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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         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.

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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

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       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

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       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:

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       (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

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       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