WESTERN RAJASTHAN COLOUR LAB Vs. UNION OF INDIA

JUDGEMENT

(1.) AFTER recalling the order dated 21st April, 2005, by a separate order passed in D.B. Civil Misc. Application No. DR(J)1203/06, we have heard learned Counsel for the parties on merit of the writ petition.

(2.) THE petitioner No. 1 is an association of individuals and firms who are engaged in business of running Photo and Colour Labs and are also engaged in the business of processing (i.e. developing and printing) colour photographic films. The petitioner No. 2 is one of the member of the Association. The dispute relates to the manner in which the value of service, rendered by them is to be computed for the purpose of determining Service Tax payable by them. Under Section 67 of the Finance Act, 1994, the value of taxable service is defined as gross amount charged by 'the service providers' for such service rendered by them. In the wake of this general definition, an Explanation has been inserted under Section 67 specifying certain individual cases of different kinds of services for the purpose of determining taxable value of services provided but the same do not include any provision about the determination of valuation in case of 'photography service', though the Explanation refers to the cost of unexposed photography film, unrecorded magnetic tape or such other storage device if any, not to be included for the purpose of calculating the taxable service. By , dated 20th June, 2003, which came into effect on 1 -7 -2003, it was envisaged that while rendering the service, the value of goods and material supplied by the Service provider to the recipient of Service shall be exempted from the levy of Service Tax, subject to condition that there is documentary proof specifically indicating the value of the said goods and material supplied. The petitioner's case is that these circular cannot control the provisions made substantively about the valuation of the taxable service to be the value of gross amount charged for the service rendered and the same can include the cost of material supplied while rendering the services, as property in goods passes to the customer by way of sale or transfer of property, which is not a part of Service provided but amounts to sales of those goods.

(3.) IN raising this contention for claiming deduction of the value of photographic materials from the gross receipts by the service provider for determining taxable service turn over, the challenge was made to the aforesaid circular dated 20th June, 2003.