COMMISSIONER OF SALES TAX Vs. BOMBAY SOUND SERVICE

JUDGEMENT

(1.) BY this reference under section 61 (1) of the Bombay Sales Tax Act, 1959 ("act") read with section 8 (1) of the Maharashtra Sales Tax on the Transfer of the Right to use any Goods for any Purpose Act, 1985, the Maharashtra Sales Tax Tribunal has referred the following questions of law to this Court for opinion at the instance of the revenue.

(2.) THE assessees in all the six cases are the owners of cine laboratories and studios. All the studios are located in Mumbai. These studios are fully air tight and air conditioned. In these studios sound recording instruments are permanently installed with electric fittings etc. The assessees do the job of sound recording, re-recording, dubbing, mixing and transferring the sound on the negative films. These studios are taken on hire by the film producers for recording songs on shift basis. The recordists, projector operators and helpers are engaged in the studios on permanent basis by the assessees who are the owners of the studios. They are the employees of the assessees. When a song is recorded, the musicians sit in the hall with their musical instruments like piano, drum, harmonium, trumpet, accordion, flute, violin, mouth organ etc. In one corner of the hall singer or the singers sit with microphones to sing the song along with accompaniments of the music being played by the musicians. The sound from the different microphones known as channels are fitted into a big console known as the sound mixing console which is installed in the control room. The recordist is the employee of the studio owners. The sound comes in from the various microphones is mini-theatre on large speakers installed in the control rooms. By means of the switches and knobs on the mixing console, the recordist mixes the inputs from the various channels and achieves an ideal balance. The rehearsal of the playing of music is always at the direction of the music director, who is employed by the film producer. When the music director is satisfied with the complete song as played and sung and mixed by the recordist, the entire song is recorded in the mixing console into a magnetic tape by means of a big tape recorder. The tape is then played back and if the producer and the music director are satisfied with the reproduction, the sessions ends. The procedure is more or less the same in case of recording of background music except that there are no singers and the song requiring background music are naturally projected on a screen by means of regular cinema. After the recording on the magnetic tape is over, the magnetic master is transferred through an optical sound recorder installed in the studio to produce a sound track negative which has to be subsequently developed in a film processing laboratory and matched with the picture negative to produce the final release print with the sound. In the recording and re-recording studios there are separate compartments for various purposes. The main hall in meant for musicians to sit with their musical instruments. The control room consists of mixing console and speakers which are embedded to the earth. In the machine room, recorder and projector are embedded to the earth. At times singer has a separate room. Optical sound recorder is embedded to the earth in other room. There is a power room consisting of sesym motors and rectifiers. The film producers hire the studios for recording music and pay for the same. This is common in all cases. In addition to this activity, the assessees also have mini-theatres which they give on hire for exhibiting films to the distributors. Studios for shooting films fully equipped with all instruments are also given on hire for shooting films. The assessees also give editing machines on hire to the film producers for editing the film before they are exhibited. Those editing machines are operated not by the assessee but by the film producers who take them on hire.

(3.) AFTER the enactment of the Maharashtra Sales Tax on Transfer of the Right to use any Goods for any Purpose Act, 1985 (referred to as the "1985 Act" or "the Act"), which came into force with effect from 1st October 1986, the assessees moved the Commissioner of Sales-tax under section 8 of the said Act read with section 52 of the Bombay Sales Tax Act, 1959 for determining the question whether the transactions referred to in the three questions and the hiring of mini-theatres, studios for shooting films and editing machines were covered by the provisions of the Act and the hire charges received by the assessee in respect thereof were taxable under Act. The Commissioner decided all these questions against the assessees. He was of the opinion that the transactions would be subject to tax as they were covered by the expression "sale", in Clause (10) of section 2 of the Act. Aggrieved by the above order of the Commissioner, the assessees appealed to the Maharashtra Sales-tax Tribunal ("tribunal" ). The Tribunal visited the studios of the assessees to ascertain whether the hiring of the studios for various purposes could be regarded as "sale" within the meaning of Clause (10) of section 2 of the Act. After inspection of the same, the Tribunal by its judgment dated 10th October, 1991, held that the activity of sound recording, re-recording, dubbing, mixing and transferring sound on negative films on charges would not amount to "sale" within the meaning of Clause (10) of section 2 of the 1985 Act. The Tribunal also held that the hire of the mini theatre to exhibit unreleased films to the distributors on charges would not come within the mischief of the Act. The Tribunal further held that the activity of giving the studios on hire with all equipments, light arrangements etc. for shooting films did not fall within the purview of Clause (10) of section 2 of the Act. The Tribunal was, however, of the opinion that the activity of hiring editing machines for editing the films would amount to "sale within the meaning of Clause (10) of section 2 of the Act. The Tribunal accordingly allowed the appeals of the assessees partly. The assessees have not challenged the finding of the Tribunal in regard to the hiring of editing machines which is against them. Similarly, the revenue has not challenged the finding of the Tribunal in regard to the hiring of the mini-theatres for exhibiting unreleased films to the distributors and hiring of studios for shooting of films which is in favour of the assessees. Revenue has challenged the finding of the tribunal only is so far as it relates to the hiring of studios for recording of music and back ground music and dubbing of film music is concerned.