact that on both the items, the assessee has paid due tax, therefore, even if the paper cuttings have been sold to a third party when due tax has been paid, in my view, sales tax is not liable to be paid again. - Decided against Revenue.

Summary

Issues Involved:
1. Revision petition under Section 86 of the Rajasthan Sales Tax Act, 1994 against the order passed by the Rajasthan Tax Board, Ajmer for the assessment year 1992-93.
2. Whether the chemical used in developing photographs and the paper cuttings left over from printing photographs are subject to sales tax under the RST Act.

Analysis:
1. The revision petition challenged the imposition of sales tax on chemical and paper cuttings by the Assessing Officer (AO). The AO considered the chemical used in developing photographs as sold to consumers and paper cuttings as sales, leading to tax levies. The Dy Commissioner (Appeals) and the Rajasthan Tax Board ruled in favor of the assessee, leading to the present petition.

2. The main contention was whether the chemical and paper cuttings, on which sales tax was imposed, were actually subject to tax under the RST Act. The revenue argued that the chemical and paper cuttings were sold to consumers, justifying the tax imposition. They cited relevant case laws to support their stance.

3. Conversely, the assessee contended that the chemical and paper were already taxed upon purchase and any subsequent sales did not warrant additional tax. They relied on judgments supporting their position.

4. The High Court analyzed the arguments and reviewed relevant judgments on similar matters. It concluded that the chemical used in developing photographs and the paper cuttings were not subject to sales tax. The Court emphasized that the chemical and paper were already taxed upon purchase, and their subsequent use did not constitute a sale to consumers.

5. The Court highlighted that photography is a skilled labor-intensive art form, and the products, such as developed photographs, do not equate to the raw materials used in their creation. It differentiated between the sale of goods and the service provided by the photographer in developing photographs.

6. The Court referenced various judgments from different High Courts and the Supreme Court to support its conclusion that the chemical and paper cuttings were not liable for sales tax. It emphasized that the goods in question were not sold to consumers but were part of the service provided by the photographer.

7. Ultimately, the Court dismissed the revision petition of the revenue, ruling in favor of the assessee and stating that the chemical and paper cuttings were not subject to sales tax under the RST Act. The judgment was detailed and supported by legal precedents, providing a comprehensive analysis of the issues involved.