COLOR LAB IS COVERED UNDER 'PHOTOGRAPHY STUDIO OR AGENCY' AND IS LIABLE TO SERVICE TAX

[Mr. M. GOVINDARAJAN]

The Finance Act, 2001 brought the photograph service in the service tax net. Section 65 (105) (zb) of the Finance Act, 1994 ('Act' for short) defines the taxable service is a service to provided or to be provided to any person by a photography studio or agency in relation to photography, in any manner. Section 65 (78) of the Act defines the term 'photography' which includes still photography, motion picture photography, laser photography, aerial photography or fluorescent photography.  Section 65(79) of the Act defines 'photography studio or agency' as any professional photographer or any person engaged in the business of rendering relating to photography. CBEC Instruction letter (File No. B11/1/2001-TRU, dated 09.07.2001 gives the details of various services coming under the photography service.

The said instruction letter indicates that the services which will come within the purview of service tax are still photography such as photographing persons or other subjects in studios or other locations, passport or identification photographs, fashion photos, industrial photographs of machine and buildings  etc.,; photographic service for advertising display, brochures, newspaper advertisement, catalogues, photography of any live event such as weddings, receptions, conventions, fashion shows, sports and news events (excluding news agency services, that is, press photographers are excluded), aerial photography such as photographs of landscape, structures and other surfaces from aircraft or helicopters with the help of camera mounted on such aircraft or helicopter; laser photography to create holograms; motion picture photography also known as cinematography to make films, which involves the general composition of a scene; the lighting of the set or location; the choice of cameras, lenses, filters and film stock; the camera angle and movements; and the integration of any special effects; fluorescence photography using ultraviolet rays to irradiate a surface or substance to identify eyes, stains and markings, specific chemical substances, and florescent components in microscope specimens; and any other kind of special photography service. Also covered are the photography services such as restoration of old photographs, processing and developing of photographic films and printing of photographs etc.,

If any definition is having inclusive clause then there is the door opened for many litigations. Like that in photography service also litigation arised. One such is whether the color laboratories is coming under the definition of photography service and is liable to service tax. This question has been answered by High Court, Madhya Pradesh in 'Colorway Photo Lab V. Union of India' - [2009 -TMI - 34137 - MADHYA PRADESH HIGH COURT].

The facts of the case run as follows. The petitioner's firm is engaged in the activity of developing of exposed negative film processing, and printing of photographs. The contention of the petition is that the work done by the petitioner does not fall within the definition of 'photography' and or 'photography studio or agency' and not liable to pay service tax.  It is further submitted that most of the issues proposed to be raised in the present writ petition stand concluded in view of the judgment of the Supreme Court in 'C.K. Jidheesh V. Union of India and others' - [2006 -TMI - 288 - Supreme Court] and in 'Rainbow Color La V. State of M.P.' - 2001 (134) ELT 332 (SC) but the question raised by the petitioner does not come within the definition of Clause 47 and or Clause 48 of Section 65 of the Act, therefore, the Court must decide the said question.

The petitioner further relying upon the judgment of the Supreme Court in 'South Gujarat Roofing Tiles Manufacturers Association and another V. State of Gujarat and another' -AIR 1977 SC 90  submitted that ordinarily the inclusive definition would not restrict its application to another article but in a given case the inclusive definition can be treated to be a closed definition. According to him the definition as given in Clause 47 and 48 of Section 65 of the Act, if are appreciated in their true perspective, it would clearly appear that the definitions are closed definitions. 

The Department contended the following:

> The word 'photograph' is not a restrictive definition but is an inclusive definition as 'photography studio or agency' would mean to include any professional photography or commercial concern engaged in the business related to photography, the work the petitioner would certainly come under the service and the petitioner would be liable to pay service tax;

> An identical challenge was made to the provisions of Finance Act and inclusive definition of 'photography', 'photography studio and/or agency' but the same had been turned down by the Apex Court in the matter of C.K. Jidheesh V. Union of India and others' - [2006 -TMI - 288 - Supreme Court];

> In 'Kerala Color Lab Association V. Union of India' - [2008 -TMI - 11622 - KERALA High Court]  it was held that the color lab would come within the definition of 'photography' and 'photography studio and agency';

> In the present set of the circumstances the Court must widen the scope of the subject because the opening words say that the definition is inclusive and there are no special reasons to treat the definition as closed definitions. The scope of the subject should always be considered in its true perspective;

The Hon'ble High Court after hearing both sides observed as follows:

> In the present matter the definition of 'photography' as provided in Clause 47 says that 'photography' includes still photography, motion picture photography, laser photography, aerial photography and fluorescent photography. This definition cannot be considered to be a closed definition because the photography avenues are much more then what are show in Clause 47;

> Similarly Clause 48 provides that 'photography studio or agency' means any professional photographer or a commercial concern engaged in the business relating to photography, then a person who is a professional photographer or a commercial concern would always come under the definition of 'photography' and 'photography studio or agency';

> In the matter of 'Rainbow Color lab and another V. State of MP and others (supra) the question before the Supreme Court was that whether the work of the photographer in taking photographs, developing and printing films was in the nature of a service contract not involving in any sale of goods. The Supreme Court observed that the work was not exigible to levy of sales tax because the work done by the color lab was not in the nature of a works contract;

> In the matter of 'Kerala Color Lab Association V. Union of India' - [2008 -TMI - 11622 - KERALA High Court] the Association came to the Court with a submission that the service tax was not leviable on the color laboratories because they were not providing any service to the consumer. The Division Bench of the Kerala High Court held that the photo color laboratories were to develop the negative and supply positive prints in the desired size, in the process the cost of material involved and passed on the consumer was far greater than the service involved.  The Court held that the color laboratories were also providing service to the consumers;

> The color photo laboratory in fact is an extended design of a studio. In a photography studio the photographer shoots the photos, thereafter in his dark room he develops negatives and, thereafter prints the desired size of the photographs. The work of the color laboratory is to receive the exposed negative/rolls, develop the same and print the photographs of the desired size as per the orders placed by the original consumer through the photographer who had taken the photographers either in the studio or anywhere else. When the word 'photography' includes still photography, motion picture photography, laser photography, fluorescent photography etc., then any negative used for taking photograph would come under the inclusive definition of photography. The work of the photographer is not only to shoot the person or the scene but is also to develop the negatives and bring the prints. When the part of the work is done by the photographer and the part of the work is assigned to others then such person i.e., color laboratory would in fact be a 'photography studio or agency';

> In our considered opinion the color laboratories would be a part of the 'photography studio or agency' involved in providing the service to the consumer and are amenable to the service tax.