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Judgment
J.K. Ranka, J.—This revision petition under Section 86 of the Rajasthan Sales Tax Act, 1994 is directed against the order dt.19/04/1999 passed by the Rajasthan Tax Board, Ajmer and it relates to assessment year 1992-93.
The brief facts are that the respondent-assessee is doing business of Photography and printing/developing photographs out of negative on paper and during the course of business, has been using chemical as well as photographic paper. Not only the assessee is doing its own printing but also is taking work on contract basis.
During the course of assessment proceedings, the Assessing Officer (for short, ''AO'') noticed that the assessee purchased photographic papers from various persons within the State and also purchased chemical from M/s. Jindal Photo Film Ltd. New Delhi and that entire photographic papers as well as the chemical was after paying due sales/purchase tax. It was the contention of the assessee that the entire chemical so also the photographic paper was used in the business and thus there was no occasion for any tax to be levied on the assessee of the chemical having used/remained in stock at the close of the year, as well as paper cuttings of the corners which came out while cutting the photograph in various sizes. The AO was of the view that in so far as chemical is concerned, it did not remain in stock or was destroyed on account of various process but he held that chemical was used while preparing photographs and thus in effect was sale to consumer though in a different form and therefore, was exigible to tax under the R.S.T. Act. In so far as the cutting of papers is concerned, the AO was of the view that the assessee sold such cutting/wastage in the market to the extent of Rs. 97,660/- which was certainly a sale, on which no sales tax was paid and thus was liable to tax. The AO was also of the view that the assessee directly credited the receipt of Rs. 97,660/- in the profit and loss account thereby hiding the sale consideration when it ought to have been shown in the trading account and not in the profit and loss account and thus on the above facts on both the issues, the AO levied tax @ 8% on chemical and @ 10% on wastage/recovery (cuttings) of paper.
Dissatisfied with the said imposition, the assessee carried the matter in appeal before the Dy. Commissioner (Appeals) who accepted the contention of the assessee on both the issues. Dissatisfied with the deletion of the said amount, the matter was carried before the Rajasthan Tax Board by the Revenue, who also, after analyzing the material on record, dismissed the appeal of the Revenue.
This instant revision petition was admitted on the following question of law:--
"(i) That whether in the facts and circumstances of the case, the judgment of learned Rajasthan Tax Board is legal?
(ii) That whether in the facts and circumstances of the case, the scraps/waste materials of the negative and photopapers can be said to be negative or photopapers.
(iii) That whether in the facts and circumstances of the case, the chemical which is being used for developing photos by processing the chemical is not transferred through which the resultant photos came into existence and it is not a sale?"
Ld. Counsel for the Revenue contended that the Assessing Officer had rightly levied tax as the chemical was used in printing/developing of photograph and thus, the assessee certainly sold the photograph to the consumer after utilizing chemical, which was an essential ingredient to prepare photographs, thus sold the same, therefore, such sale was rightly taken as a sale by the AO. He further contended that in so far as paper cuttings are concerned, not only the same were used for printing/developing of photographs but even to the extent of Rs. 97,660/-, the assessee sold the same in the market and derived income, therefore, the AO was within its right to treat the sale of paper cuttings liable to sales tax under the R.S.T. Act and thus contended that the order of the AO was well reasoned whereas the order of the Appellate Authorities was not proper. Counsel for the revenue relied upon the judgment rendered in the case of Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu and Another, reported in (1995) vol.97 STC 503; Spectrum Foto Color Labs Pvt. Ltd. v. Commercial Taxes Officer, Anti-Evasion, Jodhpur reported in (1998) 110 STC 145 ; State of Tamil Nadu Vs. Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Another, AIR 1973 SC 1045 : (1973) 3 SCC 511 : (1973) 2 SCR 636 : (1973) 31 STC 426 where it has been held that even if there is a casual trade then it is liable for sales tax.
On the contrary, ld. counsel for the assessee contended that whatever chemical or photographic papers were purchased, they were duly tax paid and in so far as chemical is concerned, at the close of the year, either the chemical was used in the process of printing/developing of the photographs or the chemical after certain time which was not usable either had to be thrown away or used and thus nothing remained with the assessee. He further contended that using of chemical in the photographic paper to print/develop the photograph cannot be said to be sale under the R.S.T. Act. In so far as the sale of left over (cuttings) photography papers are concerned, he contended that the entire goods were purchased after paying sales tax and therefore once sales tax has been paid, then even if some left over paper or cuttings have been sold, no occasion arose for holding or subjecting or treating it is a sale liable to sale tax. He further contended that both the Appellate Authorities have rightly concluded that there is no sale liable to sales tax under the R.S.T. Act. Ld. Counsel for the assessee relied upon the judgments rendered in the case of State of Tamil Nadu v. Vijay Kumar Mills Limited reported in (1996) Vol.100 STC 213; Bavens v. Union of India and Others. reported in (1995) 97 STC 161 ; Gannon Dunkerley and Co. and Others Vs. State of Rajasthan and Others, (1992) JT 324 Supp : (1992) 3 SCALE 173 : (1993) 1 SCC 364 : (1992) 3 SCR 103 Supp : (1993) 88 STC 204 : (1993) 66 TAXMAN 229 ; Punjab Business and Supply Co. (P.) Ltd. Vs. State of Maharashtra, (1978) 7 CTR 56 : (1978) 2 ELT 646 : (1977) 39 STC 386 .
I have considered the arguments advanced by the ld. Counsel for the parties and have perused the material available on record as also the judgments rendered by the various Courts.
Admittedly, tax has been paid by the assessee either for chemical purchased from Delhi or the photography papers purchased from the local market, therefore, in the light of the said facts the issue is required to be considered.
