Assistant Sales Tax Officer & Ors
Vs. B.C. Kame, Proprietor Kame Photo Studio  INSC 326 (14 December 1976)
KHANNA, HANS RAJ KHANNA, HANS RAJ GUPTA, A.C.
CITATION: 1977 AIR 1642 1977 SCR (2) 435 1977
SCC (1) 634
Madhya Pradesh General Sales Tax Act, 1959,
whether taking photographs and supplying photo-prints is sale transaction for
the purpose of--Contract of sale and contract of work and labour, distinction
The respondent carries on business, inter
alia, of supplying photo-prints to those who get themselves photographed at his
studios. The. Sales-tax authorities assessed him and levied sales tax on his
supply of photo-prints. The respondent filed a writ petition in the High Court
contending that in supplying photo-prints, he did not enter into sale
transactions but only undertook contracts of work and labour. He also refuted
the appellant's contention that a finished photograph was a marketable
commodity. The High Court allowed the writ petition holding the respondent not
liable to pay sales-tax on the supply of photo-prints.
Dismissing the appeal, the Court,
HELD: (1) When a photographer undertakes to
take photograph, develop the negative, or do other photographic work and
thereafter supply the prints to his client, he cannot be said to enter into a
contract for sale of goods. The contract on the contrary is for use of skill
and labour by the photographer to bring about desired result. [439E] Masanda's
case (1957) 8 STC 370 and Camera House Case (1970) 25 STC 354, distinguished;
28 S.T.C. 1 MP reversed.
(2) A contract of sale is one whose main
object is the transfer of property in, and the delivery of the possession of, a
chattel as a chattel to the buyer. Where the principal object of work undertaken
by the payee of the price is not the transfer of a chattel qua chattel, the
contract is one of work and labour. The test is whether or not the work and
labour bestowed end in anything that can properly become the subject of sale.
[437D-E] State of Himachal Pradesh & Ors. v. Associated Hotels of India
Ltd. STC 474 and State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd.
STC 353, applied.
Sale of Goods, 4th Edn. p. 10 by P.S. Atiyah
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 138 of 1972.
(From the Judgment and Order dated 20.3.1971
of the Madhya Pradesh High Court in Misc. Petition No. 313/70).
I. N. Shroff, for the appellants.
S.V. Gupte, J. D. Jain, Miss Kanwaljit
Miglani and Balram Sahgal for the respondent.
The Judgment of the Court was delivered by
KHANNA, J.--Whether sales tax is payable by a photographer under the Madhya
Pradesh General Sales Tax Act (Act 2 of 1959) when the 436 photographer takes
photographs or does other photographic work and thereafter supplies the photographic
prints to his client or customer is the question which arises for determination
in this appeal on certificate against the judgment of Madhya Pradesh High Court
reported in 28 STC 1. The High Court answered the question in the negative in
favour of the assessee respondent.
The respondent is the proprietor of Kame
He has apart from his main shop two branches.
He carries on business, inter alia, of buying and selling photographic goods.
After buying photographic goods he either sells them to his customers or uses
them in three ways--(1) in taking photographs and supplying prints thereof, (2)
in making enlargements for the clients who bring their own negatives, and (3)
in preparing positive prints of the same size from the negatives brought by the
clients. For doing these various types of works the assessee respondent charges
consolidated amount depending upon the work involved and the size and number of
prints demanded by the client.
The sales tax authorities assessed the
respondent for different periods from April 1, 1964 to March 31, 1969 to sales
tax on his turnover on best judgment basis as he had not kept full and complete
accounts. It may be convenient to refer to the figures of assessment for one of
For the year 1964-65 the total turnover of
the respondent was taken to be Rs. 41,500. Out of this amount a deduction of
Rs. 6,500 was allowed as relatable to developing and enlargement which was
considered to be not chargeable to tax. The balance of Rs. 35,000 was divided into
two parts Rs. 12,000 being treated as relatable to sale of materials as such
and the rest Rs. 23,000 being taken to be the receipts on account of the supply
of photo prints to those who got themselves photographed at the studios.
