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Commissioner of Sales Tax Vs. Durga Khote Productions - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 15 of 1969
Judge
Reported in[1975]36STC77(Bom)
ActsBombay Sales Tax Act, 1959 - Sections 2(28) and 61(1)
AppellantCommissioner of Sales Tax
RespondentDurga Khote Productions
Appellant AdvocateK.S. Cooper and ;R.A. Dada, Advs.
Respondent AdvocateV.H. Patil and ;H.J. Mehta, Advs.
Excerpt:
.....no tax leviable on contracts for production of processed films as they were work contracts and not sales - sales tax leviable only on sales of prints or copies of such prints by respondents to their customers. - - it is clearly a contract for the use of the artistic skill and labour of the photographer who takes the photograph. there can be no doubt that consideration technical skill is required in taking a good photograph. similarly, in the case of a film -even an advertisement film -it is the treatment which the film receives at the hands of the producer and the director, the manner in which the artists taking part play their roles, the skill which the technicians concerned in the production of the film bring to bear on their work, which will make for the intrinsic value of the..........customers as they were works contracts and not sales and, that sales tax was leviable only on sales of prints or copies of such prints by the respondents to their customers. there was produced before the authorities and the tribunal a contract entered into between the respondents and one of their customers, messrs. aiyars advertising and marketing, recorded in a letter dated 20th july, 1961, from the respondents to their said customers as a specimen of the contracts which the respondents entered into with their customers for the production of such films and the supply of prints and copies thereof to their customers. the said specimen contract was for production of two 100-feet advertisement films in colour, advertising a hairdressing called 'brylcream'. under the said contract the.....
Judgment:

Madon, J.

1. The respondents carry on the business of producing documentary films and advertisement films according to the requirements of their customers. During the period 1st January, 1960, to 18th October, 1960, the respondents made certain advertisement films. In their assessment for the said period the Sales Tax Officer held that the contracts for the production of such films and the supply of the prints thereof to the respondents' customers by the respondents were indivisible and that the said transactions were sales as defined by clause (28) of section 2 of the Bombay Sales Tax Act, 1959, and assessed the full amount payable to the respondents thereunder to sales tax. In appeal, the Assistant Commissioner of Sales Tax confirmed the view taken by the Sales Tax Officer. In second appeal to the Sales Tax Tribunal, the Tribunal held that no tax was leviable on the contracts for production of processed films between the respondents and their customers as they were works contracts and not sales and, that sales tax was leviable only on sales of prints or copies of such prints by the respondents to their customers. There was produced before the authorities and the Tribunal a contract entered into between the respondents and one of their customers, Messrs. Aiyars Advertising and Marketing, recorded in a letter dated 20th July, 1961, from the respondents to their said customers as a specimen of the contracts which the respondents entered into with their customers for the production of such films and the supply of prints and copies thereof to their customers. The said specimen contract was for production of two 100-feet advertisement films in colour, advertising a hairdressing called 'Brylcream'. Under the said contract the total cost provided was Rs. 66,704, which was made up of six specified items, namely, production cost, puppet sequence, language versions, 327 prints, excise duty and sales tax. The dispute between the parties is with respect to the said items of production cost and for making language versions of the film. Arising out of the judgment delivered by the Tribunal, at the instance of the Commissioner of Sales Tax, this reference had been made to us under section 61(1) of the Bombay Sales Tax Act, 1959, and the question which has been referred to us is as follows :

'Whether, on the facts and in the circumstances of the case and on a proper interpretation of the terms of the contracts between the respondents and their customers, the Tribunal was justified in law in holding that the transaction for production and supply of documentary and advertising films by the respondents to their customers in implementation of their orders was not a transaction of sale liable to tax under the Bombay Sales Tax Act, 1959 ?'

2. The question as framed by the Tribunal does not correctly set out what the Tribunal decided in this case. The Tribunal held that the document embodying the contract between the parties really contained two contracts, one for the production of the processed films as per the terms of the contract and the other for the supply of the required prints of such films, and that the first part, namely, the production of the processed films was a works contract and was not taxable, while the other part, which was the supply of required prints of such processed films and copies thereof, was a sale of goods and therefore taxable, a position not disputed by the respondents. Accordingly, we reframe the question submitted to us by the Tribunal as follows :

'Whether, on the facts and in the circumstances of the case and on a proper interpretation of the terms of the contractors between the respondents and their customers, the Tribunal was justified in law in holding that the said contracts were divisible contracts consisting of two parts, one for the production of processed films and the other for the supply of prints and copies, and that the contracts of processed films were not sales liable to tax under the Bombay Sales Tax Act, 1959 ?'

