2020 (4) TMI 799 - HC - Service Tax

Nature of activity - sale or service - use of the paper upon which an image is printed using certain consumables and chemical in the photography service - valuation of photography service to be determined in isolation of cost of such goods or not - meaning of ‘sale’ appearing in exemption Notification No.12/03-ST dated 20.06.200 - deemed sale - whether the appellant-assessee was entitled to the benefit of Notification No.12/2003-ST dated 20.06.2003?

Whether for the purposes of service tax the value of photography service can be determined separately from the value of certain consumables and chemicals which are used on the paper for printing the image and whether such printed photograph can be said to be a sale of goods in terms of Article 366(29A)(b) of the Constitution? - HELD THAT:- The view expressed by the Apex Court in Bharat Sanchar Nigam Limited’s case [2006 (3) TMI 1 - SUPREME COURT ] that after the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of clause (29A) 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, was reiterated by the Apex Court in M/s Pro. Lab’s case - the finding of the Tribunal that in Bharat Sanchar Nigam Limited’s case, the Apex Court has only given the passing remarks and did not overrule either C.K. Jidheesh [2005 (10) TMI 3 - SUPREME COURT ] or Rainbow Colour Lab and Another vs. State of Madhya Pradesh and others, [2000 (2) TMI 2 - SUPREME COURT ], is unsustainable.

Whether appellants having once paid the VAT under the State Act as works contractor on the material and chemicals consumed in photography service, can be charged service tax on the same value? - HELD THAT:- In view of the law laid down by the Apex Court in M/s Pro. Lab’s case, it can be safely held that photography service, which has both the elements of goods and services is covered under works contract. Thus, in a works contract which involves transfer of property, the provisions as contained in Article 366(29A) of the Constitution are attracted. Therefore, in the light of sub-clause (b) of Clause (29A) of Article 366 of the Constitution, in execution of a works contract when there is transfer of property even in some other form than in goods, the tax on such sale or purchase of goods is leviable. In this view of the matter, after the 46th Amendment, there is no question of dominant nature test applying in photography service and the works contract, which is covered by Clause (29A) of Article 366 of the Constitution where the element of goods can be separated, such contracts can be subjected to sales tax by the States under Entry 54 of List II of Schedule II - Once that is so, value of photographic paper and consumables cannot be included in the value of photography service for the purposes of imposition of service tax.

The term ‘sale’ appearing in exemption Notification No.12/03-ST dated 20.06.2003 would also include “deemed sale” as defined by Article 366(29A)(b) of the Constitution.

Appeal allowed - decided in favor of appellant.