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TMI Blog2007 (8) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... t;), upholding the decision of the Sales Tax Appellate Tribunal dated 22.1.1997 in respect of levy of sales tax on the turnover pertaining to the processing of photo film as outright sale for the assessment year 1991-92 made in T.A.No.230 of 1995 but deleting the penalty levied on the petitioner under Section 12(5)(iii) of the T.N.G.S.T.Act. 3. The facts of the case, which formed basis for filing the writ petition proceed as follows: The petitioner is a colour lab engaged in the business of processing and printing of films on the negatives supplied by the customer. The petitioner is also a dealer under the T.N.G.S.T.Act on the file of the third respondent -Deputy Commercial Tax Officer, Mandavalli Assessment circle. For processing and printing the film on the negatives supplied by the customers, the petitioner had collected charges on consolidated basis. For the assessment year 1991-92, the petitioner had reported a total and taxable turnover of ₹ 10,28,387/- and nil respectively. The assessing officer, the third respondent had held that the transaction represented sale of finished goods and not works contract and disallowed the claim of exemption on the entire turnover and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty or not and did not involve activity similar or identical to that of petitioner and hence the decision in Associated Cement Companies case ((2001) 124 STC 59) cannot be regarded as a binding precedent. He further submits that the decision of the Supreme Court in Associated Cement Companies case ((2001) 124 STC 59) cannot be construed as overruling the principle stated in Rainbow Colour Lab case ((2000) 118 STC 9) in the absence of any specific finding in the later decision overruling the principle stated in Rainbow Colour Lab case ((2000) 118 STC 9). He further contended that the availability of definition of the term "works contract" in TNGST Act would not militate the issue against the petitioner in view of the decision in Rainbow Colour Lab case ((2000) 118 STC 9). He further contended that even assuming that the transaction of the petitioner is works contract, the authority could levy tax only on the materials used in the transaction under Section 3-B of the T.N.G.S.T.Act, but not on the entire transaction value. In order to bring home his contention, the learned counsel cited the following cases: (1) PRAKASH AMICHAND SHAH VS. STATE OF GUJARAT AND OTHERS reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion about the treatment given to the transaction of the petitioner by the respective authorities. In order to have a clear view of the treatment of the transaction by each of the hierarchy of authorities, we are of the view that the following facts need to be mentioned. 9. The assessing officer by overruling the objections of the assessee that the turnover represents "works contract", treated the turnover as outright sale and assessed to tax at 10 percent under entry 7 of the first Schedule to the T.N.G.S.T.Act. The first appellate authority Appellate Assistant Commissioner has also given a clear finding to the effect that he had no hesitation to hold that the transaction of the assessee has to be treated as a "sale" and not "works contract" and thus confirmed the disallowance of exemption claimed by the assessee over the turnover ofRs.10,28,387/-. The Appellate Tribunal, while narrating the facts, had fell into error, in the sense that according to the appellate Tribunal, the first appellate authority Appellate Assistant Commissioner took a different view and treated the turnover for assessment as "works contract". In the ultimate findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of works contract under the amended law could be made only if the contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer of property takes place as an incidence of contract of service. The amendment has not empowered the State to indulge in microscopic division of contract involving the value of the material used incidentally in such contract of service. Thus, holding, allowed the appeal. (bold supplied) 11. PRAKASH AMICHAND SHAH VS. STATE OF GUJARAT AND OTHERS reported in AIR 1986 SUPREME COURT 468 was a case in which the constitutional validity of Town Planning Scheme No.VIII (Umarwada) in respect of certain lands situated at Surat City in the State of Gujarat, published under the provisions of Bombay Town Planning Act, 1954 insofar as the said scheme pertained to the land of which the appellant therein was the lessee, was questioned. In that case, the Supreme Court observed that all the arguments based on Articles 14 and 31(2) of the Constitution against that Act were repelled by the Constitution Bench in the STATE OF GUJARAT VS. SHANTILAL MANGALDAS, (AIR 1969 SC 634). The Supreme Court while answering the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed as obiter dicta and are not authoritative. The task of finding the principle is fraught with difficulty as without an investigation into the facts, it cannot be assumed whether a similar direction must or ought to be made as a measure of social justice. Precedents sub silentio and without argument are of no moment. Mere casual expressions carry no weight at all, nor every passing expression of a Judge, however eminent, can be treated as an ex cathedra statement having the weight of authority." 