TaxTMI 
TaxTMI 
2011 (8) TMI 291
X X X X Extracts X X X X
X X X X Extracts X X X X
....of such goods. (2) Whether for the purpose of section 67 of the Finance Act, 1994 the value of service provided in relation to photography would be the "gross amount charged" including the cost of material, goods used/consumed minus the cost of unexposed film? (3) Whether the term 'sale' appearing in exemption Notification No. 12/03-S.T., dated 20-6-2003, is to be given the same meaning as given by section 2(h) of the Central Excise Act, 1944, read with section 65(121) of the Finance Act, 1994 or this term would also include the deemed "sale" as defined by Article 366(29A)(b) of the Constitution? (4) Whether observations of Hon'ble Supreme Court in para 28 of its judgment in case of Imagic Creative (P.) Ltd. v. CCT [2008 TIOL - 04 - S.C. - VAT] that service tax and VAT are mutually exclusive, requires levy of service tax on photography service excluding cost of any goods used leviable to VAT under sales tax law of States? (5) Whether the decision in Shilpa Colour Lab v. CCE, Calicut 2007 (5) STR 423, has considered dominant nature of service in photography contract which does not result in sale of paper, chemicals and consumable u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....referral order as extracted hereinbefore is answered, that shall serve the purpose of Reference. With such suggestion, the Bench proceeded to hear the arguments advanced by both the sides on the following two questions only appearing in referral order reported as Agarwal Colour Advance Photo System's case (supra): "(2) Whether for the purpose of section 67 of the Finance Act, 1994 the value of service provided in relation to photography would be the "gross amount charged" including the cost of material, goods used/consumed minus the cost of unexposed film? (3) Whether the term 'sale' appearing in exemption Notification No. 12/03-S.T., dated 20-6-2003, is to be given the same meaning as given by section 2(h) of the Central Excise Act, 1944, read with section 65(121) of the Finance Act, 1994 or this term would also include the deemed "sale" as defined by Article 366(29A)(b) of the Constitution?" [Emphasis supplied] 4. Dealing with question No. (2), the referring Bench was of the view that in case of services in relation to photography, 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 mat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ticle 366(29A) of the Constitution is of no relevance for the reason that Notification does not override statutory provision. The word 'sale' in this notification has to be interpreted on the basis of its definition as given in section 2(h) of the Central Excise Act, 1944, which by virtue of section 65(121) of the Finance Act, 1994 is applicable to service tax. When there is no primary intention of parties to sell paper, consumable or chemical in providing photography service there is no room left to plead (fiction of Article 366(29A)(b) of the Constitution in absence of any such sale of these commodities as goods qua goods. In case of transactions where sale of goods is made in disguise and incidentally while providing service, those transactions call for settling in terms of provisions of sales tax law. But under Finance Act, 1994 providing of service being event of levy, incidence of tax arises on the whole of value of service including materials used in providing such service, the moment event of levy arises. 6. Learned Counsel Shri Madhav Rao appearing in all cases except Service Tax Appeal No. 437/2009 submitted that controversy has already been resolved. There is no further....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... photography film, unrecorded magnetic tape or such other storage device, if any, sold to the client during the course of providing the service. Whereas Apex Court in Bharat Sanchar Nigam Ltd.'s case (supra) considered the meaning of 'goods' after 46th Amendment in paras 43-52 and in para 53 thereof, the Hon'ble Court approved the test that for being goods it should be capable of being bought and sold. Thus BSNL decision nowhere overrules the C.K. Jidheesh's case (supra) on any material issue relating to service tax. (C) Tribunal without appreciating the above mentioned fact allowed the claim of the respondent by holding that the decision of C.K. Jidheesh was overruled by the BSNL. The Tribunal further erroneously held that summary dismissal of SLP against decision of Kerala Colour Lab. would not tantamount to affirmation of the decision of the High Court. It is submitted that decision of Kerala Colour Lab., was considered by Apex Court in C.K Jidheesh's case (supra) on merit and after hearing the parties their Lordships were pleased to hold as under :- "9. The provisions of the Finance Act had been challenged by the Kerala Colour Labs association. That challenge had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Bharat Sanchar Nigam Ltd.'s case (supra). It is submitted that the Tribunal quoted paras 41 to 49 of the decision of Bharat Sanchar Nigam Ltd.'s (supra) which clearly show that said decision pertains to issue of levy of sales tax on "SIM Card" etc., which would not be attracted for the purpose of valuation of the photographic services under the Service Tax Act. (G) In C.K Jidheesh's case (supra) this Hon'ble Court rejected the prayer of the petitioners therein regarding bifurcation of the gross receipts of processing of photographs into the portion attributable to goods and that attributable to services. In the said decision this Hon'ble Court held that "section 65(47) defines photography as including still photography, motion-picture photography, laser photography, aerial photography and fluorescent photography. Section 65(48) defines photography studio or agency as including any professional photographer or a commercial concern engaged in the business of rendering service relating to photography. Section 65(72)(zb) defines taxable service in relation to photography studio or agency as any service provided to a customer, by a photography studio or agency in relation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Notification that the inputs used in the photography should be mentioned in the invoices/bills issued to the customers. The reasoning given by the Commissioner is not sustainable. In view of the clarification given in the Boards' letter and the Notification itself the denial of benefit by the lower authorities is not justified and not correct in law. The appellants are eligible for the benefit of deduction in terms of the Boards' circular and the Notification. The order passed by the impugned authorities is not correct in law as the same is contra to the Boards' letter and the Notification. The impugned order is set aside by allowing the appeal. In terms of the above order, the only limited exercise we want the Tribunal to undertake is to ascertain whether the respondent assessee has maintained the records of the inputs used in the photography and only to that extent the matter stands remitted to the Tribunal. Civil appeal is disposed of. No order as to costs." 6.3 In the case of Technica Colour Lab (supra) when the matter was called by the Revenue, that was also dismissed by Apex Court in 2009 in Civil Appeal No. 7060 of 2009, dated 21-7-2009, following its decision in CCE ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... definition of sales is only applicable to State levy and that is not at all applicable to interprete provisions of Finance Act, 1994 while imposing service tax on photography services. 8.1 While contentions of assessee are as above, learned DR Shri Sumit Kumar appearing on behalf of Revenue submitted that what was taxed under photography services was the gross value received for taxable services provided and no sale of goods if any made and exhibited by invoice issued towards such sale is taxed under Finance Act, 1994. The Revenue authorities have only levied tax on the value of service depicted on the invoices issued showing the consideration received by the photography service provider as consideration to serve their customer. Every case needs to be dealt on the facts and circumstances of each such case without a general proposition. However, invoices showing sale separately remain untouched under provisions of Finance Act, 1994. 8.2 According to learned DR, providing of photography service is a pure service contract and there is no contract for sale of goods unless the contract brings to notice of Revenue about distinct sale, the consideration received providing photography s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contract is for rendering of service of photography. No artificial splitting or separation of value of goods not patent from invoices is called for in determining the assessable value under section 67 of the Finance Act, 1994. (E) The questions of law and fact as to whether a particular contract is a work contract, whether divisible, as answered by the Apex Court and various High Courts were in the context of charging sales tax on the goods component involved in the execution of works contract, and most respectfully these questions of law and fact are not material for the purpose of charging Service Tax under Finance Act, 1994 where the dominant service element in the activity is important for the purpose of levy and for determining assessable value of taxable service thereunder. (F) The Apex Court in Rainbow Colour Lab's case (supra) following the ratio of the earlier judgment in Assistant Sales Tax Officer v. B.C. Kame [1997] 39 STC 237 (SC) and applying the dominant intention test, held that a contract for photography is not a work contract referred to in Article 366(29A)(b) but it is a service contract referred to in Article 366(29A)(b) and the cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly applicable to the issue of valuation of the photography service and the appellants have not advanced any cogent reason for taking a different view with respect to the 'photography service'. (L) In section 67, the words; ".....amount charged by the service provider for such service provided ....... by him" are qualified by the adjective "gross", which means without deduction, total, as opposed to the term 'net'. The gross amount charged by the service provider for such services would include besides the value of the service provided labour or skill, the cost of all the input goods and services when service is the dominant object of the contract. If the proposition advanced by the appellant is accepted legislative intent of the use of the term "gross" in section 67 shall