prescribed in [SECTION] and [SECTION] of the CST (Kerala) Rules? T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 3 iii) Whether the Tribunal is correct in holding that Rubber Cess element is rightly included in the interstate sales turnover? Is not the finding illegal, and unsustainable on a correct and proper interpretation of [SECTION], [SECTION], [SECTION], [SECTION] and [SECTION] of the [ACT]? iv) Whether the Tribunal is correct in applying the principle laid down by the Supreme Court in the decision reported in [CASE NUMBER] in deciding the issue in the case with substantial situational difference? v) Is not the decision of the Supreme Court reported in [CASE NUMBER] distinguishable on facts? vi) Is not the Tribunal erred in proceeding as if the definition of the terms 'sale', 'sale price' and 'turnover' under [ACT] and [ACT] are essentially the same?" 5. The assessment proceedings has been completed by the assessing authority for the assessment years 1988-89 to1992-93 under the provisions of the [ACT]. While completing the assessments, the assessing authority had not included the cess paid by the assessee in the taxable turnover of the assessee. After the decision of the Apex Court in [PRECEDENT] , the revisional authority, in exercise of his powers under [SECTION] of the Act, 19[SECTION]3, had issued a show cause notice to the assesee directing him to show cause as to why the orders of assessment passed by the assessing authority T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 4 for the aforesaid assessment years should not be revised and why the matter should not be remanded back to the assessing authority to re-do the matter in accordance with law and in consonance with the observations made by the Apex Court in [PRECEDENT] Madras Rubber Factory Ltd. The assessee had filed its detailed objections to the show cause notice so issued by the revisional authority. The revisional authority, after considering each one of the objections so filed by the assessee, has come to the conclusion that under [SECTION] of the Act, 19[SECTION]3, the revisional authority has jurisdiction to invoke his powers to bring to tax the escaped turnover in the order of assessment passed under the provisions of [ACT] by virtue of [SECTION] of the Act. [SECTION]. Aggrieved by the findings and the conclusions reached by the revisional authority, the assessee had carried the matter by way of second appeals before the Sales Tax Appellate Tribunal in T.A.Nos. 1122 to 112[SECTION] of 1999. The Tribunal, by its order dated 20th November 1999, after considering all the grounds urged by the assessee has rejected the appeals. While holding that the revisional authority can exercise its powers under [SECTION] of the Act, 19[SECTION]3 to bring to tax the escaped turnover, it had relied upon the observations made by the various High Courts and also the language employed in [SECTION] of the [ACT] and has proceeded to hold that the Deputy Commissioner being an assessing authority under [ACT], is competent to invoke the revisional powers under [SECTION] of the [ACT] Act, 19[SECTION]3, in respect of C.S.T. assessment order as well. T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 5 7. In so far as the scope of revisional powers, the Tribunal , in paragraph 19 of its order, has stated that the revisional authority can invoke its powers under [SECTION] of the Act, 19[SECTION]3 to bring to tax the escaped turnover. To arrive at that conclusion, the Tribunal has relied upon the decision of the Full Bench of this court in Madras Rubber Factory Ltd. vs. State of Kerala [1979] 44 S.T.C. 208) and the decision of the Division Bench of this court in [PRECEDENT] . In the [PRECEDENT], the Full Bench of this court has stated as under: "The power of assessing escaped turnover under [SECTION] of the [ACT], 19[SECTION]3, and the power of revision under [SECTION] are two distinct and separate powers. They have been conferred on two different authorities , the power of revision being conferred on a superior authority. A valid exercise of the revisional power is not an infringement of the power of assessing escaped turnover. There is no bar or inhibition against getting at escaped turnover in exercise of the revisional power under [SECTION], so long as the grounds for exercise of that power are made out, viz., that the order is vitiated by illegality, irregularity or impropriety." 8. Following the Full Bench decision of this Court, a Division Bench of this court in [PRECEDENT] has stated as under: T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 [SECTION] "The exercise of powers under [SECTION] of the [ACT], 19[SECTION]3 by the Deputy Commissioner, when admittedly escapement was detected after the completion of the assessment for the year 1990-91, was correct and proper." 9. Shri [ENTITY], learned counsel for the petitioner/assessee would contend that the revisional authority, by invoking his powers under [SECTION] of the Act, 19[SECTION]3 is not authorised to bring to tax the escaped turnover, if any, in the assessment orders passed under the provisions of [ACT]. Alternatively, it is contended by the learned counsel that if there is any escaped turnover, the same can be brought to tax by the assessing authority, by invoking his powers under [SECTION] of the Act and that cannot be done by the revisional authority. 10. In so far as the second contention, raised by the learned counsel for the petitioner/assessee, in our opinion, that issue is no more res integra, in view of the law declared by the Division Bench of this court , to which we have already made a reference in the earlier paragraph. Therefore, the submission of the learned counsel on the second issue need not be considered by us, since it is only academic. 