2011 (8) TMI 291 - AT - Service Tax

Tribunal: Photography Services Valuation Ruling

Aggarwal Colour Advance Photo System Versus Commissioner of Central Excise, Bhopal

Aggarwal Colour Advance Photo System Versus Commissioner of Central Excise, Bhopal - [2011] 33 STT 33 (New Delhi - CESTAT) (LB), 2011 (23) S.T.R. 608 ... Issues Involved:1. Whether the use of paper and consumables in photography services constitutes a sale of goods under Article 366(29A)(b) of the Constitution.2. Determination of the value of photography services under Section 67 of the Finance Act, 1994.3. Interpretation of the term 'sale' in exemption Notification No. 12/03-ST, dated 20-6-2003.4. Applicability of VAT and service tax on photography services as mutually exclusive.5. Reconsideration of the decision in Shilpa Colour Lab v. CCE in light of the Supreme Court's decision in Everest Photocopier v. State of Tamil Nadu.Detailed Analysis:Issue 1: Sale of Goods in Photography ServicesThe Tribunal was tasked with determining whether the incidental use of paper and chemicals in providing photography services amounts to a sale of goods. The Larger Bench concluded that the use of such materials is integrally connected with the service and does not constitute a sale of goods under Article 366(29A)(b) of the Constitution. The Tribunal emphasized that the dominant nature of the service in photography does not result in the sale of paper, chemicals, and consumables used in providing such service.Issue 2: Value of Photography Services under Section 67 of the Finance Act, 1994The Tribunal held that the value of photography services for the purpose of Section 67 should be the 'gross amount charged' by the service provider, including the cost of materials and goods used or consumed, minus the cost of unexposed film if sold. This conclusion was supported by the Supreme Court's decision in CK Jidheesh v. Union of India, which upheld the levy of service tax on the gross value of photographic services.Issue 3: Interpretation of 'Sale' in Exemption Notification No. 12/03-STThe Tribunal clarified that the term 'sale' in exemption Notification No. 12/03-ST should be interpreted based on the definition provided in Section 2(h) of the Central Excise Act, 1944, and not as per the deemed sale under Article 366(29A)(b) of the Constitution. The notification exempts the value of goods and materials sold by the service provider from service tax, provided there is documentary proof of the sale and compliance with other conditions.Issue 4: Mutual Exclusivity of VAT and Service TaxThe Tribunal referenced the Supreme Court's observation in Imagic Creative (P.) Ltd. v. CCT that service tax and VAT are mutually exclusive. However, in the context of photography services, where there is no sale of goods involved, the Tribunal held that service tax should be levied on the entire value of the service, including the cost of materials used.Issue 5: Reconsideration of Shilpa Colour Lab v. CCEThe Tribunal found that the decision in Shilpa Colour Lab v. CCE, which excluded the value of materials used in providing photography services from the service tax valuation, was contrary to the Supreme Court's ruling in CK Jidheesh v. Union of India. The Tribunal emphasized that the gross amount charged for photography services should include the cost of materials used, as these are inseparably connected with the service.Conclusion:The Tribunal's comprehensive analysis concluded that for the valuation of photography services under Section 67 of the Finance Act, 1994, the gross amount charged should include the cost of materials used. The term 'sale' in the exemption notification should be interpreted based on the Central Excise Act, and the dominant nature of photography services does not result in the sale of goods. The Tribunal's decision aligns with the Supreme Court's rulings, ensuring that service tax is levied on the full value of photography services, excluding only the cost of unexposed film if sold.