The respondent filed writ petition to
challenge the levy of sales tax on the last item, namely, the item for the
supply of photo prints. The contention of the respondent was that in taking a
photograph, preparing its negative and thereafter the final positive print for
supplying the same to the client, the respondent undertakes a contract of work
and labour and does not enter into a sale transaction. It was also stated on
behalf of the respondent that the prepared positive print was not a marketable
commodity and he could not sell the photograph of one person to any other
person except with the former's consent. As against that, the case of the
appellants was that the respondent was carrying on a commercial activity in the
nature of trade and business and the finished photographs supplied by him to
his customer was a commodity and the supply of same attracted the levy of sales
tax. The High Court, on consideration of the matter, came to the conclusion
that the respondent only undertook the contract of work and labour and did not
enter into a sale transaction. The respondent as such was held not liable to
pay sales tax in respect of the item to which the writ petition related. The
High Court while accepting the writ petition also observed as under:
"We may lastly make it clear that in
this case we are not called upon to go into the question whether the material
used 437 in preparing the photograph is sold and taxable. The petitioner has
alleged in the petition that he was paid full tax on the value of such material
and the respondents have neither denied the fact nor have claimed tax on such
material. We, therefore, express no opinion on that question and need not
consider either Masanda's case (1957) 8 STC 370, where the only question
referred to this Court was whether such material alone could be taxed, or the
observations of the Bombay High Court in Camera House Case (1970)25 STC 354,
about severability of the contract into one spearately for service and supply
of material." In appeal before us Mr. Shroff has assailed the judgment of
the High Court. As against that,. Mr. Gupte on behalf of the respondent has
canvassed for the correctness of the view taken by the High Court.
The question as to whether a contract is a
contract of work and labour or a contract for sale is not one free from
difficulty. The reason for that is that in border line cases the distinction
between the two types of contract is very fine. This is particularly so when
the contract is a composite one involving both a contract of work and labour
and a contract of sale. Nevertheless, the distinction between the two rests on
a clear principle. A contract of sale is one whose main object is the-transfer
of property in, and the delivery of the possession of, a chattel as a chattel
to the buyer. Where the principal object of work undertaken by the payee of the
price is not the transfer of a chattel qua chattel, the contract is one of work
and labour. The test is whether or not the work and labour bestowed end in
anything that can properly become the subject of sale; neither the ownership of
materials, nor the value of the skill and labour as compared with the value of
the materials, is conclusive, although such matters may be taken into
consideration in determining, in the circumstances of a particular case, whether
the contract is in substance one for work and labour or one for the sale of a
chattel (see The State of Himachal Pradesh & Ors. v. Associated Hotels of
India(1). The respondent company in that case carried on business as hoteliers.
As a part of its business as hoteliers, the company received guests in its
several hotels to whom, besides furnishing lodging, it also served several
other amenities, such as public and private rooms, bath with hot and cold
running water, linen, meals during stated hours. The bill tendered to the
guests was all-inclusive one, namely, a fixed amount for the stay in the hotel
for each day and did not contain different items in respect of each of the
amenities. The question which arose for determination was whether the company was
liable to pay sales tax under the Punjab General Sales Tax Act, 1948 in respect
of meals served in the hotel to the ,guests coming there for stay It was held
by the Constitution Bench of this Court that the transaction was essentially
one and indivisible, namely, one of receiving a customer in the hotel to stay.
It was essentially one of service by the hotelier in the performance of which,
and as part of the amenities incidental to the service, the hotelier served
meals at stated hours. The revenue, it was held, was (1) 29 S.T.C. 474.
438 not entitled to split up the transaction
into two parts, one of service and the other of sale of food-stuffs. This Court
accordingly came to the conclusion that there was no sale of food-stuffs and
the respondent company was not liable to pay sales tax in respect of the meals
served to the guests in the hotel. In arriving at this conclusion this Court
observed as under:
"Thus, in considering whether a
transaction falls within the purview of sales tax, it becomes necessary at the
threshold to determine the nature of the contract involved in such a
transaction for the purpose of ascertaining whether it constitutes a contract
of sale or a contract of work or service. If it is of the latter kind it
obviously would not attract the tax. From the decisions earlier cited it
clearly emerges that such determination depends in each case upon its facts and
circumstances. Mere passing of property in an article or commodity during the
course of the performance of the transaction in question does not render it a
transaction of sale.