be defeated and will become redundant. (M) The word 'sale' appearing in the Notification No. 12/2003-ST, dated 20-6-2003 has to be interpreted on the basis of its definition as given in section 2(h) of the Central Excise Act, 1944, which by virtue of section 65(121) of the Finance Act, 1944 as applicable to service tax. When there is no primary intention of parties to sell paper, consumable or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. Accordingly a Misc. Order No. 125/2010 was passed in that regard. Para 4 of the said order reads as under : "4. In view of the fact that the order dated 23-4-2009 quoted above speaks of remittance of the matter whereas the order dated 21-7-2010 refers to its earlier order dated 23-4-2009 which is an order of dismissal and yet the appellants insist that the order dated 23-4-2009 referred to in the order dated 21-7-2010 is the same order quoted herein above, it is necessary for the appellants to file affidavit in that regard. Learned Counsel for the appellants prays for time in that regard to file necessary affidavit. Time granted. Affidavit to be filed within 10 days." 12. Against above direction, one Shri Alok Yadav filed an affidavit stating as under : "Affidavit 1. I, Mr. Alok Yadav, Son of Sh. S.K. Yadav, aged 37 years, resident of 859, Sector 4, Gurgaon 122 001 do hereby solemnly affirm and state as under : 2. That I appeared in C.A. No. 7061 of 2009 before the Hon'ble Supreme Court. This appeal was filed by the department against CESTAT's Final Order No. ST/286/08, dated 22-10-2008 in Appeal No. ST/333/07. 3. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce provided, certain elements of cost make value of such services and such elements which are integral, relevant, indispensable and inevitable to provide taxable service and bring that service to the stage of performance, contribute to the value of such service. Service tax being destination based consumption tax, till the taxable service reaches its destination, all elements of cost making the service reachable to such destination contribute to the value addition and form part of value thereof. Agreement or understanding of the parties to deal with the consideration for the service rendered and received does not affect incidence of tax . In whatever manner the recipient and provider of taxable service mutually arrange their affairs for their benefit to deal with consideration that is of no significance to law. Service Tax (Determination of Value) Rules, 2006 which came into force from 19-4-2006 is a step towards ascertainment of value of taxable service. 16. The nature and character of service tax has been explained by Apex Court in para 22 of the judgment in Association of Leasing & Financial Service Companies v. Union of India [2010] 29 STT 316. It is an economic concept based ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce to definition of 'sale' as appearing in the Central Excise Act, made applicable for the purpose of levy of service tax under the Finance Act, 1994. It therefore follows that the Notification intends to exempt the value of goods and materials sold by the service provider while providing service. To claim a part of the value charged as exempt in terms of the Notification, an assessee has to discharge burden of proof adducing evidence showing value of goods and material actually sold and satisfy the conditions of Notification. The expression 'sold' cannot in our considered view include 'deemed sale' of goods and material consumed by the service provider while generating and providing service. Burden of proof on the assessee 18. The subject of Notification being exemption, conditions prescribed therein need to be fulfilled. Scrutiny of genuineness of claim is mandated. Determination of assessable value of service being crucial as a measure for levy, there should be documentary proof specifically indicating the value of the goods and material in question sold while providing taxable service. The assessee claiming exemption should not have availed credit of duty paid on the goods an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nto existence. It is also quite true that no service recipient goes to a photography service provider to buy paper, chemicals and other photography materials. What the service recipient expects from the photography service provider is the photograph. No consideration is paid separately for photography service and the goods used and consumed in providing such taxable service. Value of photography service includes all elements bringing that to the deliverable stage. Consumables and chemicals used for providing such service disappear when the photograph emerges. The Hon'ble Supreme Court in C.K. Jidheesh's case (supra) has upheld levy of service tax on gross value in respect of photographic service after noting in paragraph 14 that in case of photographic service, it is a contract of service pure and simple and not a composite contract of sale of goods and service. It has also endorsed the decision of Hon'ble Kerala High Court in Kerala Colour Lab's case (supra). On the other hand, the decision of Hon'ble Supreme Court in the case of Surabhi Colour Lab (supra) has been rendered remanding the matter purely on the basis of an incorrect clarification issued by an officer of the Board, su....