Customs, Excise and Gold Tribunal - Delhi
Laxmi Color (P) Ltd. vs Cce on 6 June, 2006
Equivalent citations: 2006(110)ECC520, 2006ECR520(TRI.-DELHI), 2006[3]S.T.R.363, [2007]8STT268
ORDER C.N.B. Nair, Member (T)
1. Heard both sides and perused the record.
2. The dispute is about valuation of photographic service.
3. The claim of the appellant is that cost of photographic paper and other materials consumed while providing photographic service is eligible for deduction while valuing the service. This claim is based on Notification No. 12/2003 which exempts "value of goods and materials sold by the service provider". The ld. Consultant appearing for the appellant also relies on clarification of the board dated 7.4.2004. It is being pointed out that in terms of this clarification "cost of input material consumed/sold by the service provider" is eligible for deduction. The ld. Consultant also relied on the decision of this Tribunal in the case of Adlabs v. CCE 2006 (2) STR 121 (Tri.-Bang.) and submitted that Tribunal has held that, in regard to photographic services, deduction is available for photographic paper and material.
4. The contention of the ld. SDR is that the claim is contrary to the legal provisions as well as the judgment of the Hon'ble Supreme Court in the case of V.K. Jidheesh v. Union of India 2005 (71) RLT 505 (SC)
5. The period of dispute in the present case is April 2003 to 30.9.03. The value of any taxable service during that period was the gross amount charged by the provider of such service (Section 67 of Finance Act 2003). The explanation to that section also stated what are the elements to be excluded. Clause-2 of that explanation mentions the cost of unexposed photography film-----------if any, sold to the client during the course of providing the service". Thus, the exclusion was cost of "unexposed photography film, if any, sold". In the present case, there is no case that any unexposed photography film was sold. What was offered to the customers was photographs (exposed photography film/prints).
6. The exemption notification relied upon by the appellant may be read :
In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under Section 66 of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials.
7. We may also re-produce clarification dated 7th April 2004 of the board:
I am directed to refer to your representation forwarded to Finance Minister vide letter dated 11th March 2003 and state that in terms of the notification 12/2003-ST dated 20th June 2003, the exemption was in respect of input material consumed/sold by the service provider to the service recipient while providing the taxable services available. However, the exemption is available only if the service provider maintains the records showing the material consumed/sold while providing the taxable service. The value of such material should also be indicated on the bill/invoice issued in respect of the taxable service provided.
8. It is to be noted that even though the clarification mentioned "input material consumed", (which is beyond the scope of the exemption notification) it also stipulates that "the value of such material should also be indicated on the bill/invoice issued in respect of the taxable service provided". In the present case, admittedly, the appellant is not indicating on the bills, the value of any inputs sold/consumed. The claim is beyond the scope of notification, as no inputs have been sold and beyond clarification as no value of inputs is shown on the bills.
9. We may read the relevant portion of this Tribunal judgment in the case of Adlabs (supra) :
On a careful consideration, we notice that the Commissioner was not justified in taking the view, in contra to the Board's letter and the Notification. The appellants have maintained the records of the inputs used in the photography, nowhere it is stated in the circular 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 Board's 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 Board's circular and the Notification. The order passed by the impugned authorities is not correct in law as the same is contra to the Board's letter and the Notification. The impugned order is set aside by allowing the appeal.
10. The above view of the Tribunal would not be correct since the issue as to whether photographic service included any sale of materials had come up for consideration before the Supreme Court in the case of C.K. Jidheesh (supra) and the Court ruled as under :
There is one further difficulty in the way of the Petitioner. This Court has, in the case of Rainbow Colour Lab and Anr. v. State of M.P. and Ors. , held that contracts of the type entered into by persons like the Petitioner are nothing else but service contracts pure and simple. It is held that in such contracts there is no element of sale of goods. The judgment is binding on this Court. In view of this judgment, the question of directing the Respondent to bifurcate the receipts into an element of goods and the element of service cannot and does not arise. We see no substance in the contention that facts in Rainbow Colour Labs case were different inasmuch as in that case the Court was dealing with a case where photographers take photographs, develop them and then give the photos to the customer. In our view, the ratio of Rainbow Colour Lab's case also applies to cases like the present."
11. Thus, it remains judicially concluded that in a service like photography, "there is no element of sale of goods.
12. In the result, the appellant's claim for deduction of input costs cannot find acceptance in view of the above ruling of the Hon'ble Supreme Court, the terms of exemption notification and the clarification of the Board.
13. The appeal fails and is rejected.
(Dictated & pronounced in open Court on 6.6.06)