DECIDING AUTHORITY : Supreme Court
DATE OF JUDGMENT: 02/02/2000
BENCH: S.P.Bharucha, N.S.Hegde
Facts : Common questions involved in these appeals are whether the job rendered by a photographer in taking photographs, developing and printing films would amount to a works contract as contemplated under Article 366(2A)(b) of the Constitution read with Section 2(n) of the M.P.General Sales Tax for the purpose of levy of sales tax on business turnover of the photographers.
Judgement : The case of Assistant Sales Tax Officer & Ors. vs. B.C. Kame (1977 (39) STC 237) was quoted with approval by this Court in the case of Everest Copiers vs. State of Tamil Nadu (1996 (103) STC 360) (to which judgment one of us – Hon. Bharucha, J. – was a party) wherein it was stated: Where the main object of the work undertaken by the person to whom the price is paid is not the transfer of a chattel as a chattel, the contract is one of work and labour. The main object of the work undertaken by the operator of a photocopier or xerox machine is not the transfer of the paper upon which the copy is produced; it is to duplicate or make a xerox copy of the document which the payer of the price wants duplicated. The paper upon which the duplication takes place is only incidental to this transaction. The object of the payment of the price is to get the document duplicated, not to receive the paper. The payer of the price has no interest in the bare paper upon which his document is duplicated. He is interested in it only if it bears such duplication. What is involved is not a sale but a contract of work or labour. In Bavens v. Union of India & Ors. (1995 (97) STC 161), a Division Bench of the Kerala High Court had taken the view that Where a photographer takes a photograph of his customer, develops the negative and supplies positive prints in the desired size to the customer, 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 are subjected to processing, etc., by the photographer so as to make the contract a works contract. There is no accretion to goods or property or the nucleus of a property which originally belonged to the customer. There is no works contract involved in this category of a photographers activity. However modernised the camera be, the skill of the photographer is still important for getting the best results. It cannot also be treated as a sale of the photograph for the reason that it is not the intention of the customer to buy a photograph from the photographer. The photograph has no marketable value. What is expected from the photographer is his service, artistic skill and talent. If any property passes to the customer in the form of photographic paper, it is only incidental to the service contract. No portion of the turnover of a photographer relating to this category of work would be exigible to sales tax. We are in agreement with the view taken by the Kerala High Court in the above case. The reliance placed by the High Court in Builders case (supra) is misplaced. Though this Court in the said case held that by the 46th Amendment to the Constitution, the definition of the expression tax on the sale or purchase of goods stood enlarged, it also held that the 46th Amendment does no more than making it possible for the States to levy sales-tax on the price of goods and m
aterials used in the works contract as if there was a sale of such goods and materials. The Court also observed : We are surprised at the attitude of the States which have put forward the plea that on the passing of the 46th Amendment the Constitution had conferred on the States a larger freedom than what they had before in regard to their power to levy sales tax under entry 54 of the State List. The 46th Amendment does no more than making it possible for the States to levy sales tax on the price of goods and materials used in works contracts as if there was a sale of such goods and materials. We do not accept the argument that sub-clause (b) of article 366(29-A) should be read as being equivalent to a separate entry in List II of the Seventh Schedule to the Constitution enabling the States to levy tax on sales and purchases independent of entry 54 thereof. As the Constitution exists today the power of the States to levy taxes on sales and purchases of goods including the deemed sales and purchases of goods under clause (29- A) of article 366 is to be found only in entry 54 and not outside it. We may recapitulate here the observations of the Constitution Bench in the case of Bengal Immunity Co. Ltd. (1955) 6 STC 446; (1955) 2 SCR 603 in which this Court has held that the operative provisions of the several parts of article 286 which imposes restrictions on the levy of sales tax by the States are intended to deal with different topics, and one could not be projected or read into another and each one of them has to be obeyed while any sale or purchase is taxed under entry 54 of the State List. Thus, it is clear that unless there is sale and purchase of goods, either in fact or deemed, and which sale is primarily intended and not incidental to the contract, the State cannot impose sales-tax on a works contract simplicity in the guise of the expanded definition found in Article 366(29-A)(b) read with Section 2(n) of the State Act. On facts as we have noticed that the work done by the photographer which as held by this Court in Kames case (supra), is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by the respondent-State cannot be sustained.
Held : Appeal Allowed.
By Tejasv Anand , IVth Year,AMITY LAW SCHOOL,DELHI.
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