Scalp Preparation Service, Installation And Maintenance Of The Wig – Indivisible Contact: High Court Of Madras

The single bench of Judge Anitha Sumanth relied on the Supreme Court’s decision in the case Imagic Creative Pvt. Ltd Vs. Trade Tax Commissioner. The Supreme Court specifically noted the difference between a mixed contract and an indivisible contract. A composite contract is a contract that would include sales and service components, whereas an indivisible contract, also including sales and service components, is a contract where the distinction between the two is very fine and difficult to establish.

The Applicant/Assessed is a hair studio and performs non-surgical hair replacement/head prosthesis business for people who have experienced hair loss. The manufacture of wigs falls under Chapter 67 of the Central Excise Tariff Act 1985, and the applicant remits central excise duty under section 3(1) of the Excise Act 1944 central.

The petitioner submits the entire turnover of the manufacture and assembly of the wig to VAT. The applicant has taken the position that this is the sale of goods and that the service rendered, preparation and assembly, is only incidental to the sale. The wig, once made, must be adjusted. The first step is to measure the head, then test the endurance of the skin. The wig is prepared to the specific dimensions of the customer. An option is also available to color the wig if desired. The head is prepared by shaving and cleaning, and oil is applied to the scalp to rid it of dryness. A mud wrap can be applied to rid it of excess sweat glands. The head is then washed, conditioned and sterilized with dettol. The wig is then taped to the head with medical tape and glue, and the wig hair is cut to match the existing hairstyle. The wig is also maintained, if the customer wishes, and repaired either completely, that is to say by removal of the wig, sterilization, cleaning of the scalp and replacement of the wig, or partially, that is i.e. by washing and tightening the free ends. .

The question was whether the intrinsic or dominant character of the transaction was that of the sale of wigs or the provision of a service.

The petitioner argued that the wig is an essential part of the transaction, as there would be no transaction without the wig.

The department argued that the activity would fall squarely within the definition of service under section 65B(44) of the Finance Act 1994, from 01.07.2012. The definition of service is inclusive, ie any activity performed by one person for another for remuneration, with certain exceptions. The department proceeded on the basis that none of the exceptions Transfer of Ownership of Property or Real Estate; deemed sale; monetary transaction; and actionable claims are all exceptions. The department proceeds with the sale of the entire turnover according to the petitioner’s balance sheet, reducing the sale value of the laser combs which were offered for tax at 14.5% VAT as a service.

The court held that the integral component of the transaction is the wig itself, since without the wig there would be no transaction per se. The application of the wig and the preparation of the scalp to receive the wig are incidental to the product itself.

“A customer could very well buy a wig without opting for the fitting or maintenance service. The scalp preparation, fitting and wig maintenance services are only intended to facilitate and help to the use of the product and would be irrelevant in the absence of a wig,” the court said.

Deal Title: White Cliffs Hair Studio Private Ltd. Versus Additional Commissioner

Case No: WP.No.12198 of 2019 and WMP.Nos.12470 and 27704 of 2019

Citation: 2022 LiveLaw (Mad) 338

Dated: 08.07.2022

Counsel for the applicant: lawyer Joseph Prabakar

Counsel for the Respondent: Maître D. Naveen Duraibabu

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