Kerala High Court
Deputy Commissioner Of Sales Tax ... vs Sreeni Printers on 24 March, 1987
Equivalent citations: [1987]67STC279(KER)
Author: T. Kochu Thommen
Bench: T. Kochu Thommen
JUDGMENT K.P. Radhakrishna Menon, J.
1. The State is before us. The year of assessment is 1976-77.
2. Facts lie in a narrow compass. The amount of Rs. 1,18,801.29 representing the turnover of photo blocks supplied by the assessee in the assessment year to various parties though included in the return, was claimed to be not liable to be assessed under the Kerala General Sales Tax Act because the contracts under which the supplies were made did not involve sale of any materials. The contracts were all in the nature of works contracts. The assessing authority did not accept this argument. The claim accordingly was disallowed. The appellate authority disposed of the appeal, the assessee had filed against the order of the assessing authority, with a direction to re-examine the claim afresh. The department challenged the said order of the appellate authority before the Appellate Tribunal. The Appellate Tribunal, relying on a decision of the Supreme Court in Assistant Sales Tax Officer v. B.C. Kame [1977] 39 STC 237 held that in making the photo blocks and supplying them to the customers, there was no element of sale involved; the contracts essentially and undisputably were in the nature of works contract and therefore the assessee was entitled to the exemption claimed.
3. The questions of law raised for decision by the petitioner are :
(a) Whether the Tribunal is justified in law in holding that the transaction of the assessee in making photo blocks and supplying them to the customers are in the nature of works contract and that there was no sale involved in the said transaction ?
(b) Whether the Tribunal is justified in law in drawing analogy for the decision of the Supreme Court in [1977] 39 STC 237 (Assistant Sales Tax Officer v. B.C. Kame) ?
(c) Is not the decision of the Supreme Court reported in [1977] 39 STC 237 (Assistant Sales Tax Officer v. B.C. Kame) distinguishable on facts ?
(d) Whether the view taken by the Tribunal is correct in the light of the decision of this Honourable Court reported in [1978] 42 STC 140 (John Mathew Bros. v. State of Kerala) ?
(e) Whether the Tribunal is justified in law in holding that the assessee can dispute the taxability of the turnover even if he has conceded the said turnover in the return filed by him ?
(f) When an assessee has collected tax on a particular transaction, can he claim exemption from tax in respect of the said transaction ?
4. The point arising for consideration is whether a contract for preparation of photo blocks was a contract for skill and labour and hence did not involve the sale of materials and as such no tax was leviable under the Kerala General Sales Tax Act on the price of the materials used for making the blocks. It cannot be disputed that for making the photo block, the block-maker should first take a photograph of the subject, develop it and also enlarge it to the corresponding size of the desired block. The block-maker thereafter has to engrave it on a zinc plate. To engrave it on a zinc plate some processing with the aid of chemicals is required. The zinc plate afterwards is affixed on to a hard wooden block. It can thus be seen that the labour and skill a block-maker should put in in making the blocks, are more than the labour and skill a photographer may put in to take a photograph. It is true that the value of the materials contained in the block and the price of the block are also relevant considerations though not conclusive in deciding the issue whether the transaction which results in the supply of the blocks to the customer, partakes the character of a sale, or is only a works contract. Compared to the degree of labour and skill involved in the block-making, the value of the materials will be very negligible. Yet another relevant aspect that should be borne in mind is that the block has use only for the particular customer and not for any other person. It could therefore be seen that the degree of skill and labour required in the preparation of the photo block is more than that is required in the preparation of a photo print. The Madhya Pradesh High Court in Commissioner of Sales Tax v. Vasudeo Rao [1981] 48 STC 447, considering the question whether a contract for preparation of blocks is a contract for skill and labour and hence does not involve sale of materials and as such no tax is leviable under the Madhya Pradesh General Sales Tax Act, 1958 on the price of the materials used for making the blocks, has held thus :
In view of the clear pronouncement of their Lordships of the Supreme Court in the case of a photographer which equally applies to the case of block-maker because as found by the Board of Revenue the degree of skill and labour required in the preparation of a block is more than that required in the preparation of a photo print, the Board of Revenue has not committed any error of law that the turnover of the assessee in the present case was not exigible to sales tax.