11. To answer the first issue raised by the learned counsel for the petitioner, firstly we need to notice the provisions of [SECTION] of the [ACT]. Therefore, the said provision is extracted and it reads as under:- "Subject to the other provisions of this Act and the rules made thereunder the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 7 under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax, including any interest or penalty , payable by a dealer under this Act as if the tax or interest or penalty payable by such a dealer under this Act is a tax or interest or penalty payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law , including provisions relating to returns, provisional assessment advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references , refunds, rebates, interest or penalty , charging or payment of interest compounding of offences and treatment of documents furnished by a dealer as confidential shall apply accordingly. Provided that if any State or part thereof there is no general sales tax law in force , the Central Government may, by rules made in this behalf make necessary provision for all or any of the matters specified in this sub-section." 12. [SECTION] vest the power with state authorities to assess or re-assess tax, levy penalties, deal with appeals and other remedies, recover the tax as finally determined and carry out all other functions necessary in those matters. Therefore, the Deputy Commissioner was competent to invoke his revisional powers under [SECTION] of the [ACT] T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 8 Act in respect of assessment orders passed under the [ACT]. In the instant case, as we have already noticed, there was escapement of turnover under the provisions of the Act. In order to bring to tax the escaped turnover , the revisional authority has exercised his powers under [SECTION] of the Act, 19[SECTION]3 in view of the decision of the Apex Court in the case of [PRECEDENT]. Therefore, we are of the opinion, firstly the Deputy Commissioner of Commercial Taxes was justified in invoking his revisional powers to bring to tax the escaped turnover in the assessment orders passed under the [ACT]. 13. In the appeal filed by the assessee, the Tribunal has raised two issues for its consideration and decision. They are, whether the Deputy Commissioner was competent to invoke his revisional powers in respect of an assessment completed under the [ACT] and that the cess paid under the [ACT] does not form part of interstate sales turnover of the producer of rubber, even if it may form part of the purchase turnover of a rubber dealer. The Tribunal by its well considered order has answered both the issues against the assessee. On issue No.1, the Tribunal has observed: "We may note the powers for reviews, revisions and references are provided in the latter portion of [SECTION] of the [ACT] on equal footing. in the above two cases, we have seen that the courts have held that the provisions for reference under [ACT] could be invoked in respect of liability under [ACT] by virtue of [SECTION] of [ACT]. The revision power of Deputy Commissioner is similar to the power of the Commissioner for entertaining reference applications. Therefore, we have no hesitation to hold that the Deputy Commissioner can legally invoke the suo motu revision power under [SECTION] of the [ACT] read with T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 9 [SECTION] in respect of an assessment order passed under [ACT]. Further, the Deputy Commissioner is also an assessing authority under the [ACT] empowered to assess, re-assess, collect and enforce payment of any tax under the [ACT] of the State. Revision proceedings in relation of re-opening of assessment is initiation of or continuation of proceedings for assessment, re-assessment, collections and enforcement of payment of tax. [SECTION] of the [ACT] authorises the authorities empowered under the [ACT] of the State to exercise all the powers they have under the general sales tax law of the State, including provisions relating to revision in respect of assessment, re-assessment, collection and enforcement of tax due under [ACT]. The Deputy Commissioner being an assessing authority under the [ACT], Deputy Commissioner is competent to invoke the revisional powers under [SECTION] of the [ACT] in respect of a CST assessment order as well. The Deputy Commissioner has not therefore over stepped his jurisdiction as contended by the counsel for the appellant. The revision orders are hence valid and as authorised by law.". 14. In our view, the reasonings and the conclusion reached by the Tribunal is in accordance with what we have observed in the course of our order. Therefore, no exception can be taken to the findings and conclusion reached by the Tribunal on this issue. Therefore, we confirm the findings of the Tribunal on this issue. 15. In so far as the second issue that they have raised for their consideration, is now squarely covered by the decision of Apex Court in the case of [PRECEDENT] Madras Rubber Factory Ltd. (1998) [SECTION] KTR 118 (SC). Applying the principles laid down in that case, the Tribunal has answered this issue against the assessee. We do not think that the Tribunal has gone wrong in applying the principles laid down in Madras Rubber T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 10 Factory's case to answer the second issue against the assessee. 1[SECTION]. In view of the aforesaid discussion, the orders passed by the authorities under the Act and the Tribunal requires to be sustained by us. Accordingly, the revision petitions requires to be rejected and they are rejected. Pending C.M.Ps are also disposed of. Ordered accordingly. [ENTITY], CHIEF JUSTICE. [ENTITY], JUDGE. lk/dk T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 11 [ENTITY], C.J.& [ENTITY], J. [CASE NUMBER] Dated this the 8th August, 2007 O R D E R T.R.C. Nos. 11[SECTION], 120, 121,122 AND 123 OF 2000 12 ? IN THE HIGH COURT OF KERALA AT ERNAKULAM ST Rev No. 287 of 2003() 1. [ENTITY], M/S.J.J.ENTERPRISES, Petitioner Vs 1. [ENTITY] REP. BY Respondent For Petitioner :[ENTITY] For Respondent : No Appearance The Hon'ble the Chief Justice [ENTITY] The Hon'ble MR. Justice [ENTITY] Dated :14/08/2007 O R D E R
[ENTITY], C.J. & [ENTITY], J.