3. Before us Mr. Cooper on behalf of the applicant has urged that the contracts in question were one and indivisible and that under them what were really contracted for were prints of a finished production and, therefore, they were contracts for the sale of goods and the whole amount payable thereunder was liable to sales tax. Mr. Cooper has relied upon certain authorities, which deal with the case of a printer who carries out job-work for his customers, supplying the paper himself, in which it has been held that these were contracts for the sale of goods. These authorities were a decision of the Allahabad High Court in Kanpur Journals Ltd. v. Commissioner of Sales Tax, U.P. [1956] 7 S.T.C. 661; a decision of the Nagpur Bench of this High Court in Saraswati Printing Press v. Commissioner of Sales Tax, Eastern Division, Nagpur [1959] 10 S.T.C. 286; a decision of the Andhra Pradesh High Court in State of Andhra Pradesh v. Sri Krishna Power Press, Vizianagaram [1960] 11 S.T.C. 498; and another decision of the Andhra Pradesh High Court in S.R.P. Works and Ruby Press v. State of Andhra Pradesh [1972] 30 S.T.C. 195. We, however, do not see any necessity of referring to these cases in detail because to compare a film producer with a printer is according to us inapposite. A proper analogy would be that of a photographer. So far as the case of a photographer is concerned, we have the judgment of a Division Bench of our own High Court in Camera House, Bombay v. State of Maharashtra [1970] 25 S.T.C. 354. That was also a reference under section 61(1) of the said Act. In that case one of the question which the High Court had to consider was whether, when a person went to a photographer to have his photograph taken and to receive from the photographer the prints thereof, the transaction was a works contract or was a sale of goods or was a divisible contract partly for work and labour and partly for the sale and supply of goods. The Division Bench held that three stages were involved in such a transaction, namely, the taking of the photograph in the studio, the developing of the film roll and the furnishing of prints thereof to the customers, and that the intention of the parties in the transaction before it was to enter into three distinct contracts. The Division Bench observed as follows (at pages 367-168) :

'It is impossible to say that the first part of the transaction, viz., the taking of a photograph, is, even as a matter of plain language, a contract for sale. It is clearly a contract for the use of the artistic skill and labour of the photographer who takes the photograph. There can be no doubt that consideration technical skill is required in taking a good photograph.'

4. The Division Bench rejected the contention raised on behalf of the State that, with modern technique, the taking of photographs was almost mechanical. It further observed :

'A person who wants to have his photograph taken does not walk into any shop, but discriminates between a good photographer and a bad photographer, and also takes into account the charges for the same which vary considerably according to the skill and reputation of each indivisible photographer.'

5. If the taking of a photograph involves skill and labour, the shooting and production of a documentary or advertisement film equally involve skill and labour. A cinematographic film is more than just the taking of a photograph of a still object. It is the preservation of a sequence of scenes in motion in a manner which results in a work of art. A motion picture is the product of the combined artistic skill and labour of a number of persons. These persons include the director, those who act in the film, the cameraman, the electrician, the make-up man, the costume designer, the script-writer, the music director and others. Even in the case of an advertisement film the advertisement value of the film will depend upon the skill and art with which the film presents the subject which it sets out to advertise. It was, however, urged by Mr. Cooper that what the respondents have done is to shoot films from a finished films script given to them and, therefore, their work was mechanical. Two scripts in respect of the specimen contract, referred to above, have been produced on the record. The first script contains 11 scenes. The first column of the script describes the scenes, while the second column sets out the dialogue or the commentary which is to go with each scene. The second script shows that that particular film was to be in 15 scenes and there again what the commentator has to say or the dialogue between the artists taking part in the film is set out against each scene in the second column. A film is not just its plot or the sequence of scenes. A film is the manner in which the story is presented and the bald story is very often of very little significance. In fact, baldly started, the plot or theme of even some of the greatest masterpieces of literature would sound banal. It is the treatment which the plot receives at the hand of the poet or the author which makes a masterpiece. Similarly, in the case of a film - even an advertisement film - it is the treatment which the film receives at the hands of the producer and the director, the manner in which the artists taking part play their roles, the skill which the technicians concerned in the production of the film bring to bear on their work, which will make for the intrinsic value of the film as a good advertising media or otherwise.

6. It was next contended by Mr. Cooper that at least so far as the item 'language versions' is concerned, that was purely mechanical as six different commentaries were to be made for each film. This argument overlooks the fact that the commentary is not to be reproduced anyhow when the film is shown, but that with each particular scene there goes a particular piece of dialogue or a particular part of the commentary. In fact, in the second script the last 7th, 8th and 9th scenes consist of a jingle, the first line of which is to be sung when the 7th scene is being shown, the second and the third lines when the 8th scene is shown and the fourth line when the 9th scene is shown. It is the reproduction of the commentary and the jingle and the dialogue at the right moment in which lies the skill and artistry in making versions in different languages of the same film.