5. With respect we agree with this decision of the Madhya Pradesh High Court.
6. The learned Government Pleader, however, submits that the question whether a contract for preparation of blocks is a contract for skill and labour, has not been considered by the Appellate Tribunal in the right perspective. According to him necessary facts have not been found by the Appellate Tribunal. That the decision of the Appellate Tribunal is based on the ruling of the Supreme Court in Assistant Sales Tax Officer v. B.C. Kame [1977] 39 STC 237, relied on by the Madhya Pradesh High Court to come to the above conclusion, is beyond dispute. However, according to the learned counsel, the Tribunal has not considered all the relevant aspects to arrive at the conclusion that the contracts in question are in the nature of works contract.
7. It cannot be disputed that the occupation of a block-maker is essentially one of skill and labour. It is true that to make the block he has to use certain materials. However if the substance of the contract between the buyer and the assessee is that skill and experience of the maker of the blocks require to be used for the production of the blocks, then the contract is in the nature of works contract despite the fact that some materials also will pass to the customer along with the skill involved in the production of the block. Whether in the State of Madhya Pradesh, or in the State of Kerala, the occupation of a block-maker is essentially one of skill and labour. This being the position the decision of this Court in John Mathew Bros. v. State of Kerala [1978] 42 STC 140 which has not considered the specific question arising for consideration in this case although there was a passing reference to the point whether the art of block-making is a contract of work and labour involving skill, in the said judgment, has no application here.
8. In paragraph 7 of the order, the Appellate Tribunal has catalogued the undisputed facts thus :
The question is whether the works, undertaken by the respondents are similar or identical in nature, with the works undertaken by a photographer. According to the respondents, several publishers of newspapers and periodicals like Kerala Kaumudi, Kala Kaumudi, etc., are sending photos to them and giving orders to them to take or engrave photo blocks from these photos for printing in their newspapers or periodicals. They are submitting that when a photo is brought, a block is engraven using their expertise or skill, as, otherwise, the photo or periodical (sic). According to them, it is not even like mere composing in a printing press, which work can be said to be mechanical even and requires more practice than skill, but for engraving photo blocks, it requires more skill, expertise and attention. It cannot be disputed that any one can take a photo with a camera but whether the photo is good or not will depend upon the training or expertise and skill of the photographer. Same is the position with regard to the art or work of engraving photo blocks also and consequently, the decision of the Supreme Court in B.C. Kame's case [1977] 39 STC 237 is applicable as rightly held by the order of the Bench quoted in para 4 above.
The facts available on record are more or less similar to the facts considered by the Madhya Pradesh High Court in Vasudeo Rao's case [1981] 48 STC 447 aforesaid. In other words in arriving at the decision that the degree of skill and labour required in the production of the block, is even more than that is required for the production of photo print, the Madhya Pradesh High Court has taken note of facts which are practically identical with the facts found by the Tribunal here. That the occupation of a block-maker is essentially one of skill and labour, no more can be disputed in the light of the judicial pronouncements mentioned above. We therefore have no hesitation to hold that the skill and labour required for the production of the photo block is more than that is required for the production of photo prints. If that be so the main question arising for consideration and covered by questions, A, B, C, D and F, according to us, has rightly been answered by the Tribunal in favour of the assessee.
9. Regarding the point covered by question it is enough if it is said that under fiscal law there is no scope to set up the plea of estoppel. Equity has no place in taxing statute. If a particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. The point covered by question E has accordingly been rightly rejected by the Tribunal.
For the reasons stated above the tax revision case is dismissed. No costs.