2010 (2) TMI 156 - HC - Service Tax

Photography service- The assessee was engaged in rendering service relatable to photography, i.e. developing and printing. In processing of photography, goods/ materials were consumed. The case of the revenue was that the assessee had not sold any material/goods to the recipient of service and had willfully suppressed the taxable value of these materials/goods. The adjudicating authority dropped the proceedings against the assessee. However, the revisional authority raised the demand of service tax along with interest and also imposed penalty. On assessee s appeal, the Tribunal set aside the order of the commissioner and restore the original order of the adjudicating authority. Held that- the photography films, printing papers, chemicals and envelops are the integral and essential ingredients to complete the process of photography, meaning thereby that the components of sale of photography, developing and printing etc. are clearly distinct from that of photography service. Therefore, the nature of photography service is that of works contract service and it involves the elements of both sale and service and therefore, no service tax was leviable on the sale portion. Thus the order of the Tribunal was to be maintained. Thus the appeal was to be dismissed.

Summary

Issues:
Whether the assessee is liable to pay service tax on the value of goods/material consumed during the processing of photography or not?

Analysis:
The judgment involves a series of appeals consolidated due to common questions of law and facts. The revenue appealed against the order of the Customs, Excise & Service Tax Appellate Tribunal, invoking section 35G of the Central Excise Act, 1944. The respondent-assessee, a photography service provider, was alleged to have suppressed taxable value of goods consumed during service provision, leading to a show-cause notice. The assessee argued that essential materials were integral to their service, constituting a major portion of expenditure. The Adjudicating Authority referred to a clarification by the Central Board of Excise and Customs but proceedings were dropped. However, the revisional authority upheld the demand for service tax, interest, and penalty, which was later set aside by the Appellate Tribunal.

The core question for determination was whether the assessee should pay service tax on the value of goods/material consumed during photography processing. The Appellate Tribunal's decision was based on a similar case involving works contract nature of photography services, where the service tax was held to be leviable on the sale portion. The judgment referenced a Supreme Court case, emphasizing that if a transaction involves both service and sale components, they should not be re-mixed for tax purposes. It was established that photography service, developing, and printing involved distinct sale components, making the service tax not applicable to the sale portion.

The judgment concluded by maintaining the impugned order of the Appellate Tribunal, dismissing the appeals with no order as to costs. The decision was based on the clear distinction between the sale and service elements in the photography service, following the precedent set by previous legal interpretations.