Appeal No 138 of 1972
From the Judgment and Order dated 2031971 of the Madhya Pradesh High Court in Misc
Petition No 31370
I N Shroff for the appellants
SV 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 determi nation 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 Photo Studio
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 the years
For the year 1964 65 the total turnover of the respondent was taken to be Rs 41500
Out of this amount a deduction of Rs 6500 was allowed as relatable to developing and enlargement which was considered to be not chargeable to tax
The balance of Rs 35000 was divided into two parts Rs 12000 being treated as relatable to sale of materials as such and the rest Rs 23000 being taken to be the re ceipts 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 taxa ble
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 197025 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 sub ject 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 circum stances 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
vs Associ ated Hotels of India1
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 STC 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 deter mine the nature of the contract involved in such a transaction for the purpose of ascer taining 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 determina tion 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 materi als 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 enter ing 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 trans action 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 vs Gannon Dunkerley  Co Madras Ltd1 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 accre tion
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 PS Atiyah
The following passage in that book has a material beating so far as the present case is concerned 1 9 STC 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 vs Griffin  laid down that if a contract would result in the trans fer of the property in goods from one party to another then it must be a contract of sale
The view was exploded in Robinson vs Graves 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 LJ stated the law as fol lows 1935 1 KB 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 in volved 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 produc ing 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 pur chased by him in our opinion is essentially one of skill and labour
A good photograph reveals not only the aes thetic 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 pre served 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 SCI76 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
MP Appeal dis missed


Summary:
The respondent carries on business inter alia of supplying photo prints to those who get themselves photo graphed at his studios
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 contend ing 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 photo graph 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 con tract 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 STC 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
vs Associated Hotels of India Ltd STC 474 and State of Madras vs Gannon Dunkerley  Co Madras Ltd STC 353 applied
Sale of Goods 4th Edn
p 10 by PS Atiyah relied upon