SALES TAX REVISION. [CASE NUMBER]
Dated this the 14th August , 2007 O R D E R [ENTITY], C.J.:
This revision petition is filed questioning the legality or otherwise of the orders passed by the Sales Tax Appellate Tribunal in [CASE NUMBER] dated 29th April, 2003. The assessment year in question is 1988-89.
2. The assessee is engaged in the business of running a photo processing lab . According to the assessee, his activity is confined to taking of photographs of customers and delivering their photographs . This activity, according to the assessee, is a skilled labour, which is not exigible to tax.
3. The assessee had filed his annual returns before the assessing authority . The same is rejected by the assessing authority . After such rejection, the assessing authority had issued a pre-assessment notice, proposing certain turnovers to be exigible to tax under the [ACT], 19[SECTION]3 (hereinafter referred to as 'Act'). The view of the assessing authority is that the activity of the assessee would come within the meaning of the expression "works contract" and accordingly, had levied tax on the taxable turnover of the assessee. Aggrieved by the said order, the assessee had carried the matter in an appeal before the first appellate authority. The first appellate authority had allowed the appeal and had issued certain directions to the assessing authority to re-do the assessment in SALES TAX REVISION. [CASE NUMBER] accordance with law and in accordance with the observations made in the course of the order.
4. After the disposal of the appeal, the assessing authority had passed yet another order. In the said order, the assessing authority had once again levied the tax under the Act, treating the activity of the assessee as "works contract", which is exigible to tax under the Act. This order of the assessing authority was the subject matter of the appeal before the first appellate authority and the first appellate authority had allowed the appeal of the assessee. Being aggrieved by the above said order, the State had carried the matter in appeal before the Salestax Appellate Tribunal in [CASE NUMBER]. The Tribunal, by its order dated 29.04.2003, has rejected the appeal following the observations made by the Apex Court in [PRECEDENT] . In the orders passed, the Tribunal had made the following observations:
"7. The first appellate authority has accepted the contention of the assessee and allowed the appeal for the five years on the following finding.
"The activity of the appellant is to develop and print out the exposed , film brought by the customer in the appellant's colour lab. It is commonly known that the photo prints supplied by the appellant to the customer are not saleable in the open market as the same has no value. The Supreme Court in the case of [PRECEDENT] held that when a photographer undertakes to take photographs develop the negative or do other photographic SALES TAX REVISION. [CASE NUMBER] work and thereafter supply the prints to the customers, he cannot be said to enter into a contract for sale of goods. On the contrary the contract is for use of skill and labour to bring out a desired results . The occupation of a photographer except in so far as he sells the goods purchased by him is essentially one of skill and labour. In the advanced technology the machine carry out the entire process by the help of a skilled person. Hence the colour photo printing is not a works contract but it involve essentially a labour and service."
8. But the contention of the revenue is that the decision in Rainbow Colour Lab's case has been overruled in [PRECEDENT]. There is some force in the contention of the revenue. In [PRECEDENT] the Honourable Supreme Court of India held as follows:
"The Forty Sixth Amendment was made precisely with a view to empower the State to bifurcate the contract and to levy sales tax on the value of the material involved in the execution of works contract, notwithstanding that the value may represent a small percentage of the amount paid for the execution of the works contract. Even if the dominant intention of the contract is rendering of a service which will amount to a works contract, after the Forty Sixth Amendment the State would now be empowered to levy Sales Tax on the material used in such contract. The conclusion arrived at the Rainbow Colour Lab case, in our opinion, runs counter to the express provision contained in [SECTION] as also of the constitution bench decision of this court in [PRECEDENT]."
