TMI Blog1999 (3) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... and sales of photographic goods, processing of film from the negatives given by their customers. They also undertake the job of photography. The controversy arose when works contract was made deemed sales in pursuance of the 46th Constitutional Amendment to the Kerala General Sales Tax Act, 1963 (for short the Act ). According to the appellant, photography is not a specified activity covered by the Fourth Schedule to the Act and the activity of a photographer/ the processing unit are three-fold: (a) taking photographs of customers with films supplied by the photographer and supplying prints or enlargements after developing the same; (b) developing, printing and if necessary enlarging exposed films supplied by the customers; and (c) take positive prints from the negatives brought by the customers and supply the prints in desired size to the customer along with their negative. When a photographer undertakes to take photographs, develop negative or do other photographic works and thereafter supply the prints to his clients, he cannot be said to enter into a contract for sale of goods and the contract, on the contrary, is for use of skill and labour by the photographers to bring ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the goods, namely, the negative supplied by the customer in order to bring about the activity within the ambit of the works contract. It is submitted that the said decision has been affirmed by the Supreme Court when it dismissed Special Leave Petition (Civil) No. 4700 of 1993 on May 3, 1993 See [1994] 92 STC FRSC 1, Sl. 1. against the decision of the West Bengal Taxation Tribunal. This apart, the Supreme Court had also approved this position in the decision reported in Everest Copiers v. State of Tamil Nadu [1996] 103 STC 360 ; AIR 1996 SC 2662. In view of the above decision, counsel submitted that the learned single Judge ought to have allowed the original petition in toto declaring that the appellant is not liable to pay tax on their turnover relating to the photography as works contract. 4.. Since this legal position has not been considered by the learned Judge, the appellant filed R.P. No. 1 of 1999 highlighting the aforesaid aspects. The learned Judge dismissed the review petition on January 12, 1999. Aggrieved by the judgment of the learned single Judge, the petitioner preferred the writ appeal. According to the appellant, in view of the settled legal position, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the assessment order. Exhibit P4 is the demand notice and exhibit P5 is the order passed by the Appellate Assistant Commissioner, Thrissur, in a stay petition filed by the appellant wherein the Appellate Assistant Commissioner granted conditional stay directing the appellant to pay 50 per cent of the balance tax and surcharge within 15 days and furnish security for the balance amount. In the original petition, similar and identical contentions and question of law have been raised as in W.A. No. 776 of 1999. The original petition was dismissed by the learned single Judge by confirming the conditional order of the appellate authority. 6.. This appeal has been filed against the judgment of Shanmugham, J., in O.P. No. 7208 of 1994 which was disposed of in terms of Jacob Cherian s case [1995] 97 STC 161 (Ker) Reported as Bavens v. Union of India.; (1995) 1 KLT 240. The review petition filed to review the above judgment was dismissed by Sivarajan, J., on March 19, 1999 in R.P. No. 7 of 1999. Here again, the very same contentions are raised as in the other two writ appeals. 7.. Learned counsel for the appellants reiterated the contentions raised by the appellants in the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction, fitting out, improvement, repair, manufacture, processing, fabrication, erection, installation, modification or commissioning of any movable or immovable property. Mere execution of a works contract does not by itself attract liability for tax under the Act unless it is accompanied by transfer of property in goods involved in the execution of the contract. When goods used in the process of executing a works contract are consumed in the process as in the case of chemicals used by the party or fuel and power, there is no transfer of any goods from the contractor to the awarder of the contract attracting liability to tax. The 46th Amendment to the Constitution has introduced clause (29A) to article 366 defining tax on the sale or purchase of goods as inclusive of a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract. The definition of sale in section 2(xxi) of the Act was thereafter amended with effect from April 1, 1984, inter alia, adding Explanation (3A) deeming a transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract as a sale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, it is not so in the case of the further processing or taking positive prints or making additional copies especially due to the availability of sophisticated cameras and other accessories/equipments used by the photographers in their work. Therefore, the Government Pleader submitted that the appellants are bound to pay tax on the value of the photographic paper which forms part of their turnover. 