For, even in a contract purely of work or
service, it is possible that articles may have to be used by the person
executing the work and property in such articles or materials may pass to the
other party. That would not necessarily convert the contract into one of sale
of those materials. In every case the court would have to find out what was the
primary object of the transaction and the intention of the parties while
entering into it.
It may in some cases be that even while entering
into a contract of work or even service, parties might enter into separate
agreements, one of work and service and the other of sale and purchase of
materials to be used in the course of executing the work or performing the
service. But, then in such cases the transaction would not be one and
indivisible, but would fail into two separate agreements, one of work or
service and the other of sale." Reliance in the above cited case was
placed upon an earlier decision of this Court in the case of State of Madras v.
Gannon Dunkerley & Co. (Madras) Ltd.(1) wherein the Constitution Bench of
this Court held that in a building contract the property in materials used,
does not pass to the other party to the contract as movable property. It would
so pass if that be the agreement between the parties.
But if there was no such agreement and the
contract was only to construct a building, then the materials used therein
would, in the opinion of the Court, become the property of the other party to
the contract only on the theory of accretion.
The distinction between a contract of sale
and contract for skill and labour has been discussed at page 10 of the 4th Edn.
of "Sale of Goods" by P.S. Atiyah. The following passage in that book
has a material beating so far as the present case is concerned:
(1) 9 S.T.C. 353.
439 "The distinction between contracts
of sale and contracts for skill and labour has agitated the courts for many
years, and though its importance has been greatly diminished by the repeal of
Sect. 4 of the Act, it still cannot be ignored. It was thought for many years
that Lee v. Griffin (1861), 1 B.&S. 272 laid down that, if a contract would
result in the transfer of the property in goods from one party to another, then
it must be a contract of sale.
The view was exploded in Robinson v. Graves
(1935) 1 K.B. 579 where it was held that a contract to paint a portrait was a
contract for skill and labour and not a contract for the sale o[ goods, despite
the fact that it was the object of the contract to transfer the property in the
completed portrait to the defendent. Green L.J. stated the law as follows
(1935) 1 K.B. at p. 587:
If the substance of the contract .... is that
skill and labour have to be exercised for the production of the articles and
it is only ancillary to that that there will
pass from the artist to his client or customer some materials in addition to
the skill involved in the production of the portrait, that does not make any
difference to the result, because the substance of the contract is the skill
and experience of the artist in producing the picture." Keeping the above
principles in view, we may now turn to the facts of the present case. When a
photographer like the respondent undertakes to take photograph, develop the
negative, or do other photographic work and thereafter supply the prints to his
client, he cannot be said to enter into a contract for sale of goods. The
contract on the contrary is for use of skill and labour by the photographer to
bring about a desired result. The occupation of a photographer, except in so
far as he sells the goods purchased by him, in our opinion, is essentially one
of skill and labour. A good photograph reveals not only the aesthetic sense and
artistic faculty of the photographer, it also reflects his skill and labour. A
good photograph in most cases is indeed a thing of beauty. It not only seeks to
mirror and portray a scene from actual life, it also catches and preserves for
the future what belongs to and is a part of the fleeting moment. The ravage
brought about by the passage of time, the decay and the ageing process which
inevitably set in as the years roll by leave what is preserved in the
photograph unaffected. It is no wonder that an old photograph revives nostalgic
memories of days no more, but to which we rook back through the mist of time
with fondness even though such fondness has a tinge of sadness.
We, therefore, find no cogent ground to
disagree with the High Court in so far as it has decided against the revenue
and has held the contract to be one for work and labour. Our attention has been
invited during the course of arguments to some decisions of the High Courts. It
is, in our opinion, not necessary to deal with those cases 12 -1546 SCI/76 440
because after giving the matter our consideration was are of the opinion, that
the view taken by the High Court in the judgment under appeal substantially
represents the correct position in law. The appeal consequently fails and is
dismissed, but in the circumstances without costs.
M.P. Appeal dismissed.