TMI Blog2017 (9) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, it emerges that all the appellants herein were discharging service tax liability on 25% of the gross billing based on the ad-hoc arrangement arrived at by their Association pursuant to Board's letter dated 07.04.2004 to The Punjab Colour Lab Association. We also find that there is no allegation by the department that 25/75 ratio of Service Cost to Material Cost being followed by the appellants is incorrect. Appeals will required to be remanded back to the original authority for the limited purpose of working out the net service tax liability after taking the value on which they have discharged sales tax/VAT - appeal allowed by way of remand. - ST/00145/2007, ST/00298/2008, ST/00176 to 00179/2008 - 40882-40887/2017 - Dated:- 30-5-2017 - Smt. Sulekha Beevi C.S, Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) For the Appellant - Shri M. Karthikeyan, Adv, Shri S. Durairaj, Adv. For the Respondent - Shri S. Nagalingam, AC (AR) ORDER Per Bench: The issue involved in all these appeals being the same are heard together and disposed by this common order. 2. The appellants are engaged in the business of Photography, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Customs to The Punjab Colour Lab Association. That being an interpretational issue, the appellants cannot be saddled with intent to evade tax and so extended period is not invokable. 4. Against this, the learned AR reiterated the findings in the impugned order. He submitted that the issue whether the appellants are liable to pay service tax on the entire value received by them has been decided in the judgment of the Larger Bench in the case of Agrawal Colour Advance Photo System Vs Commissioner of Central Excise, Bhopal reported in 2011 (23) S.T.R. 608 (Tri.-LB). He submitted that in the said case, the Larger Bench had discussed that the materials and consumable used in the Photographic Services are inseparable and, therefore, assessees cannot deduct the cost of the materials on consumables used in the said service. Further that there is no sale involved of the materials while rendering the Photographic Services as mandated in the Notification No.12/2003-ST and, therefore, the assessees are not eligible to make such deductions. The appellants have not furnished any invoices to establish the sale of such materials and for this reason also, they are not entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graphy, Service tax has to be levied on the gross amount charged by the service provider for providing such service, which would include value of all materials or goods used/consumed or becoming medium or basis for providing the taxable service being inseparably and integrally connected with such service enabling the same performable or capable of being performed. The only deduction, permissible from the gross amount, will be of the value of unexposed film, if any, sold. With great respect the judgments of Tribunal in cases of Shilpa Color Lab. (supra), Adlab v. CCE (supra), Delux Colour Lab Others v. CCE, Jaipur Others (supra) are impediment and appear to be contrary to the law laid down by Hon'ble Supreme Court in case of C.K. Jidheesh v. UOI (supra), which is a direct judgment of Hon'ble Supreme Court on the issue of valuation of photography service. So far as the third question referred to the Larger Bench is concerned, the view of the Referring Bench was as under :- Notification No.12/2003-S.T., dated 20-6-2003 fully exempts from Service tax, the value of the goods which are sold in course of providing a taxable service. The contention of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the moment event of levy arises. 6.2 Viewed in this light, we find merit in the appellant's plea that the show-cause notice per se would be hit by limitation. When the law itself is unclear or has not attained finality, it is inconceivable to allege that assessees who have discharged tax liability on their own had confused understanding of the law, albeit wrongly, cannot be charged with having suppressed or misstated facts with an intention of evading tax liability. 6.3 Coming to the merits of the matter, while the appellant's have placed reliance on the judgment of the Hon'ble apex court in the case of Pro Lab (supra) , it is seen that the said case primarily deal with the constitutional validity of entry 25 of Schedule VI of the Karnataka Sales Tax Act, 1957. The amendment brought forth to the said Act on 29.04.2004 with retrospective effect (from 01.07.1989) for levy of sales tax on processing and supply of photo prints and photo negatives was analysed in the said judgment and the Hon ble apex court held that entry 25 of Schedule VI of the Act of the Karnataka Sales Tax Act, 1967 is constitutionally valid. The appeal was filed against the judgment pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley-l was directly overcome . It then went on to say that all the sub-clauses of Article 366(29A) serve to bring transactions where essential ingredients of a 'sale' as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchase or sale for the purposes of levy of sales tax. 66. It then clarified that Gannon Dunkerley-l survived the Forty-Sixth Constitutional Amendment in two respects. First, with regard to the definition of sale for the purposes of the Constitution in general and for the purposes of Entry 54 of List II in particular except to the extent that the clauses in Article 366(29A) operate and second, the dominant nature test would be confined to a composite transaction not covered by Article 366(29A). In other words, in Bharat Sanchar, this Court reiterated what was stated by this Court in Associated Cement that dominant nature test has no application to a composite transaction covered by the clauses of Article 366(29A). Leaving no am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-clauses (b), (c) and (d) of Clause (29A) of Article 366 would be subject to restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law; (ivy while enacting law imposing a tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29A)(b), it is permissible for the State legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the course of the inter-state trade or commerce under Section 3 of the Central Sales Tax Act or outside under Section 4 of the Central Sales Tax Act or sale in the course of import or export under Section 5 of the Central Sales Tax Act; and (v) measure for the levy of tax contemplated by Article 366(29A)(b) is the value of the goods involved in the execution of a works contract. Though the tax is imposed on the transfer of property in goods involved in the execution of a works contract, the measure for levy of such imposition is the value of the goods involved in the execution of a works contract. Since, the taxable event is the transfer of property in goods involved in the execution of a works contract and the said transfer of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be mentioned that the Larger Bench in the case of Agrawal Colour Advance Photo System (supra) observed that the word 'sold' in Notification No.12/2003-ST has to be interpreted using the definition of 'sale' in Central Excise Act, 1944 and not deemed sale as under Art. 366(29A)(b) of the Constitution. In the case of Pro Lab (supra) the Hon'ble Apex Court held that the goods/materials used in Photography Services are subject to levy of sales tax as it involves deemed sale as per Art. 366(29A)(b) of Constitution. 6.5 In our opinion, therefore, more applicable to the facts of this case would be that of the Safety Retreading Co. Pvt. Ltd. (Supra). In that case, the appellants had been paying service tax only on the labour component after taking 70% towards materials cost on the gross tyre retreading charges billed and received. The Hon'ble Supreme Court, while taking note of the Notification No.12/2003-ST, dated 20.06.2003 as also CBEC Circular, dated 07.04.2004 held that the assessee is liable to pay tax only on the service component quantified at 30%. In these appeals before us, it emerges that all the appellants herein were discharging servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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