KERALA COLOUR LAB ASSOCIATION Vs. UNION OF INDIA

JUDGEMENT

(1.) BOTH these Writ Petitions under Art. 226 of the constitution of India challenge the imposition of service tax under Finance Act of 1994, as amended by the Finance Act of 2001, on the taxable service provided by a photography studio or agency, in relation to photography, in any manner.

(2.) SERVICE tax was introduced for the first time by the finance Act, 1994 and levied on certain categories of services like stock brokers, general insurers and telephone services. It came to be extended to advertising agencies, courier agencies and pager services by the Finance Act of 1996. The service tax net was widened by adding twelve more services by the finance Act, 1997. By the Finance Act, 1998, twelve more service were brought within the purview of service tax, namely, Architects, Interior Decorators, management Consultants, Real Estate Agents, Practising Chartered Accountants, practising Company Secretaries, Practising Cost Accountants, Security Agencies, credit Rating Agencies, Market Research Agencies, Under Writers and Mechanised slaughter Houses. The relevant definitions under the Finance Act are as under: S. 65 (47): Photography.- "photography includes still photography, motion picture photography, laser photography, aerial photography and fluorescent photography". S. 65 (48): Photography studio or agency.-"photography studio or agency means any professional photographer or a commercial concern engaged in the business of rendering service relating to photography". S. 65 (72) (zb): Taxable SERVICE in relation to photography studio or agency.- "means any service provided "to a customer, by a photography studio or agency in relation to photography, in any manner. " Under S. 66, SERVICE Tax is charged at five per cent of the value of taxable services referred in clause (zb) of S. 65 (72 ). S. 67 provides that valuation of taxable service for charging service tax shall be the gross amount charged by the service provided for such service rendered by him. The explanation to S. 67 which provides for inclusions and exclusions of certain amounts. The only relevant clause is clause (b) under 'amounts not included', which reads as under: " (b) the cost of exposed photography film, unrecorded magnetic tape or such other storage device if any, sold to the client during the course of providing the service "we are not concerned with the rest of the provisions for the present purpose.

(3.) THE contention of the learned counsel is that, in view of the peculiar types of services rendered by colour laboratories, where about 80 per cent of the value of the property passed to the customer consists of costs of photographic film, value of service being negligible, it is wholly erroneous to treat colour laboratories and photography studios as rendering "service", as understood generally. It is urged that, in all other cases falling under the net of service tax as defined in S. 65 (72), the cost of material involved is nil or negligible, the service element being predominant, in the case of the activities carried on by the petitioners, the reverse is the truth. By applying the dominant character test, their activity cannot be considered as a "service".