13.. We have already extracted the three categories of activities carried on by the photographers. The first category is where the photographer takes a photograph of the customer, develops the negative, takes positive prints and delivers the prints to the customer. Here, the photographer uses his own camera and his own film. The negative which is subjected to further processing belongs to the photographer and not to the customer. No basic goods are provided by the customer which was subjected to processing, etc., by the photographer so as to make the contract one in the nature of works contract. There is no accretion to goods or the property or nucleus of a property which originally belonged to the customer. By applying the above test, it cannot be held that there is any works cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Madhya Pradesh General Sales Tax Act when the photographer takes photographs or does other photographic work and thereafter supplies the photographic prints to his customer. The photographer in that case carries on business, inter alia, of buying and selling photographic goods also. After buying photo-graphic goods, he either sells them to his customers or uses them in three ways: (i) in taking photographs and supplying prints thereof, (ii) in making enlargements for the clients who bring their own negatives, and (iii) in preparing positive prints of the same size from the negatives brought by the customers. The sales tax authorities assessed the assessee to sales tax on his turnover. The assessee filed a writ petition to challenge the levy of sales tax on the last item, i.e., item (iii) above, namely, the item for the supply of photoprints. His contention was that in taking a photograph, preparing its negative and thereafter the final positive print for supplying the same to the client, he undertakes a contract of work and labour and does not enter into a sale transaction. It was also his contention that the prepared positive print was not a marketable commodity and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the test of marketability will be a useful guide in most of the situations. The division Bench, after referring to Srinivasa Printing Works v. Sales Tax Officer (1966) KLT 1139, Sales Tax Officer v. Somasundaran [1974] 33 STC 68 (Ker), P.T. Varghese v. State of Kerala [1976] 37 STC 171 (Ker) and various other decisions, held that on the facts and circumstances of the case, no mistake was committed by the Tribunal either in ascertaining the facts or in applying the relevant principles of law and that the transactions regarding supply of letter heads, visiting cards, etc., were in the nature of works contract. The division Bench has also observed that the Tribunal s decision could not be treated as laying down inflexible rules applicable to all transactions of a similar nature where attendant facts might be different. The Bench further held that it is difficult to accept the contention of the Government Pleader that supply of bill books, etc., by a printer should always be regarded as a sale on the basis of the authority of P.T. Varghese v. State of Kerala [1976] 37 STC 171 (Ker) and that the said decision cannot be construed as laying down any such inflexible rule. 18.. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is essentially a contract to do skilled labour. Moreover, if the teeth prepared by the dentist for a particular customer, was not taken delivery of by him, it would be a waste. In other words, what is manufactured is not marketable goods. That is a very vital factor to decide whether there is a sale of goods. In the light of the above, and for the reasons contained in paragraph 3 of the order of the Appellate Tribunal, we hold that the Appellate Tribunal was justified in stating that teeth setting charges is not a transaction of sale of goods exigible to levy of sales tax under the Act. 19.. We shall now advert to the decision cited by learned counsel for the appellants in Everest Copiers v. State of Tamil Nadu [1996] 103 STC 360 (SC); AIR 1996 SC 2662. In that case, the appellant runs a photocopying business. Assessment was made on the basis that there was a sale by the appellant of the photocopied or xeroxed document to the customer. The Supreme Court was concerned with the question as to whether the making of photostat copies with the use of a xerox or other machine and delivering the copies so taken to the customer on receipt of payment amounts to a sale of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the photographers into three categories and also considered the various judgments cited by either side. The division Bench in Jacob Cherian v. Union of India [1995] 97 STC 161 (Ker)*; (1995) 1 KLT 240 has held with respect to first category as work not exigible to sales tax finding that the work of the photographer is of artistic skill and talent. If any property passes to the customer in the form of photographic paper, it is only incidental of service contract. As regards category Nos. 2 and 3, the division Bench held that the work done by the assessee in these categories would certainly come within the activity processing referred to in the definition of works contract . Taking positive prints out of the developed negatives which is an allied activity to the processing of exposed film would come under the definition of works contract . The photographer is working upon the exposed film or the negatives supplied by the customer and produce the positive prints in the desired sizes. The division Bench also negatived the contention that while carrying on the above activity of processing an exposed roll of film and taking positive prints therefrom, there is no artistic talent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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