In my view, the Tax Board has rightly come to the conclusion that there is no justification in levy of sales tax on the two items namely; (i) chemical (ii) photographic paper left over/cuttings of photographic paper. In so far as the chemical is concerned, it has rightly been held that whatever chemical was purchased, was duly tax paid and the chemicals having been used in the printing/developing the photograph cannot be said that it was a sale as such to the consumer of chemicals and what was sale, was a photograph duly developed and not chemical. It is an admitted fact that the photographs are developed primarily on account of the chemicals being used and either it was used in entirety or if some chemical remained after certain time, it had to be destroyed or could not have been re-used after certain processes. One cannot hold that chemical has been sold to the consumers. Similarly the paper cuttings which remained after proper sizing as such no new item came to existence, a paper would remain a paper whether after cutting of the corners or otherwise and thus no new item can be said to be produced merely because photographs are prepared in different shapes and sizes according to the direction of the consumer.
The Apex Court in the case of Gannon Dunkerley and Co. And Others (supra) has expressed that the cost of incorporation of the goods in the works contract cannot be made a part of the measure for levy of tax contemplated by article 366(29-A)(b).
The Kerala High Court in the case of Bavens v. Union of India and Others (supra) was considering similar issue and in the business of Photography and the Revenue in that case sought to levy tax on chemical as well as photographic paper but the Hon''ble Kerala High Court was also of the view that on both the items, no tax is leviable.
The Madras High court in the case of State of Tamil Nadu v. Vijay Kumar Mills Limited (supra) after considering the judgment rendered in the case of Gannon Dunkerley and Co. and Others (supra) held that the cost of the consumable item used in the execution of works contract, the property for which is not transferred in the course of the execution of the works contract, will certainly come within the purview of the "labour charges and other like charges" contemplated under sub-section(2)(e) of section 3-B of the Act, therefore, such cost of consumables, has to be excluded from the total turnover of a dealer in calculating taxable turnover for the purposes of levy of tax under section 3-B(1) of the Act.
The Madras High Court in the case of Tamil Nadu Mosaic Manufacturers Association (supra) had also an occasion to consider similar matter and held that ink used in the execution of the printing works contract or the toys used in the execution of dying works contract of consumables items such as water, electricity, fuel etc. used in the execution of the works contract, the property in which is not transferred in the course of the execution of a works contract and accordingly held that it is not liable to tax.
The Hon''ble Bombay High Court in the case of Punjab Business and Supply Co. Pvt.. Ltd. (supra) had an occasion to consider issue relating to cloth which was sold in pieces and not in the form of takas or bales manufactured by the mills and held that both rags and chindhis are pieces of cloth though irregular shapes and sizes but it cannot be said that they are not manufactured cloth. Rags and chindhis also do not cease to be manufactured cloth, merely because the purchaser put them to use as raw material for making paper or paper products.
In my view, after analyzing the aforesaid judgments, photography can be said to be pure work of art, it is the art of fixing an optical image by photochemical means. In common parlance photography means, "drawing a picture with light". The occupation of a photographer, except in so far as he sells the goods purchased by him, in my opinion, is essentially one of skill and labour. A good photograph reveals not only the aesthetic sense and artistic faculty of the photographer, but it also reflects his skill and labour. A good photograph in most cases is indeed a thing of beauty. It not only seeks to mirror and portray a scene from actual life, but it also catches and preserves for the future what belongs to and it is a part of the fleeting moment. It is no wonder that an old photograph revives nostalgic memories of days no more, but one would certainly look back when seeing the photographs through the mist of time with fondness even though such fondness has a tinge of sadness.
In my view, the respondent-assessee is engaged in photographic work and dealer in photographic goods. As far as assessment on the turnover in respect of sale of photographic goods is concerned, there is no dispute but the only dispute which has been raised in the instant petition is about the chemical being used and the left over paper cuttings of the photographs of the customers, which is being developed from negatives or when they develop the exposed negatives brought by the customers and supply them positive prints, or when they take positive prints from the negatives brought by the customers, is a contract for service by the photographer. The activities carried on by the petitioner can be generally categorized that (i) they take photograph of their customers, develop the negative and supply positive prints in the desired size to the customers, (ii) they develop the exposed film brought by the customers, take positive prints from them and supply the negative and the positive prints in the desired size to the customers, (iii) they take positive prints from the negative brought by the customers and supply the prints in the desired size to the customers along with their negative. They also enlarge the photograph according to the desire of the customers. The contention of the revenue that the chemical which is being used by the assessee in developing the positive print in fact is being sold to the customers in a different form, in my view, is not proper. The contract is to be seen as one of work and labour and in my view, whatever chemical has been used, cannot be said to be sale directly or indirectly to the customers by the assessee.
The photograph which is taken out, out of negative of a customer indeed may not have marketable value except that the customer may use the same in the drawing rooms, offices or in the use or pasting the same in the various forms for applying in driving license, passport, admission etc.
In my view, the paper cuttings even after the paper being cut to size, remain a paper may be out of a full sized paper only some cuttings remain after the photograph being cut according to size. Therefore, a paper would remain a paper even after making into different sizes and it is also an admitted fact that on both the items, the assessee has paid due tax, therefore, even if the paper cuttings have been sold to a third party when due tax has been paid, in my view, sales tax is not liable to be paid again.
The judgment relied upon by the counsel for the revenue in the case of State of Tamil Nadu v. Burmah Sheel Oil Storage and Distributing Co. of India Ltd. and Anr. (supra) is entirely on a different concept and distinguishable where the Hon''ble Apex court was considering sale of goods of casual trade and thus was a scrap sale connected with business of company.
Thus, in view of what has been observed herein above, the question of law is answered against the revenue and in favour of the assessee and the instant revision petition of the revenue is dismissed with no order as to cost.