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TMI Blog2008 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... original concept and design advertising material for their clients and design brochures, annual reports etc. The Contract between the appellant and their clients does not appear to have been entered into in writing as no written contract as such has been placed before us. 4. We may notice a purchase order and the invoice which have been produced before us and the authenticity whereof is not in question : ESTIMATE P & PR Unit M/S ISRO HEADQUARTERS, Antariksh Bhavan, New BEL Road, Bangalore, Estimate No. 014F Date : 26.04.2003, Job No.: 051/APR/ 03, Enquiry No. Co-ordinated by : Mr. C.S. Ramachandran Particulars Qty. Rate Rs. P. Amount Rs. P. 1 GSAT 2 POSTER Conceptualising, Design and Production of Computer Artwork of size A3, front back 1 No. 1 No. 1,500.00 1,500.00 1,500.00 1,500.00 2 B/w Line drawings in back page Artwork of size A5 4 Nos. 100.00 400.00 3 Digital Inkjet Output on Photoglossy Paper for Layout of size A3 (1.5 sq. ft.)@ Rs. 100/- per. sq. ft. front back 1 No. 1 No. 150.00 150.00 150.00 150.00 4 Four Colour Separated Positives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less : Exempted turnover 1) Taxes collected Rs. 2,43,848-00 2) Discount allowed Rs. 80,332-00 3) Service charges, design & art work charges collected in which no transfer of property in goods is involved Rs. 54,27,260-00 4) Advertisment charges for Newspapers collected Rs. 80,12,976-00 5) Sales outside the state Rs. 62,400-00 Rs. 1,38,26,816-00 Taxable turnover Rs. 65,53,320-00 Classification of TTO: 1) Sale of Computer Printedmaterials @ 8% from 1.4.03 to 31.5.03 Rs. 4,57,242-00 Rs. 36,580-00 2) -do- from 1.6.03 to 31.3.04@ 9% Rs. 16,19,122-00 Rs. 145,721-00 3) -do- to Government Department sagainst D forms @ 5% Rs. 11,45,034-00 Rs. 57,252-00 4) Sale of Printed materials as II dealer liable for RST @ 1.5% Rs. 33,31,922-00 Rs. 49,979-00 5) Addl. Tax after 1.6.03 @ 1% Rs. 27,642/- 6) Cess @ 15% on tax after 1.2.04 Rs. 5,850-00 Total Tax Rs. 3,23,024-00 6. After passing of the order of assessment, a raid was conducted. A criminal proceeding was initiated against the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is clear to us is the services rendered by the appellant is an indivisible activity and liable to levy of tax. The authority in Annexure-A after noticing the material facts, has chosen to hold that in the bills there is a separate charge made as content development concept design, photography scanning and other charges such as system charges including colour sketch pen or computer used design software etc. Ultimately, the brochures come out. Considering the entire ambit of activity of the dealer, it is seen that it is a comprehensive contract or supply of printed material developed by the company. The bills also indicate the entire activity tantamounts to making indivisible contract in a divisible contract . The subsequent rectification application made by the applicant dated 24.12.2005 was not considered by the authority in terms of Annexure-H, after noticing the judgment of the Supreme Court in the case of Associated Cement Companies Ltd. (Stated supra). Therefore, it is clear that there is no mistake apparent on the face of the record. We are in full agreement with the impugned orders at Annexure-A & H. 9. Mr. Joseph Vellapalli, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch such a proceeding is taken recourse to is well known. When a decision of a competent authority is not known and an entrepreneur intends to know as to what would be his liability under the taxing statute, such a proceeding is ordinarily taken recourse to. But it is not necessary for us to consider the matter any further. In this case, the order of assessment was complete. The State did not prefer any appeal there against. The process of accounting or the methodology adopted by the assessee for the purpose of payment of both service tax as also the value added tax attained finality at least for that year. 12. Be that as it may, as the order of the competent authority under Section 60 of the Act would be binding on the assessing authority, in future also, we may examine the merit of the matter. 13. The fact that the appellant is a service provider is not in dispute. It is also not in dispute that the orders received by it to provide such services is party specific and issue specific; be it for issuance of a brochure or a year book or for any other purpose. Appellant, in their returns, made three categorical divisions in regard to its tax liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. 16. By reason of the said provision, therefore, a legal fiction was created so as to make the supply of goods involved in a works contract, subject to tax. A transaction of the present description was not contemplated. The question came for consideration again in Builders Association of India & Ors. v. Union of India & Ors. [(1989) 2 SCC 645] and M/s.Gannon Dunkerley & Co. & Ors. v. State of Rajasthan & Ors. [(1993) 1 SCC 364]. It has expressly been laid down therein that the effect of amendment by introduction of clause 29A in Article 366 is that by legal fiction, certain indivisible contracts are deemed to be divisible into contract of sale of goods and contract of service. In Gannon Dunkerley case (supra), it had been held: Keeping in view the legal fiction introduced by the Forty-sixth Amendment whereby the works contract which was entire and indivisible has been altered into a contract which is divisible into one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. It indisputably becomes an object of trade and commerce. These mediums containing the intellectual property are not only easily available in the market for a price but are circulated as a commodity in the market. Only because an instruction manual designed to instruct use and installation of the supplier program is supplied with the software, the same would not necessarily mean that it would cease to be a goods . Such instructions contained in the manual are supplied with several other goods including electronic ones. What is essential for an article to become goods is its marketability. 19. The question yet again came up for consideration before a Three Judge Bench of this Court in Bharat Sanchar Nigam Ltd. v. Union of India (supra) wherein it was held; 44. Of all the different kinds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of view of a reasonable person of average intelligence. 20. We may, at this juncture, also notice the decision of this Court in Associated Cement Company (supra). The question which arose for consideration therein was as to whether any intellectual property contained in a software would be subject to custom duty within the meaning of Section 2(22) of the Customs Act, defining goods. A three Judge Bench of this Court sought to make a distinction between such a contingency arising under the Customs Act involving a works contract and a contract of sale stating : 32. In the sales tax cases referred to hereinabove no doubt the question which arose was whether in a works contract, where there was a supply of materials and services in an indivisible contract, but there the question had arisen because the States powers prior to the Forty-sixth Amendment to the Constitution, were not entitled to bifurcate or split up the contract for the purpose of levying sales tax on the element of moveable goods involved in the contract. Apart from the decision in Rainbow Colour Lab case 11 which does not appear to be correct, the other decisions cited related to the pre-For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government would be deprived of obtaining any tax whatsoever under the Finance Act, 1994, it is possible to arrive at a conclusion that no tax at all would be payable as the tax has been held to be an indivisible one. A distinction must be borne in mind between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and clause 29A had to be inserted in Article 366, must be kept in mind. 26. We have noticed hereinbefore that a legal fiction is created by reason of the said provision. Such a legal fiction, as is well known, should be applied only to the extent for which it was enacted. It, although must be given its full effect but the same would not mean that it should be applied beyond a point which was not contemplated by the legislature or which would lead to an anomaly or absurdity. 27. The Court, while interpreting a statute, must bear in mind that the legislature was supposed to know law and the legislation enacted is a reasonable one. The Court must also bear in mind that where the application of a Par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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