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Valuation — Cost of paper, chemical, etc. — All such costs incurred for which payment is received is includible for levy of service tax — Agreement between parties cannot affect tax incidence — Only goods sold separately are excludible as per Notification No. 12/2003.
Facts
The main questions to be considered by the Tribunal were:
Whether value of photography service was to include cost of goods, materials used/consumed?
Whether the exemption mentioned as per Notification No. 12/2003, dated 20-6-2003 was applicable in this case?
The appellant claimed that if the value of the goods used for providing photography service was ascertainable, the same should be excluded while determining service tax liability, since the Finance Act, 1994 taxes only taxable services. The Revenue claimed that the demand of service tax raised against the assessee was based on the amount as shown in the invoices. Unless there was documentary evidence in respect of goods sold while providing such service, the appellant cannot allege that tax is levied on such goods as well. Photography service being a pure service contract, there would be no contract for sale of goods unless an agreement brought such provisions to the notice of the Department about distinct sale, the consideration received in exchange for providing photo-graphy service would be the value chargeable to tax. The value of all goods and materials consumed for providing such service being inseparably and integrally connected to such service making the provision of such service possible, must form part of value of taxable service. The only deduction can be the value of unexposed film, if any, sold.
Held
Service tax being a destination-based tax, all elements of cost making the service consumable up to the destination contribute to the value of such tax. In case of photography service, it was held that the cost of materials and goods used are integral and indispensable to the provision of service and thus are to be included for the purpose of valuation of such service. Notification No. 12/2003 S.T. exempts goods which are separately sold by the service provider while providing such service and the same does not include deemed sale.
