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TMI Blog2008 (10) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... s CORAM : Mr S N Jha, President Mr M Veeraiyan, Member (T) Per : S N Jha : The dispute in these four appeals - which were heard together and are disposed of by this common order - relates to determination of the value of photography service as a taxable service for the purpose of levy of service tax under the Finance Act, 1994. 2. The service provided or to be provided to a customer by photography studio or agency in relation to photography in any manner is a taxable service under sub-clause (zb) of Clause 105 of Section 65 of the Finance Act, 1994. 'Photography Studio or Agency' has been defined in Clause 79 of Section 65 to mean, any professional photographer or a commercial concern (now any person w.e.f 18.04.2002) engaged in the business of rendering service relating to photography . Section 67 of the Act deals with valuation of taxable services for charging service tax. As the provision stood at the relevant time prior to 18.04.2006 the value was to be computed on the basis of gross amount charged by the service provider for the taxable service provided or to be provided by him. 3. The authorities below have held that the value of the photography s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved in this category of a photographer's activity. However modernised the camera be, the skill of the photographer is still important for getting the best results. It cannot also be treated as a sale of the photograph for the reason that it is not the intention of the customer to buy a photograph from the photographer. The photograph has no marketable value. What is expected from the photographer is his service, artistic skill and talent. If any property passes to the customer in the form of photographic paper, it is only incidental to the service contract. No portion of the turnover of a photographer relating to this category of work would be exigible to sales tax. and agreed with the above view of the High Court. The Supreme Court concluded as under: 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(29A)(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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow Colour Lab case must be deemed to have been over-ruled or in any event required to be reconsidered by a Larger Bench. The plea was rejected in these words:- We are unable to accept this submission. In Associated Cement Companies' case, 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's case. Even otherwise, the questions raised in this Petition are fully covered and answered by the decision of the Kerala High Court, which we confirm as laying down the correct law. 8. The Supreme Court in BSNL case (supra) decided by a Larger Bench of three Judges took a different view. Instead of referring to the relevant findings - which may not be adequate to convey the point and the underlying logic - it would be appropriate to extract the relevant parts of the judgment in extenso as under: 41. Sub-clause (a) covers a situation where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word 'goods' was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, delivery etc. would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remain static. The Courts must move with the times. But the Forty-sixth Amendment does not give a licence, for example, to assume that a transaction is a sale and then to look around for what could be the goods. The word goods has not been altered by the Forty-sixth Amendment. That ingredient of a sale continues to have the same definition. The second respect in which Gannon Dunkerley has survived is with reference to the dominant nature test to be applied to a composite transaction not covered by Article 366(29A). Transactions which are mutant sales are limited to the clauses of Article 366(29A). All other transactions would have to qualify as sales within the meaning of Sales of Goods Act, 1930 for the purpose of levy of sales tax. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the M.P. General Sales Tax Act for the purpose of levy of sales tax on the business turnover of the photographers. 47. The Court answered the questions in the negative because, according to the Court: : (SCC pp.388-89 391, paras 11 15) Prior to the amendment of Article 366, in view of the judgment of this Court in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. the States could not levy sales tax on sale of goods involved in a works contract because the contract was indivisible. All that has happened in law after the Forty-sixth Amendment and the judgment of this Court in Builders' case is that it is now open to the States to divide the works contract into two separate contracts by a legal fiction : (i) contract for sale of goods involved in the said works contract, and (ii) for supply of labour and service. This division of contract under the amended law can be made only if the works contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer in property takes place as an incident of contract of service..........What is pertinent to ascertain in this connection is what was the dominant intention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in Kerala Colour Lab Association, remains intact and binding. It was pointed out that in C.K. Jidheesh case, the Supreme Court noticed, with approval, the decision of the Kerala High Court in Kerala Colour Lab. Association vs UOI, 2003 (156) ELT 17 (Ker.). Heavy reliance was placed on the said decision of the Kerala High Court and it was stated that decision was upheld by the Supreme Court in SLP (Civil) No. 11614 of 2002 and SLP (Civil) CC 6811 of 2002. 11. In BSNL case the principal question was whether providing mobile phone connections by the service providers partakes the character of sale on which States could levy sales tax. While according to the States it also amounted to 'sale' on which sales tax could be levied, the service providers/petitioners contended that the transaction was merely a service and the Union Government alone was competent to levy tax thereon. The decision was thus no doubt rendered in the context of leviability of sales tax on portion of the activity or transaction, but from the extracted portions of the judgment, it is amply clear that the Supreme Court went into the entire gamut of 'deemed sale' in the context of Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases by either party in support of their respective contentions. While on behalf of the appellants, reference was made to Tvl. R. Mini Color Lab vs The Tamil Nadu Taxation, Special Tribunal, The Sales Tax Appellate Tribunal, reported in MANU/TN/8854/2007; Magic Creative Pvt. Ltd. vs CCT, 2008-TIOL-04-SC-VAT; Shilpa Colour Lab vs CCE, Calicut, 2007 (5) STR 423; Digi Studio vs CCE, Calicut, 2008 (10) STR 31; CCE vs Crystal Colour Lab, 2008 (10) STR 26; Adlabs vs Commissioner, 2006 (2) STR 121; Kunhayammed vs State of Kerala, 2001 (129) ELT 11 (SC); Gujarat Ambuja Cements Ltd. vs Union of India, (2005) 4 SCC 214,218; and Suchitra Components vs CCE, 2007 (208) ELT 321 (SC). 15. On behalf of the Revenue, reliance was placed on Laxmi Color (P) Ltd. vs Commissioner of Central Excise, Jaipur-ll, 2006 (3) STR 363 (T-Del.); Delux Colour Lab. Pvt. Ltd. vs Commissioner of Central Excise, Jaipur, 2005 (4) STR 152 (T-Del); Panchsheel Colour Lab. Vs Commissioner of Central Excise, Raipur, 2006 (4) STR 320 (T-Del); Delhi Studio Colour Lab vs Union of India, 2007 (5) STR 184 (P H); Commissioner of Central Excise Customs vs Larsen Toubro Ltd., 2006 (4) STT 12 (CESTAT-MUM); Hari Khemu Gawali ..... X X X X Extracts X X X X X X X X Extracts X X X X
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