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Showing contexts for: rainbow colour lab in Shilpa Color Lab vs Commissioner Of C. Ex. on 30 October, 2006Matching Fragments
Though the above decision is in favour of the appellants, the Principal Bench, Delhi took a contrary view in Laxmi Color (P) Ltd. v. CCE, Jaipur-II. While taking a contrary view, CESTAT, Delhi relied on the following decisions:
(i) C.K. Jidheesh v. UOI 2006 (1) STR 3 (S.C.) : 2005 (71) RLT 505 (S.C.)
(ii) Rainbow Colour Lab. and Anr. v. State of M.P. and Ors. .
8.6 In order to appreciate the issues, we shall examine the decision in the case of Rainbow Colour Lab. The Rainbow case relates to Sales Tax. The Madhya Pradesh Sales tax authorities took a view that the job done by photographers amounted to "works contract". They took advantage of the 46th Amendment of the Constitution and the consequent amendment to the definition of 'sale' in Section 2(n) of the local Sales Tax Act. The authorities decided that the turnover of the photographers would be exigible to the levy of Sales Tax. This issue was examined by the Hon'ble Apex Court and it was held that the job rendered by a photographer in taking photographs, developing and printing films does not amount to 'works contract' and not exigible to the levy of sales tax. In other words, the work done by the photographer is only in the nature of a service contract and not involving any sale of goods.
8.7 In the C.K. Jidheesh case, the Apex Court followed the decision of the Rainbow Colour Lab case. In the Jidheesh case, the petitioner claimed that the UOI must bifurcate the gross receipts of processing of photographs into the portion attributable to goods and that attributable to services. Then, it must tax only that portion of the receipts, which is attributable to the services rendered. While dismissing the petition, the Apex Court made the following observations in para 11.
11. 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. This 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.
8.8 In the Laxmi Colour (P) Ltd. case, the Tribunal relied on Jidheesh case and held that there is no element of sale of goods in a service like photography. In fact, while deciding the same, the Tribunal extracted para 11 of the Jideesh decision.
Thus, it appeared that the entire issue has been finally settled in view of the decision of the Apex Court in the Jideesh case. But, that was not to be, in view of further developments overruling the above decisions.
8.9 The learned Advocates brought to our notice that the Hon'ble Apex Court, in the Bharat Sanchar Nigam Ltd. and Anr. v. UOI and Ors. 2006 (2) S.T.R. 161 (S.C), has overruled the decisions in the case of C.K. Jidheesh and Rainbow Colour Lab cases. In order to appreciate the implications of BSNL decision to the present appeals, we like to present the following background information:
46. This conclusion was doubted in Associated Cement Companies Ltd. v. Commissioner of Customs saying:
The conclusion arrived at in Rainbow Colour Lab case , in our opinion, runs counter to the express provision contained in Article 366(29-A) as also of the Constitution Bench decision of this Court in Builders Assn. of India v. Union of India .
47. We agree. After the 46th Amendment, the sale element of those contracts which are covered by the six sub-clauses of Clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying. Therefore when in 2005, C.K. Jidheesh v. Union of India (2005) 8 SCALE 784 held that the aforesaid observations in Associated Cement (supra) were merely obiter and that Rainbow Colour Lab (supra) was still good law, it was not correct. It is necessary to note that Associated Cement did not say that in all cases of composite transactions the 46th Amendment would apply.