Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976 Equivalent citations: 1977 AIR 1642, 1977 SCR (2) 435, AIR 1977 SUPREME COURT 1642, 1977 (1) SCC 634, 1977 TAX. L. R. 2047, 1977 SCC (TAX) 225, 1977 2 SCR 435, 1977 UPTC 153, 39 STC 237, 1977 2 SCJ 348 Author: Hans Raj Khanna Bench: Hans Raj Khanna, A.C. Gupta, Jaswant Singh PETITIONER: ASSISTANT SALES TAX OFFICER AND ORS. Vs. RESPONDENT: B.C. KAME, PROPRIETOR KAME PHOTO STUDIO DATE OF JUDGMENT14/12/1976 BENCH: KHANNA, HANS RAJ BENCH: KHANNA, HANS RAJ GUPTA, A.C. SINGH, JASWANT CITATION: 1977 AIR 1642 1977 SCR (2) 435 1977 SCC (1) 634 ACT: Madhya Pradesh General Sales Tax Act, 1959, whether taking photographs and supplying photo-prints is sale trans- action for the purpose of--Contract of sale and contract of work and labour, distinction between. HEADNOTE: The respondent carries on business, inter alia, of supplying photo-prints to those who get themselves photo- graphed 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 contend- ing that in supplying photo-prints, he did not enter into sale transactions but only undertook contracts of work and Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  1 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 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 relied upon. JUDGMENT: 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 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 Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  2 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. 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 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 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 (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 Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  3 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. v. Associ- ated 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. 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. Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  4 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 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 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 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. "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 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 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 fol- lows (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 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 Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  5 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 SCI/76 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 dis- missed. Assistant Sales Tax Officer And Ors vs B.C. Kame, Proprietor Kame Photo Studio on 14 December, 1976  6