Dominant intention test limits sales tax on photographic services: incidental material transfer does not make a works contract.

The Forty-sixth Constitutional Amendment permits sales tax on a works contract only to the extent that the transaction genuinely involves a sale, actual or deemed, of goods. A contract does not become a works contract merely because materials pass incidentally during performance; the controlling test is the dominant intention of the transaction. Where the primary object is skilled labour or service and any transfer of material is only incidental, the arrangement remains a contract of work and labour and is not a taxable sale. Applied to photographic services, the activity was treated as essentially artistic and service-oriented, so the levy on turnover could not be sustained.

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Issues: Whether the photographic work of taking photographs, developing negatives and supplying prints amounted to a works contract, or was merely a contract of work and labour outside the levy of sales tax under Article 366(29A)(b) of the Constitution and Section 2(n) of the M.P. General Sales Tax Act.

Analysis: The enlarged definition of sale introduced by the Forty-sixth Constitutional Amendment permits a State to tax only that part of a works contract which genuinely involves a sale, actual or deemed, of goods. A contract does not become a works contract merely because some material passes incidentally in the course of performance. The controlling enquiry is the dominant intention of the transaction. Where the primary object is to obtain a service or skilled labour, and any transfer of paper or other material is only incidental, the transaction remains one of work and labour and not a taxable sale. Applying that principle, the activity of a photographer in producing photographs or prints was held to be essentially artistic and service-oriented, with no marketable commodity and no primary intention to transfer goods as such.

Conclusion: The photographic activity was not a works contract for sales tax purposes, and the levy on the assessees' turnover could not be sustained.

Ratio Decidendi: After the Forty-sixth Amendment, sales tax can be levied on a works contract only where the transfer of property in goods is the primary object of the transaction; an incidental passing of material in a contract predominantly for work or labour does not amount to a taxable sale.

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