9911796707
TMI Blog1997 (4) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... arised thus: The petitioner is engaged in the business of developing exposed photo films and preparing positive prints from the negatives, given by the customers. On July 12, 1988, a survey was conducted in its business premises by the Assistant Commercial Taxes Officer, Anti-Evasion II, Jodhpur. He noticed that the transactions relating to the purchases of photo papers and chemicals from outside Rajasthan were not shown in the returns and tax was also not paid on them. On July 13, 1988, he issued notice to show cause as to why tax (relating to the assessment years 1987-88 and 1988-89) on the job receipts be not imposed. D.B. Writ Petition No. 3139 of 1989 was filed by the petitioner challenging the validity of 46th Constitution Amendment Act, 1982, consequential amendments made in the Act by Rajasthan Sales Tax (Amendment) Act (No. 9 of 1988) and also the said notice. It was decided by the honourable Rajasthan High Court on July 24, 1991 that the question whether a works contract is a pure labour contract or not is a mixed question of law and fact and should be decided by the assessing authority. The returns for the periods in controversy were duly filed, disclosing taxable turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and amendments of the Act by the Rajasthan Sales Tax (Amendment) Act, 1988 and 1989. The petitioner s business did not fall within the definition of the works contract . Obtaining negatives from exposed photo films involves highly technical knowledge and expertise, requiring optimum time, temperature and proper mixture of chemicals. This process involves various stages, namely, developing, bleaching, fixing, stabilizing, washing and drying. During these processes, chemicals get diffused with emulsion creating light and shed on the negative of the film. The photographer retouches the negatives for obtaining best result therefrom. The customer giving the exposed films pay the amount to the photographer for positive prints for his expert services. There is no sale of papers or chemicals. There is also no transfer of property in the said goods. Supply or involvement of these goods is only incidental to the job-work. There cannot be any deemed sale of papers and chemicals. As a matter of fact, these goods lose their identity and are consumed in the process. The 46th Constitution (Amendment) Act which brought clause (b) in article 366(29A) does not confer any separate or independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hic work skill and labour are involved and sale is not involved. Transfer of property in the papers used for obtaining positive prints is mainly incidental to such contract. Even assuming for the sake of arguments that the petitioner s activity involved works contract, no tax liability arose as no transfer of property took place. Section 2(u) defining works contract was inserted by Act No. 7 of 1987 with effect from April 1, 1987. The works contract as defined under section 2(u) of the Act became exigible to tax with effect from April 22, 1988. Leviability of tax on works contract was possible if it fell under section 2(u) read with section 2(o)(ii) of the Act. The present contracts did not involve any transfer of property in goods. There did not exist any basic goods or nucleus in which additions or accretions were made in the execution of works contract. There was no improvement or accretion in negatives. 4.. Mr. Rajendra Mehta also contended: Penalty under section 16(1)(e) of the Act could be levied when there was conscious and deliberate concealment of any particular from a return furnished or a deliberate furnishing of inaccurate particulars therein. The existence of men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1977] 39 STC 237 (SC), Everest Copiers v. State of Tamil Nadu [1996] 103 STC 360 (SC), Bavens v. Union of India [1995] 97 STC 161 (Ker) and Tasveer Kendra v. State of Gujarat [1976] 37 STC 238 (Guj). 7.. The honourable Rajasthan High Court has held in the Writ Petition No. 3139 of 1959 filed by the petitioner itself that the question whether a contract is a works contract or a works contract purely of labour or service is a mixed question of fact and law. 8.. Admittedly, the petitioner developed exposed films and obtained negatives therefrom and also prepared positive prints from the negatives, both brought by the customers. For these jobs, consolidated amounts had been charged depending upon the work involved and size and number of prints required. The exposed films are developed in a dark room with the help of a mixture of certain chemicals in defined proportion and negatives are obtained therefrom. This work can only be done by a person who has acquired experience and specialised knowledge in this respect. If exposed film is not properly developed, the negative obtained therefrom would not give proper and positive prints. In order to get good positive prints, retouching of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution. 12.. The position remained the same even after the 46th Amendment of the Constitution. When there is no transfer of property in any goods or materials, there is no question of tax liability on account of the contract for service/labour/ skill. No transfer of property is involved in a works contract for labour/service in which the use of material is incidental to its execution and the transfer of title to the goods is merely an incident of the contract and not on account of any express or implied sale of the goods. 13.. Assistant Sales Tax Officer v. B.C. Kame [1977] 39 STC 237 (SC), fully applies to these cases. It is not correct to say it is confined to a photographer who goes to a place on the request of his customer, takes photographs and gives positive prints after taking the snaps. It would be best to quote here the following observations made at page 241: When a photographer like the respondent undertakes to take photograph, develop the negative, or do other photographic work and thereafter supply the prints to his client, he cannot be said to enter into a contract for sale of goods. The contract on the contrary is for use of skill and labour by the photographe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily convert the contract into one of sale of those materials. In every case, the court would have to find out what was the primary object of the transaction and the intention of the parties while entering into it. It may in some cases be that even while entering into the contract of work or even service, parties might enter into separate agreements, one of work and service and the other of sale and purchase of materials to be used in the course of executing the work or performing the service. But, then in such cases the transaction would not be one and indivisible, but would fall into two separate agreements, one of work or service and the other of sale. These principles can be deduced from the decision of this Court in State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474 (SC). In the decision in the case of State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 STC 353 (SC); [1959] SCR 379, this Court had stated that according to the law, both of England and of India, in order to constitute a sale, it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which of course presuppos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egatives, doing other photographic work and supply of prints. 18.. It is correct that recent decision of honourable Supreme Court given in Everest Copiers v. State of Tamil Nadu [1996] 103 STC 360, relates to photostat copier and not to a photographer. It is clear from extract of the decision, quoted in para 14 supra, that it does not support the contention of the learned counsel for the respondents. On the contrary, it greatly supports the contention of the learned counsel for the petitioner. 19.. It is correct that Bavens v. Union of India [1995] 97 STC 161 (Ker), supports the contention for the learned counsel for the respondents. It has been held that the developing of the exposed film and preparating of positive print from the negative involve processes attracting section 2(xix)(a), Kerala General Sales Tax Act, 1963, defining works contract . This case is distinguishable for various reasons. Firstly, the definition of works contract given in section 2(xix)(a), Kerala General Sales Tax Act, 1963, does not include the expression to exclude a works contract purely of labour or service as appears in section 2(u) of the Rajasthan Sales Tax Act, 1954. Secondly, it has simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars therein. It is obvious that the penalty is attracted when the act of the dealer is a conscious act of concealment of any particulars or of deliberate furnishing of inaccurate particulars in his return. It has been held in the Commissioner of Income-tax, West Bengal v. Anwar Ali [1970] 76 ITR 696 (SC); AIR 1970 SC 1782 while construing a similar provision in section 28(1)(c) of the Income-tax Act, 1922 that mere rejection of the explanation of the assessee as false does not automatically attract penalty in such a situation and before the penalty can be imposed it must be held that the assessee had consciously concealed the particulars or had deliberately furnished inaccurate particulars. In the present case the Tribunal has held that there was no attempt at concealment by the dealer and his act was bona fide, inasmuch as, the transaction was shown in the books of accounts produced before the departmental authorities and the same was not shown in the return since the dealer contended that the transaction was not exigible to sales tax. There is thus no infirmity in the Tribunal s order setting aside the penalty imposed by the assessing authority under section 16(1)(e) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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