ORDER
V.K. Singhal, J.
1. Petitioner is a Diagnostic center rendering the services of laboratory test, viz., Bio Chemistry, Clinical pathology, Micro-biology, etc.,
Notice dated 7.11.1989 was issued to the petitioner under Section 23 of the Karnataka Tax on Entry of Goods Act, 1979, in respect of purchase of X-ray unit from outside India, for liability under the Act. It was also mentioned that the goods which are imported by the petitioner are not scheduled goods, and x-ray unit is an industrial machinery, and the petitioner was considered liable, The receipts for developing X-ray for the customers was considered liable for works contract. The petitioner filed his objections to the notice. Thereafter, in the endorsement dtd. 17.11.1989 issued by the Deputy Commissioner of Commercial Taxes, it was found that the contract of X-ray photos is a works contract and under Section 2(viii) a person who is engaged in the business of transfer of property in goods involved in the execution of works contract is a dealer. It is pointed out that since there are not that 75 persons in the centre and the X-ray machinery is an industrial machinery, the petitioner is liable for Entry Tax at 2% for the machines purchased during 1987-88 as per Entry 17 of the Karnataka Tax on Entry of Goods Act.
2. The submission of the Learned Counsel for the petitioner is that the petitioner is a service center and is not carrying on any activity of transfer of property in goods involved in the works contract, and thus the petitioner is neither a dealer under the K.S.T. Act nor is liable for tax under the works contract.
3. Learned Government Pleader stated that in the case of GOLAK BIHAR MOHANTHI v. STATE OF ORISSA (1974) 33 STC 514 the Orissa High Court has held that the transaction between the patient and a rediologist is a contract of work and labour. It is on this basis, it is submitted that it amounts to works contract.
4. I have considered over the matter.
Section 5-B of the Karnataka Sales Tax Act, 1957 provides for levy of tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of works contracts, mentioned in column (2) of the Sixth schedule at the rates specified in the corresponding entries in column (3) of the said schedule. Works contract has been defined in Clause 2(1) (v-i) which includes any agreement for carrying out for cash, deferred payment or other valuable consideration the building, construction, manufacture, processing fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. It is by virtue of insertion of Clause (b) in Article 366(29A) that works contract has been brought under the definition of sale. In order to be a sale there must be transfer of property and if the transfer of property is in the execution of the works contract, then liability could be fixed.
In case of diagnostic center where a patient goes for having his x-ray prepared or diagnosis of a particular ailment, the question which has to be seen is whether such a transaction could be considered to be a works contract. The x-ray film is no doubt is given to the customer, but that is having no commercial value and it is for the reason that the Doctor who has to diagnose on the basis of the x-ray film may have a look at it. The decision relied on by the Learned Counsel for the respondent instead of helping him goes against him. This question was considered by the Rajasthan High Court in the
case of DR. HEMENDRA SURANA v. STATE OF RAJASTHAN (1993) 90 STC 251
wherein it was held that x-ray film handed over to the patient has no commercial value and there is no sale or transfer of property.
5. Section 28 of the Karnataka Tax on Entry of Goods Act as it was at the relevant time provided that nothing in this Act shall apply to persons who are not dealers in the scheduled goods. Dealer has been defined in Clause 2(A)(4). Dealer means any person who, in the course of business, whether on his own account or on account of a principal or any other person, brings or causes to be brought into a local area any goods or takes delivery or is entitled to take delivery of goods on its entry into a local area and includes an occasional dealer.
Under Clause 2(k) of the Karnataka Sales Tax Act, Dealer means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration, or other valuable consideration.
Definition of works contract under Clause 2(A)(8-a) of the Karnataka Tax on Entry of Goods Act is as under:-
“Works Contract” means any agreement for carrying out for cash, deferred payment or other valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or any other immovable property, or manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair, conversion, or commissioning if any movable property.”
6. Section 3 of the Karnataka Tax on Entry of Goods Act is the charging section creative change when the scheduled goods are brought into local area for consumption, use or sale therein. Section 4 also fixes the liability for registration on dealers who buys or receives scheduled goods and who are doing business in local areas from the perusal of the Karnataka Entry Tax Act as well as the Karnataka Sales Tax Act, it is evident that a person can be made liable for payment of entry tax if he is a dealer and is involved in carrying out the works contract. The works contract which has been defined under the Karnataka Tax on Entry of Goods Act refers to movable property as well as immovable property. In respect of movable property there should be an act of manufacturing, processing, fabrication, erection, installation, fitting out, improvement, modification, repair, conversion or commissioning of any movable property.
The act of preparing an X-ray photo cannot be included in any of the acts mentioned above. It is not the property of the customer on which any work is carried on. There is no transfer of the property as the x-ray film given to the patient has no commercial value. In these circumstances, I feel that the view taken by the Commercial Taxes Officer is not correct. The petitioner is not a dealer and therefore no liability can be fixed on him under the fact. The exemptions which has been provided under Section 28 of the Karnataka Tax on Entry of Goods Act, as it was existing at the relevant time gives the exemptions to such persons who are dealers under the Karnataka Sales Tax Act. Since the petitioner is neither registered under the Karnataka Sales Tax Act nor is a dealer, further as he has not carried out any work in the nature of works contract, the petitioner is not liable for payment of tax.
Annexures-A and C are accordingly quashed.