TMI Blog2004 (3) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... application seeking advance ruling in regard to exigibility of digital printing to sales tax. The appellant submitted that process of digital printing is a skilled job of printing which does not involve any transfer of property in goods as a consequence of any contract of sales; that the customers provide the art works and designs in the form of computer files stored in floppy/compact discs; and that the assessee uses such art works and designs to produce full size pictures as per the specifications of the customers and the pictures are thereafter printed on vinyl film. It is submitted that the dominant intention of a contract relating to digital printing, is the process of digital printing. It is contended that the use of vinyl film is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of the contract. Every contract, be it a service contract or otherwise, may involve the use of some material or the other in execution of the said contract. State is not empowered by the amended law to impose sales tax on such incidental materials used in such contracts. (emphasis supplied) 4.. The authority however ruled that digital printing is a works contract liable to tax under section 5-B of the Act, under entry 43 of Sixth Schedule to the Act, by relying on the following observations of the Supreme Court in Associated Cement Companies Ltd. v. Commissioner of Customs [2001] 124 STC 59: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Rainbow case [2000] 118 STC 9 (SC); (2000) 2 SCC 385, the Supreme Court held that no part of the turnover of a photographer relating to the work of developing negatives and supplying positive prints would be exigible to tax. It is also true that a similar view of this Court in Keshoram Surindranath Photo-Mag (P) Ltd. v. Assistant Commissioner of Here italicised. Commercial Taxes [2001] 121 STC 175 was affirmed by the Supreme Court by order dated 20-4-2000 in SLP (Civil) Nos. 6136-6163 of 2000 following the decision in Rainbow case [2000] 118 STC 9 (SC); (2000) 2 SCC 385. But the principle laid down in Associated Cement Companies Ltd. ( ACC for short) [2001] 124 STC 59 (SC) will prevail over the decision in Rainbow case [2000] 118 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said question was specifically considered with reference to several decisions including the decision in Rainbow [2000] 118 STC 9 (SC), in great detail and categorically held that the principle of dominant intention was no more relevant after the Forty-sixth Amendment; and the said amendment was made precisely to empower the State to bifurcate the contract and to levy sales tax on 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. It also in terms stated that the decision in Rainbow [2000] 118 STC 9 (SC) required consideration; and that the conclusion arrived in Rainbow [2000] 118 STC 9 (SC) runs counter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 (SC), the appellant's contention that in a contract for digital printing, the dominant intention is digital printing, and not transfer of property in goods and therefore no part of the contract price can be subjected to tax, even if the cost of vinyl film (or other suitable material) on which the matter is printed and the cost of the ink used for printing, constitute a part of the contract price, is clearly untenable. The test of dominant intention is no longer relevant. A contract for digital printing is a works contract and not a service contract , even if it involves highly skilled work and professional and technical expertise. Even if the value of material used in such a works contract is a small percentage of the total cost, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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