Page 62 - GSTL_16th July 2020_Vol. 38_Part 3

300 GST LAW TIMES [ Vol. 38
should be allowed to be deducted for the purposes of computing service tax lia-
bility as it falls in the category of storage device. The appellant also assailed the
circular F No. B-11/01/2001-TRU, dated 9-7-2001 whereby it was clarified that
cost of photographic paper and chemicals is not excludable from the taxable val-
ue. The appellant was issued show cause notices for contravention of the provi-
sions of the Finance Act inasmuch as not only the appropriate service tax was not
paid but it also failed to produce material facts required for verification of the
correctness of the service tax paid. It was proposed as to why service tax of `
6,76,386/- for the period 16-7-2001 to 31-3-2005 should not be recovered on es-
caped 70% taxable value of ` 95,36,540/- under Section 73(a) along with the in-
terest under Section 75 of the Act and penalty under Section 76 and 78 of the Act.
Against the show cause notices the appellant preferred a writ petition before this
Court being W.P. No. 1433/2002 inter alia contending that the explanation to Sec-
tion 67 of the Act did not include the cost of unexposed photography on record-
ed magnetic tapes on such other storage device if any sold to customers during
the course of providing services. The said writ petition was dismissed vide order
dated 22-3-2002 and against the same, letters patent appeal forming subject mat-
ter of FPA No. 311/2002 also failed vide order dated 6-9-2005. Thereafter, the
appellant appeared before the Adjudicating Authority and submitted that appli-
cable service tax was paid on service part on photographic service and in respect
of balance amount which stands for material sold to customers they are exempt-
ed in terms of Notification No. 12/2003-S.T., dated 20-6-2003. In this manner, the
appellant was originally assessed by the Assessing Officer i.e. Assistant Commis-
sioner, Central Excise Division, Jabalpur vide order dated 25-11-2005 (Annexure
A-1) whereby relying upon the judgment of the Apex Court in Writ Petition (Civ-
il) No. 507/2002 [2006 (1) S.T.R. 3 (S.C.)] (C.K. Jidheesh v. Union of India), demand
of service tax amounting to ` 6,76,386/- was levied on the appellant on the mate-
rial consumed in the course of its business of photography along with equal pen-
alty under Section 76 of the Act. The findings recorded by the Assistant Commis-
sioner, are reproduced as under :-
“Discussion & Findings :-
I have carefully gone through the case records & find that M/s. Agrawal
Colour, Advance Photo System Russel Chouk, Jabalpur is engaged in Pho-
tographic Service on which Service Tax was levied w.e.f. 16-7-2001. I ob-
served that on this issue number of show cause notices have been issued.
This issue has also been raised in the Supreme Court in the Writ Petition
(Civil) No. 507 of 2002 (C.K. Jidheesh v. U.O.I.). The honourable Supreme
Court has turned down the petitioner’s prayer for an order directing the
Respondent to bifurcate the gross receipts or processing of photographs in-
to the portion attributable to goods & that attributable to services. The peti-
tioner claims that the respondent must tax only that portion of the receipts
which is attributable to the services rendered. The Supreme Court has also
held that contracts of the type entered into by persons like the petitioner are
nothing else but services contracts pure & simple. It is held that in such con-
tracts there is no element of sale of goods. In the light of the Supreme Court
judgment the noticee’s submission that they are correctly paying service tax
is not correct. After considering every aspect of the case and respectfully
following the Supreme Court’s judgment I pass the following order…..”
3. Against the order-in-original dated 25-11-2005, the appellant pre-
ferred an appeal before the Commissioner (Appeals), Customs & Central Excise,
Bhopal on the ground that it is paying service tax on service part of the photo-
graphic service and VAT/commercial tax on the balance amount representing

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