7. In support of his submission that the production of a film is not a work of art but the making of a chattel which is ultimately sold, Mr. Cooper has relied upon the judgment of a single Judge of this High Court in Wassiamull Assomull & Co. v. Goodluck Pictures. In that case the plaintiffs advanced certain loans to the defendants who were film producers. When the plaintiffs sued to recover the loans, one of the defences taken up was that the plaintiffs were money-lenders and were not entitled to maintain the suit unless they had obtained a licence under the Bombay Money-lenders Act, 1947. Under the said Act, however, the definition of the term 'loan' expressly excludes 'a loan to a trader'. In support of their submission that the suit was maintainable without a licence being obtained under the Bombay Money-lenders Act, the plaintiffs contended that the defendants were traders and that the said loans made to them for the production of a film were loans to a trader and no licence under the said Act was, therefore, necessary. Accepting the submissions of the plaintiffs, K. K. Desai, J., held that the loans in question made were loans to a trader. In the course of his judgment, he observed :

'Though there is no evidence in this connection, it is permissible to take judicial notice of the fact that in the production of a film, it would be essential for defendant No. 1 to gather together with intent to complete production of the film certain persons like artists, cameramen, director and various other assistants, who will all assist in photographing and shooting into a film the story intended to be filmed and exhibited. The various persons so gathered together will have to expend labour on the raw stock of the film, so that the dupe negatives and positives, which may be ultimately filmed, might be reproduced on cinema screen as a complete article. It is also permissible for me to note that from the film as produced several diverse prints will have to be made and ultimately distributed by defendant No. 1 as producer of the film, so that the film may be sold by defendant No. 1 or distributed by it through diverse distributors at diverse places. I have mentioned the above usual activities of a film producer only to show that the ultimate production that is made is not a work of art as such but is the result of cumulative labour of diverse persons gathered together by a producer on the raw stock of a film, which again has to be put in the market in the manner mentioned by me above.'

8. In that case the learned Judge was really considering whether a loan by a financier to a film producer for the purpose of financing the production of a film was a loan to a trader. There was no question before him whether a contract for the production of a film was a contract of work and labour or a contract of sale. What the learned Judge was concerned with was the distribution and exhibition of the film and not with its actual production. There are many more things involved in the production of a film than what has been noted by the learned Judge in the passage cited above. It is not possible to accept the learned Judge's conclusion that a film is not a work of art. That particular question was not before K. K. Desai, J. - The only question was whether a film producer, who produces a film and sells the distribution rights or exhibition rights therein, in the business which he carries on with the finished products was a trader or not. That was a question wholly different from the one which we have to consider.

9. The very question which we have to decide arose before a Division Bench of this High Court consisting of Mody, Ag. C.J., and Chandrachud, J., in Commissioner of Sales Tax v. Patel India Pvt. Ltd. [1971] 28 S.T.C. 516. In that case a contract was entered into between the Central Government and a film producer under which the producer agreed to shoot, direct, produce, edit, title and in all respects complete a 35 mm. talkie-film of the length of about 2,000 feet on the subject of handloom industry with background music and commentary in Hindu and after completion to deliver to the buyer the original picture negative, sound track, etc., of that film. The Tribunal held, on a construction of the said contract, that it was a contract for a work of art and not for the sale of goods, and when the Commissioner applied to him to refer the case to the High Court, it refused to state the case. The Commissioner of Sales Tax thereupon applied to the High Court under section 34(2) of the Bombay Sales Tax Act, 1953, for a direction to the Tribunal to refer to the High Court the questions whether the contract between the Central Government and the film producer was a contract for sale of goods or whether it was a contract for a work of art. The application was opposed by the film producer. Dismissing the application the Division Bench observed :

'It is clear to our mind that this is not a contract for sale of goods. The production of the picture stipulated for in the contract was really a production of a work of art which really involved the skill of an artist. Under the circumstances, although construction of a document would be a question of law, and it would be so in this case also, we are satisfied that, on a construction of the contract, the reasons for holding that the contract was for a work of art are so overwhelming that no useful purpose would be served in directing a reference to be made.'

10. So far as the contracts in question before us are concerned, we really fail to see how any argument can arise about their severability. In the said contracts the parties have clearly stipulated separately for the production cost, for the language versions and for the supply of prints.

11. We accordingly hold that the Tribunal was correct in the view which it took and answer the question as reframed by us in the affirmative.

12. The applicant will pay to the respondents the costs of this reference.

13. Reference answered in the affirmative.


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