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
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
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
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. 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
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 (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 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.
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 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.
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 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 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
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 dis-
missed.
441