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B.C Kame v. The Assistant Sales Tax Officer, Circle No. 2, Jabalpur, And Others
Factual and Procedural Background
Shri B.C. Kame, proprietor of Kame Photo Studio and its two branches in Jabalpur, carries on the business of buying and selling photographic goods. He is registered as a dealer under the Madhya Pradesh General Sales Tax Act and avails of sales tax concessions under the Central Sales Tax Act by declaring that goods purchased outside Madhya Pradesh will either be resold or used as raw material for manufacture of other goods for sale. His business includes selling photographic goods or using them in three ways: taking photographs and supplying prints, making enlargements from customers' negatives, and preparing positive prints from customers' negatives. He charges a consolidated amount based on the work and prints supplied.
The Madhya Pradesh Sales Tax Department assessed the petitioner for sales tax for the periods from 1st April 1964 to 31st March 1969 on a best judgment basis due to incomplete accounts. For the period 1964-65, the total turnover was assessed at Rs. 41,500, with Rs. 6,500 deducted for developing and enlargement. The remaining Rs. 35,000 was divided into Rs. 12,000 treated as sale of materials charged at 10%, and Rs. 23,000 considered as receipts from supply of photoprints to customers who were photographed at the studios.
The present writ petition challenges the taxation of the gross receipts from the supply of photoprints, which were treated as sales of manufactured finished products. The petitioner contends that the process involves a contract of work and labour rather than a sale transaction since customers seek the photographer's skill rather than to buy printed paper. Moreover, the prints are not marketable commodities as they cannot be sold to others without the customer's consent. The petitioner claims this item has been wrongly taxed for each period.
The State raised a preliminary objection that appeals under the Madhya Pradesh General Sales Tax Act, 1958 are pending and thus the writ petition should not be entertained. However, the court chose to consider the matter on merits due to the principle involved and a State Government notification dated 10th March 1965 clarifying that photographers under these categories are liable to pay sales tax on payments received from customers.
Legal Issues Presented
- Whether the gross receipts from the supply of photoprints by the petitioner constitute a sale of manufactured finished products liable to sales tax, or a contract of work and labour not subject to sales tax.
- Whether the writ petition is maintainable despite pending appeals under the Madhya Pradesh General Sales Tax Act.
Arguments of the Parties
Petitioner's Arguments
- The process of taking photographs, preparing negatives, and producing positive prints constitutes a contract of work and labour, not a sale transaction.
- Customers seek the photographer's skill rather than to purchase printed paper as a commodity.
- The positive prints are not marketable commodities because they cannot be sold to others without the customer's consent.
- The taxation of gross receipts from photoprints is therefore incorrect.
State's Arguments
- A preliminary objection was raised that appeals are pending under the Madhya Pradesh General Sales Tax Act, and the writ petition should not be entertained.
- The State Government issued a notification clarifying that photographers are liable to pay sales tax on payments received from customers.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court acknowledged the preliminary objection regarding pending appeals but chose to decide the matter on merits due to the significance of the principle involved and the State Government's notification clarifying liability of photographers to pay sales tax on payments received. The court considered the nature of the transaction—whether it was a sale of manufactured goods or a contract for work and labour. The petitioner’s contention that the transaction did not amount to a sale but rather a contract of service was central to the analysis. The court’s approach was to assess the taxability of the receipts in light of the statutory framework and the notification issued by the State Government.
Holding and Implications
DISPOSED OF
The court decided to entertain the writ petition despite pending appeals and proceeded to examine the question of taxability on its merits. The direct effect is that the court will determine whether the receipts from photoprints constitute taxable sales or not. No new precedent was established by this decision beyond the immediate parties involved.
1. This is a writ petition by Shri B.C. Kame who is the proprietor of Kame Photo Studio. He has two more branches--New Delhi Studio and P. Kame Studio, all in the city of Jabalpur. He carries on the business of buying and selling photographic goods. In the certificate of registration as dealer under the Madhya Pradesh General Sales Tax Act it is entered that he also uses the photographic goods as raw material for manufacture of other goods for sale. When he buys the goods outside the State of Madhya Pradesh he gives a declaration that he will either resell the goods or use them as raw material for manufacture of other goods for sale. He thus gets a concession in respect of sales tax under the Central Sales Tax Act on his purchases. After getting those goods he either sells them to his customers here or uses them in three ways--(1) by taking photographs and supplying prints thereof, (2) by making enlargements for customers who bring their own negatives, and (3) by simply preparing positive prints of the same size from the negatives brought by the customers. For doing all these kinds of works he charges a consolidated amount differing according to the work involved and the size and number of prints demanded by the customer.
2. The Madhya Pradesh Sales Tax Department has assessed the petitioner for the different periods from 1st April, 1964, to 31st March, 1969, to sales tax on his turnover on best judgment basis as he did not keep full and complete accounts. The figures of assessment of one of such periods are reproduced to indicate the basis of assessment which has been followed in each period. There being no difference in the principle involved, it is not necessary to give the details of other periods. For the first period, i.e., 1st April, 1964, to 31st March, 1965, the assessment was made by order dated 30th April, 1970. The total turnover was taken to be Rs. 41,500. Out of this a deduction of Rs. 6,500 was allowed as relatable to developing and enlargement which was not considered chargeable. The balance of Rs. 35,000 was again divided into two parts--Rs. 12,000 being treated as relatable to sale of materials as such and charged at 10 per cent. and the rest Rs. 23,000 being taken to be the receipts on account of the supply of photoprints to those who got themselves photographed at the studios.
3. In the present writ petition the challenge is only to the last item similarly charged for all the periods on the gross receipts for the supply of photo prints, treating them to be manufactured finished products sold to the customers. The contention of the petitioner is that in taking a photograph, preparing its negative and then preparing the final positive print for supplying the same to the customer, the petitioner undertakes a contract of work and labour and does not enter into a sale transaction. The customer does not come to the studio to buy the printed paper but to utilise the skill of the photographer to get a good photo prepared. The petitioner has also contended that the prepared positive print is not a marketable commodity and he cannot sell the photo of one person to any other person except with the former's consent. His claim, therefore, is that this item for each period-has been wrongly taxed.
4. In reply a preliminary objection has been taken that appeals under the Madhya Pradesh General Sales Tax Act, 1958, have however been filed and are pending and, therefore, this writ petition should not be entertained. We have, however, decided to consider this question on merits because it involves a difficult matter of principle and also because the State Government has issued a notification dated 10th March, 1965, by way of clarification saying
"photographers under these categories are liable to pay sales tax on the payment received from the customers". In view of this notification we consider it proper to decide the question of taxability of this item on merits.
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