9. We now proceed to consider the question as to SALES TAX REVISION. [CASE NUMBER] whether the order of the 1st appellate authority directing to delete the levy of tax on the turnover involved in the works contract on the basis of the decision of the [PRECEDENT] is liable to be interfered with. In Associated Cement Company's case [PRECEDENT] the Honourable Supreme Court has categorically held that after the 4[SECTION]th Amendment of the [ACT] the turnover representing works contract could be bifurcated so as to levy sales tax on the value of materials involved in the execution of works contract. In fact, the impugned order of the first appellate authority directing to delete the levy of tax on the value of materials involved in the activities of the assessee in the light of the decision in Rainbow Colour Lab's case is not sustainable, in so far as the decision in Rainbow Colour Lab's case has been overruled in Associated Cement Company case.
10. In the light of the decision of the Honourable Supreme Court in Associated Cement Company ([2001] 4 SCC
593), we hold that the assessing authority rightly levied tax on the service charge received from the colour photo printing by treating it as works contract. So, the 1st Appellate authority should not have interfered in the finding of the assessing authority. In the circumstances, we concur with the findings of the assessing authority and setting aside the order of the first appellate authority, the original assessment is restored."
5. Aggrieved by the said order passed by the Tribunal, the assessee is before us in this Revision, filed under [SECTION] of the Act. The assessee has raised the following questions of law for our consideration and decision; they are as under:
"A. Is not the Photographic work - taking photograph, SALES TAX REVISION. [CASE NUMBER] developing and printing films carried on by the assessee only a skilled labour inexigible to tax? Can this activity be termed as works contract and as a sequel assess such turnover to tax in the hands of the assessee especially in the light of the judicial pronouncements like 39 STC 237, 103 STC 3[SECTION]0, 118 STC 9 etc.?
B. Is not the order of assessment in the instant case clearly barred by limitation?
C. Is not the proposal for levy of interest under [SECTION] from the very end of the assessment year concerned unjust, improper and illegal ? Is not such a levy possible and permissible only with effect from the date of the Tribunal order with which only in any event liability to tax has been finally fastened on the assessee, on a true reading of [SECTION] of the [ACT]?
[SECTION]. In so far as the questions of law B and C are concerned , the same was never urged or argued either before the assessing authority or before the Tribunal. Under [SECTION] of the Act, this Court can exercise its revisional powers, if the Tribunal has erroneously decided or failed to decide any questions of law.
7. The questions of law- B and C , formulated for our consideration and decision, were never urged or raised before the Tribunal . The Tribunal had no occasion to adjudicate those questions of law. In view of that, it cannot be said that the Tribunal had either failed to decide any questions of law or erroneously decided any questions of law . In that view of the matter, we do not intend to express any opinion on the questions of law- B and C raised by the Revision Petitioner in this Revision Petition. SALES TAX REVISION. [CASE NUMBER]
8. In so far as the question of law-A is concerned, Shri [ENTITY], learned counsel appearing for the petitioner would contend that the Tribunal was not justified in relying upon the observations made by the Apex Court in [PRECEDENT] to come to the conclusion that the activity of the assessee is exigible to tax on the ground that the said activity is in the nature of a works contract. Learned counsel would further submit that the decision rendered by the Apex Court in [PRECEDENT]) is not overruled by any subsequent decision by the Apex Court and therefore, the Tribunal was not justified in allowing the State 's appeals. In support of their contention, learned counsel relied upon the observation made by the Apex Court in [PRECEDENT]).
9. Per contra, learned counsel appearing for the Revenue, Shri [ENTITY], would submit that the decision of the Apex Court in Rainbow Colour Lab ' s case was impliedly overruled by the Apex Court in [PRECEDENT] and that decision of the Apex Court in Associated Cement Companies 's case has been confirmed by the Apex Court in Bharat Sanchar Nigam Ltd. and another vs. Union of India and others ([200[SECTION]] 145 STC 91).
10. In Rainbow Colour Lab's case, the Apex Court was considering the provisions of the [ACT], [ACT] and in that decision, the Apex Court has held that, unless there is a sale and purchase of goods, either in fact or deemed, and such sale is primarily intended and not incidental to the contract, the State cannot impose sales tax on a works contract simpliciter on the basis of the expanded definition found in [SECTION] of the [ACT] and that the work done by the photographer is only in the nature of service contract, not involving any sale of goods. That was a decision rendered by two learned Judges of the Apex Court.
