Page 73 - GSTL_16th July 2020_Vol. 38_Part 3

2020 ] AGRAWAL COLOUR ADVANCE PHOTO SYSTEM v. COMMISSIONER OF C. EX. 311
70. The Forty-sixth Amendment leaves no manner of doubt that the
States have power to bifurcate the contract and levy sales tax on the
value of the material involved in the execution of the works contract.
The States are now empowered to levy sales tax on the material used
in such contract. In other words, Clause (29A) of Article 366 empow-
ers the States to levy tax on the deemed sale.”
21. To sum up, it follows from the reading of the aforesaid judgment that
after insertion of clause (29A) in Article 366, the Works Contract which was
indivisible one by legal fiction, altered into a contract, is permitted to be bi-
furcated into two: one for “sale of goods” and other for “services”, thereby
making goods component of the contract exigible to sales tax. Further,
while going into this exercise of divisibility, dominant intention behind
such a contract, namely, whether it was for sale of goods or for services, is
rendered otiose or immaterial. It follows, as a sequitur, that by virtue of
clause (29A) of Article 366, the State Legislature is now empowered to seg-
regate the goods part of the Works Contract and impose sales tax there-
upon. It may be noted that Entry 54, List II of the Constitution of India em-
powers the State Legislature to enact a law taxing sale of goods. Sales tax,
being a subject-matter into the State List, the State Legislature has the com-
petency to legislate over the subject.
22. Keeping in mind the aforesaid principle of law, the obvious conclusion
would be that Entry 25 of Schedule VI to the Act which makes that part of
processing and supplying of photographs, photo prints and photo nega-
tives, which have “goods” component exigible to sales tax is constitutional-
ly valid. Mr. Patil and Mr. Salman Khurshid, Learned Senior Counsel who
argued for these assessees/respondents, made vehement plea to the effect
that the processing of photographs etc. was essentially a service, wherein
the cost of paper, chemical or other material used in processing and devel-
oping photographs, photo prints etc. was negligible. This argument, how-
ever, is founded on dominant intention theory which has been repeatedly
rejected by this Court as no more valid in view of 46th Amendment to the
Constitution.
23. It was also argued that photograph service can be exigible to sales tax
only when the same is classifiable as Works Contract. For being classified as
Works Contract the transaction under consideration has to be a composite
transaction involving both goods and services. If a transaction involves on-
ly service i.e. work and labour then the same cannot be treated as Works
Contract. It was contended that processing of photography was a contract
for service simplicitor with no elements of goods at all and, therefore, Entry
25 could not be saved by taking shelter under clause (29A) of Article 366 of
the Constitution. For this proposition, umbrage under the judgment in B.C.
Kame’s case (Assistant Sales Tax Officer and others v. B.C. Kame, Proprietor
Kame Photo, AIR 1977 SC 1642) was sought to be taken wherein this Court
held that the work involving taking a photograph, developing the negative
or doing other photographic work could not be treated as contract for sale
of goods. Our attention was drawn to that portion of the judgment where
the Court held that such a contract is for use of skill and labour by the pho-
tographer to bring about desired results inasmuch as a good photograph
reveals not only the asthetic sense and artistic faculty of the photographer,
it also reflects his skill and labour. Such an argument also has to be rejected
for more than one reasons. In the first instance, it needs to be pointed out
that the judgment in Kame’s case was rendered before the 46th Constitu-
tional Amendment. Keeping this in mind, the second aspect which needs to
be noted is that the dispute therein was whether there is a contract of sale of
goods or a contract for service. This matter was examined in the light of law
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