13. In the case of STATE OF HARYANA VS. RANBIR reported in (2006) 5 SCC 167, it was held that a decision is an authority for what it decided and not what could logically be deduced therefrom; that the distinction between a dicta and obiter was well known; Obiter dicta was more or less presumably unnecessary to the decision. It might be an expression of a viewpoint or sentiments, which has no binding effect. An 'obiter dictum' as distinguished from a ratio decidendi is an observation by the Court on a legal question suggested in a case before it, but not arising in such manner as to require a decision. Such a obiter may not have a binding precedent. But it could not be denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the word sale in the M.P. General Sales Tax Act, 1958 after its amendment consequent to the insertion of Article 366(29A). The question there was whether the job rendered by a photographer in taking photographs, developing and printing films would amount to works contract for the purpose of levy of sales tax. This Court held that the work done by the photographer was only a service contract and there was no element of sale involved. After referring to earlier decisions of this Court, it was observed at page 14 of STC (391 of SCC) as follows: 15 . Thus, it is clear that unless there is sale and purchase of goods, either in fact or deemed, and which sale is primarily intended and not incidental to the contract, the State cannot impose sales tax on a works contract simpliciter in the guise of the expanded definition found in Article 366(29-A)( b ) read with Section 2( n ) of the State Act. On facts as we have noticed that the work done by the photographer which as held by this Court in Kame case 2 is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the respondent State cannot be sustained. 25. Even though in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses related to the pre-Forty-sixth Amendment era where in a works contract the State had no jurisdiction to bifurcate the contract and impose sales tax on the transfer of property in goods involved in the execution of a works contract. The Forty-sixth Amendment was made precisely with a view to empower the State to bifurcate the contract and to levy sales tax on the value of the material involved in the execution of the works contract, notwithstanding that the value may represent a small percentage of the amount paid for the execution of the works contract. Even if the dominant intention of the contract is the rendering of a service, which will amount to a works contract, after the Forty-sixth Amendment the State would now be empowered to levy sales tax on the material used in such contract. The conclusion arrived at in Rainbow Colour Lab case (2000) 118 STC 9 (SC) : (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) 73 STC 370 : (1989( 2 SCC 645." (bold supplied) 17. The Supreme Court however found in the said judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the printing of photograph from negative was service contract has been doubted by the Larger Bench in Associated Cement Companies case (2001) 124 STC 59, the Supreme Court held thus: "13. We are unable to accept this submission. In Associated Cement Companies' case (2001) 4 SCC 593 the question was whether or not custom duty could be levied on drawings, designs, diskettes, manuals, etc. The argument there was that these were intangible properties and not goods as defined in Section 2(22) of the Customs Act. The question of levy of service tax did not arise in that case. The observations relied upon are mere passing observations and do not overrule Rainbow Colour Lab case (2000) 118 STC 9 (SC) : (2000) 2 SCC 385 " (bold supplied) 20. However, a Bench consisting of three Judges in the case of Bharat Sanchar Nigam Ltd. v. Union of India,(2006) 145 STC 91 : (2006) 3 SCC 1, wherein the point for consideration was in the nature of transaction by which mobile telephone connections are enjoyed, is it a sale or is it a service or is it both, with reference to the sales tax legislation for the levy of sales tax. The Supreme Court considering Rainbow Colour Lab case (2000) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45" 50. We agree. After the Forty-sixth Amendment, the sale element of those contracts which are covered by the six sub-clauses of clause (29-A) of 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 (2001) 124 STC 59 (SC) were merely obiter and that Rainbow Colour Lab (2000) 2 SCC 385 was still good law, it was not correct. It is necessary to note that Associated Cement 26 did not say that in all cases of composite transactions the Forty-sixth Amendment would apply." (bold supplied) 21. The above Judgment without any uncertain terms answered that Associated Cement Companies' case (2001) 124 STC 59 =(2001) 4 SCC 593 is correct in saying Rainbow Colour Lab case (2000) 118 STC 9 (SC) runs counter to the provisions contained in Article 366(29-A) as also of the Constitution Bench decision in Builders Association case ((1989) 73 STC 370). The judgment further ruled that the observation in C.K.JIDHEESH VS. UNION OF INDIA (2006) 144 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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