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S.B. Sinha & Harjit Singh Bedi
Imagic Creative Pvt. Ltd. - PETITIONER
Versus
Commissioner of Commercial Taxes & Ors. - RESPONDENT
Appeal (civil) 252 of 2008
Arising out of SLP (C) No.6499 of 2007
Decide On : 09/01/2008
Karnataka Sales Tax Rules – Rule 3 – Finance Act, 1994 – Karnataka Sales Tax Act – Section 12 – Karnataka Value Added Tax Act, 2003 – Tax – Liability of – Whether the charges collected towards the services for evolution of prototype conceptual design on which service tax had been paid under the Finance Act, 1994 as amended from time to time is liable to tax under the Karnataka Value Added Tax Act, 2003 is the question involved in this appeal which arises out of a judgment and order passed by a Division Bench of the Karnataka High Court in STA – Held, Payments of service tax as also the VAT are mutually exclusive. – Therefore, they should be held to be applicable having regard to the respective parameters of service tax and the sales tax as envisaged in a composite contract as contradistinguished from an indivisible contract. – It may consist of different elements providing for attracting different nature of levy. – It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract; irrespective of the element of service provided. – Approach of the assessing authority, to us, thus, appears to be correct. – Whether goods are incorporeal or corporeal, tangible or intangible, they must be deliverable. – To the extent that the decision in State of U.P. v. Union of India held otherwise, it was, in court’s humble opinion erroneous. – Impugned judgment cannot be sustained. – It is set aside accordingly – Appeal Allowed
JUDGMENT:
S.B. Sinha, J. -- Leave granted.
2. Whether the charges collected towards the services for evolution of prototype conceptual design (i.e. creation of concept), on which service tax had been paid under the Finance Act, 1994 as amended from time to time is liable to tax under the Karnataka Value Added Tax Act, 2003 (the Act) is the question involved in this appeal which arises out of a judgment and order dated 29.11.2006 passed by a Division Bench of the Karnataka High Court in STA No.7 of 2006.
3. Appellant is an advertising agency. It provides for advertisement services. It creates original concept and design advertising material for their clients and design brochures, annual reports etc. The Contract between the appellant and their clients does not appear to have been entered into in writing as no written contract as such has been placed before us.
4. We may notice a purchase order and the invoice which have been produced before us and the authenticity whereof is not in question :
ESTIMATE
P & PR Unit
M/S ISRO HEADQUARTERS ,
Antariksh Bhavan, New BEL Road ,
Bangalore , Estimate No. 014F Date : 26.04.2003 , Job No.: 051/APR/ 03 , Enquiry No.
Co-ordinated by : Mr. C.S. Ramachandran Particulars GSAT 2 POSTER Qty. Rate Amount Rs. P. Rs. P.
1. Conceptualising, Design and Production of Computer Artwork of size A3, front back 1 No. 1 No. 1,500 1,500 00 00 1,500 1,500 00 00
2. B/w Line drawings in back page Artwork of size A5 4 Nos. 100 00 400 00
3. Digital Inkjet Output on Photoglossy Paper for Layout of size A3 (1.5 sq. ft.) @ Rs. 100/- per. sq. ft. front back 1 No. 1 No. 150 150 00 00 150 150 00 00
4. Four Colour Separated Positives Size: A3 @ Rs. 250/- per colour x 4 Nos. = 1,000 front back
5% Service Tax on item 1 5% KST on item 3 1.5% Resale Tax on item 4 1 Set 1 Set 1,000 1,000 00 00 1,000 1,000 150 15 30 00 00 00 00 00
Rupees Five Thousand Eight Hundred Ninety Five Only Total Rs. 5,895 00
INVOICE
Consignee
M/S MORRIS TOOLING PVT. LTD.
Doddaballapur
Bangalore
Co-ordinated by Mr. Muniswamy Invoice No. 707 Dated 31.01.2004 Delivery Note/Date 531/23.01.04 Job No. 1175/DEC/03 Purchase Order No. MTP/PUO/2004/00002 Dated 21.01.2004
Sl. No. Description of Goods Quantity Rate Amount Rs. P. Rs. P.
HSK TOOL HOLDER
1. Designing and System Charges 9,000 00
2. Four Colour Separated Positives for Cover Size: A3 1 Set 1,728 00
3 Two Colour Separated Positives Size : A4 21 Sets 468 00 9,828 00
4 Four Colour Offset Printing on 300 GSM Matt Art Card for Cover Two Colour Offset Printing on 170 GSM Matt Art Paper for Inner pages with centre pinning 500 Nos. 31,850 00
8% Service Tax on item 1 1.5 % Resale Tax on item 2-4 720 651 00 00 TOTAL 53,777 00
Rupees Fifty Three Thousand Seven Hundred Seventy Seven Only
5. They filed their returns both under the Finance Act, 1994 as also the Act. An order of assessment was passed by the Assessing Authority in terms of Section 12 of the Karnataka Sales Tax Act and Rule 3 of the Karnataka Sales Tax Rules, material portion whereof reads as under :
“In view of the above discussions, I hereby complete the assessment for the year 2003-2004 under section 12(3) of the KST Act 1957 by confirming the turnovers pro
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