11. Subsequently, a three-Judge Bench of the Supreme Court in [PRECEDENT], while considering the question whether drawings, designs, diskettes, manuals, etc., relating to machinery or industrial technology were 'goods' which could be subjected to customs duty on their transaction value at the time of their import, under the Customs Act, 19[SECTION]2 and the appellant's contention relying on several decisions relating to levy of sales tax, that in contracts for supply of services, there is no sale of goods and no customs duty could be imposed on the intellectual property which was obtained, considered in detail all the decisions including that in Rainbow Colour Lab ([2000] 118 STC 9), and held that even though the decisions relating to levy of sales tax would have no application to the case of levy of customs duty, the decision in Rainbow Colour Lab required consideration, that the Forty-sixth Amendment was made precisely with a view to empower the State to bifurcate the contract and to levy sales tax on the value of the SALES TAX REVISION. [CASE NUMBER] materials involved in the execution of the works contract, notwithstanding that the value may represent a small percentage of the amount paid for the execution of the works contract, that the conclusion arrived at in Rainbow Colour Lab ran counter to the express provision contained in [SECTION] as also of the [ACT] Bench decision of the Supreme Court in [PRECEDENT].
12. [PRECEDENT]' case, did not relate to sales tax, but to customs duty, and the question whether there is any sale of goods in a contract for supply of services, was specifically raised for consideration. The said question was specifically considered with reference to several decisions including the decision in [PRECEDENT], in great detail and what was stated by the court was not intended to be a passing comment or casual observation. The Supreme Court categorically laid down the principle relating to works contract and held that the decision in Rainbow Colour Lab ran counter to the [ACT] Bench decision in Builder's Association [1989] 73 STC 370 and article 3[SECTION][SECTION](29A) even though decisions relating to levy of sales tax had no application to the case that was being considered by it relating to customs duty. The enunciation of law and pronouncement by the three- Judge Bench of the Supreme Court in [PRECEDENT], is law declared under [SECTION] and will SALES TAX REVISION. [CASE NUMBER] prevail over the principle laid down in the two-Judge Bench of the Supreme Court in [PRECEDENT].
13. By the aforesaid observation in Associated Cement Companies's Case, the three Judge Bench of the Supreme Court has impliedly overruled the observation made by the Apex Court in Rainbow Colour Lab's case .
14. In [PRECEDENT], the Supreme Court, at paragraphs 49 and 50 has observed as under:
"49. This conclusion was doubted in [PRECEDENT] saying :
"The conclusion arrived at in [PRECEDENT], in our opinion, runs counter to the express provision contained in [SECTION] as also of the [ACT] Bench decision of this court in Builders' Assn. of India vs. Union of India ([1989] 2 SCC [SECTION]45)" .
50. We agree. After the 4[SECTION]th Amendment, the sale elements of those contracts which are covered by the six [SECTION] are separable and may be subjected to sales tax by the States under [SECTION] and there is no question of the dominant nature test applying. Therefore, when in [PRECEDENT] held that the aforesaid observations in Associated Cement were merely obiter and that [PRECEDENT] was still good law, it was not correct. It is necessary to note that [PRECEDENT] did not say that in all cases of composite transactions the 4[SECTION]th Amendment would apply."
SALES TAX REVISION. [CASE NUMBER]
15. In the said decision, the Supreme Court has accepted the view expressed by the Apex Court in Associated Cement's case . While saying so, it once again reiterated that the decision rendered in Rainbow Colour Lab's case has been subsequently overruled by the Apex Court and therefore, the levy of tax in respect of transfer of goods involved in the execution of works contract of the nature of work undertaken by a photographer in taking photographs, developing and printing films is now enforceable.
1[SECTION]. In the instant case, the Tribunal has relied upon what was observed by the Apex Court in Associated Cement's case and has come to the conclusion that the activity of the petitioner is in the nature of works contract and therefore liable to pay the [ACT].
17. In our opinion, the Tribunal has correctly applied the law declared by the Apex Court and has correctly come to the conclusion that the activity of the petitioner is in the nature of the works contract and therefore exigible to tax under the [ACT]. In view of the above discussion, we are of the opinion that the orders passed by the Tribunal is in consonance with the law declared by the Apex Court in Associated Cement's case , which has been confirmed by the Apex Court in [PRECEDENT].
18. In view of the above, the questions of law framed by the assessee require to be answered against the assessee and in favour the Revenue. Accordingly, the revision petition requires to be rejected and it is rejected. SALES TAX REVISION. [CASE NUMBER] In the facts and circumstances of the case, the parties are directed to bear their own costs.
Consequently, [CASE NUMBER] is also dismissed. Ordered accordingly.
[ENTITY], CHIEF JUSTICE.
[ENTITY], JUDGE.
lk/DK.