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TMI Blog2008 (9) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... deducting the expenses of raw materials etc. from the gross receipts. Accordingly, demand cum show cause notice dated 18/20-10-2006 for the period 16-7-2001 to 31-3-2005 was issued. 3. In response to Show Cause Notice the appellant filed their defence reply on the following grounds : (i) that the department denying the deduction of value of material used is not sustainable. Reliance is placed on : 2006 (2) S.T.R. 89 (Commr. Appl.) - In Re : Express Colour Lab. 2006 (3) S.T.R. 45 (Commr. Appl.) - In Re : Spectrum Colour Lab. 2006 (2) S.T.R. 121 - Adlabs v. CCE, Bangalore (ii) The Show Cause Notice invoking larger period of limitation is barred by limitation and is liable to be struck down. Reliance is placed on : 2006 (4) S.T.R. 349 (Tri.-Mum.) - ZEE Telefilms Ltd. v. CCE, Mumbai 2006 (4) S.T.R. 232 (Tri. - Bang.) - Vijaya Advertisers v. CCE, Tirupathi. (iii) The impugned Show Cause Notice has utterly failed to show any contumacious conduct or deliberate violation of Statute on part of Noticee in order to make them liable for invocation of penal provision. Reliance is placed on : Hon ble Supreme Court in EID Perry v. ACCT reported in 2000- AIR-551. Nestle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the condition that penalty shall not exceed the amount of Service Tax involved. The penal liability is to be computed by the Deputy Commissioner of the Central Excise Division-I, Lucknow at the time of payment by the party, as per this order. (iii) imposed penalty of Rs. 11,35,904.00 upon the appellant under Section 78 of the Act. (iv) imposed penalty of Rs. 1000/- under Section 77, for the various contravention of the provisions of the Act. 5. Aggrieved with the said impugned order the appellant preferred this appeal on the following grounds : (i) that the appellants are entitled to deduct the expenses incurred towards the purchase of raw material and had paid the tax accordingly without any intention to evade any tax in accordance with the condition contained in Notification No. 12/2003-S.T. dated 20-6-2003, adjudicating authority has grossly misinterpreted and misconstrued the language of Notification No. 12/2003-S.T. dated 20-6-2003. (ii) that while passing the order adjudicating authority did not follow the judicial pronouncement cited by the appellant namely Express Colour Lab., Specturm Colour Lab. etc. (iii) that the case of C.K. Jidheesh v. UOI reported in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the judgments passed by Hon ble Supreme Court in the case of C.K. Jidheesh [2006 (1) S.T.R. 3 (S.C.)], Rainbow Color Lab. and others v. State of M.P. and others, 2001 (134) E.L.T. 332 (S.C.) = (2000) 2-SCC-385-(S.C.) and order of Hon ble CESTAT as in case of Laxmi Color Ltd. v. Commissioner, 2006 (3) S.T.R. 363 (Tri.-Delhi) (judgments as discussed supra). All the cited judgment by the Revenue is based on the concept that contracts of the type entered in photographic services are nothing else but service contracts pure simple and it was held that in such contracts there is no element of sale of goods. Incidentally the Larger Bench of Hon ble Apex Court in the case of BSNL Anr. v. UOI Ors. reported in 2006 (2) S.T.R. 161 (S.C.), have examined the issue, what is sale, in perspective of Article 366 of the Constitution of India, the Hon ble Apex Court has observed that after enactment of 46 amendment to the constitution Article 366 was amended by inserting a definition of tax on the sale or purchase of goods in clause (29A). The relevant amendment related to this case is described in clause (29A)(b) which is reproduced below : (b) a tax on the transfer of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not involving any sale of goods, we are of the opinion that the stand taken by the respondent State cannot be sustained . 46. This conclusion was doubted in Associated Cement Companies Ltd. v. Commissioner of Customs - (2001)-4-SCC-593 saying :- The conclusion arrived at in Rainbow Colour Lab. case [(2000)2-SCC-385], in our opinion, runs counter to the express provision contained in Article 366(29-A) as also of the Constitution Bench decision of this Court in Builders Assn. of India v. Union of India (1989)-2 SCC-645 . 47. We agree. After the 46th Amendment, the sale element of those contracts which ere covered by the six sub-clauses of Clause (29A) of the Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying. Therefore when in 2005 , C.K. Jidheesh v. Union of India - (2005)-8-SCALE-784 held that the aforesaid observations in Associated Cement (supra) were merely obiter and that Rainbow Colour Lab. (supra) was still good law, it was not correct. It is necessary to note that Associated Cement did not say that in all cases of composite transactions the 46th Amendment wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. it is clear from the Section 67(ii) read with the Notification No. 12/2003-S.T., dated 26-6-2003 and subsequent clarification vide Circular F.No. 233/2/03-CX-4 dated 7-4-2004 that deduction from the gross value of services rendered is very much available for goods and articles sold cs such during the course of service for which bills/invoices have been issued. These can be claimed as deduction on the basis such documentary proof. In so far as goods, articles and consumables sold whose price can be indicated on individual bills and invoices there is no problem in claiming deduction. 8. However, there are types of consumables where it is not possible to indicate prices separately for each bill/invoice issued. Their value can be distributed at the end of given assessment period, for that period by way of apportioning only. Although their value in not shown on each invoice/bill, there is no doubt that they are being sold to the user of photographic services. Notification No. 12/2003-S.T., dated 20-6-2003 speaks of documentary proof regarding the value of such consumables sold. These documentary proof can be in form of payment evidence of the service providers for given perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicating the value/cost of the said goods and materials consummed in terms of Notification No. 12/2003 dated 20-6-2003, during a given period during which service provider issued bills and invoices. Further, in case of Jyoti Art Studio v. CCE, Hyderabad reported in 2008 (10) S.T.R.. 158 (Tri.-Bang.) held that deduction of raw material and outside printing costs are permissible without their being mentioned in invoice/bill as there in no specific clause regarding the same in Notification No. 12/2003-S.T. - Section 67 of Finance Act, 1994. In the instant case the Appellants is paying the Service Tax on the value arrived at after deducting the expenses of raw material from the gross receipt. The appellant is declaring the cost of paper, chemicals etc. consumed in photography services, in trade tax return as well as in their balance sheet. Thus, in the light of the BSNL case as discussed supra that after enactment of 44th Amendment of the constitution, transfer of property in goods involved in the execution of the work contract was deemed to be a sole by this amendment the amendment allows specific contract viz. work contract by legal fiction to be divisable contracts where t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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