TMI Blog2005 (8) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... similar entry 25 of any other State, the Keshoram decision [2001] 121 STC 175 (Kar) continues to be binding on the State. In these circumstances, the petitioners are right in their submission that in the light of the binding judgment of Keshoram and in the absence of any declaration in terms of the findings in para 23, the State Government lacks legislative competence in the light of a binding judgment on the parties. We, therefore, find substance in the argument of the petitioners with regard to the unconstitutionality of the impugned Act in the case on hand in the given circumstances. At this stage, we must also notice an argument of the State with regard to re-enactment in the light of the observations of the division Bench in Golden Color Lab case. It is no doubt true that the division Bench did say that the decision in ACC [ 2001 (1) TMI 248 - SUPREME COURT] , at best, may enable the State to re-enact the provisions similar to entry 25. This sentence has to be read along with other findings in paras 22(3), 23, 26 and 27. If read the judgment as a whole, it would be clear that re-enactment is permissible or possible only in the event of a subsequent declaration with regard to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Entry No. 25 of this Schedule as it was enforced up to September 6, 1999 specified works contracts relating to processing and supplying photographs, photo prints, photo negatives and during different years prescribed rate of tax at 8 per cent and 10 per cent. A division Bench of this Court in its judgment dated September 6, 1999 [2001] 121 STC 175 [Keshoram Surindranath Photo-Mag (P.) Ltd. v. Assistant Commissioner of Commercial Taxes (LR), City Division, Bangalore] declared entry 25 of the Sixth Schedule to the Act which specified the works contract of processing and supplying photographs, photo prints and photo negatives and also prescribed rate of basic tax payable, as beyond the scope of article 366 of the Constitution of India. The special leave petition filed by the State was dismissed on April 20, 2000. 3.. Later the Supreme Court rendered a judgment in the case of Rainbow Colour Lab v. State of Madhya Pradesh [2000] 118 STC 9 that the work carried out by M/s. Rainbow Colour Lab was only in the nature of service contract not involving any sale of goods and therefore it was not liable to sales tax. The activities carried on by the petitioners are identical with thos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g and supply of photographs, photo prints and photo negatives, right from the year 1989, although levy of sales tax on the said processes has held to be unconstitutional, as stated above. Aggrieved by the amendment, the petitioners have filed these writ petitions. 5. W.P. Nos. 10170-10172 of 2004 are filed by M/s. Photo Emporium and others. The facts in these cases are as under: 6. The petitioners say that their main business is running of a photo studio which involves the making of photographs, photo prints, enlargements, etc. For the assessment years 1990-91 to 199899, the petitioners have filed monthly and annual returns before the assessing authority under the Sales Tax Act and the returns were verified and assessment orders were passed for the said period. The petitioners refer to Rainbow Colour Lab's case [2000] 118 STC 9 (SC) and sought for rectification of the assessment order and sought for refund of tax paid by the petitioners. The assessing authority accepted the same and passed rectification order and allowed refund of Rs. 1,72,748. Thereafter, the petitioners received nine demand notices from the respondent. The basis for the said notices was Circular No. 17/2002-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a binding judgment of this Court in Keshoram Surindranath Photo-Mag (P.) Ltd. v. Assistant Commissioner of Commercial Taxes (LR), City Division, Bangalore [2001] 121 STC 175. He refers to various case laws to us in support of his submissions. 10. Sri Naganand, learned Senior Counsel, appearing in the connected writ petitions further argues that assuming without admitting that the Act is valid, even then, the demand notices are to be declared as unsustainable since the proceedings would show of confiscatory nature proceedings and that there could be no retrospective operation in so far as confiscatory proceedings are concerned. He wants the assessment orders/the demand notices to be declared as illegal and unconstitutional in these cases. 11.. Smt Sujatha, learned Additional Government Advocate for the State, invites our attention to the various judgments to say that the Supreme Court in Associated Cement Companies Ltd. v. Commissioner of Customs [2001] 124 STC 59 has ruled that Rainbow Colour Lab v. State of Madhya Pradesh [2000] 118 STC 9 runs contrary to the judgment of the Constitution Bench of Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following reasoning: Photography is a process of an art of producing visible images on sensitive bodies by action of light or other form of radiant energy. Duration of action of light and also use of the chemical is highly a technical expertise. Therefore taking into consideration the various decisions referred to above it could be considered that it is a works contract where property which is transferred in paper is only incidental to such contract. In strict sense, it is a service where the main object is not transfer of property in goods. A good photograph as observed by the apex Court, is a thing of beauty and revives nostalgic memories. It is a work of art. In Assistant Sales Tax Officer v. B.C. Kame [1977] 39 STC 237 (SC) it has already been held that there is no sale involved and in spite of the fact that it is a works contract it could not be subjected to tax because the intention of the parties is not to transfer the goods in the execution of said works contract. It is only ancillary and incidental to service contract. The photographs are not marketable or saleable commodity and as such no tax can be levied. Entry 25 of the Sixth Schedule to the Karnataka Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view to empower the State to bifurcate the contract and to levy sales tax on the value of the material involved in the execution of the works contract, notwithstanding that the value may represent a small percentage of the amount paid for the execution of the works contract. Even if the dominant intention of the contract is the rendering of a service, which will amount to a works contract, after the Forty-sixth Amendment the State would now be empowered to levy sales tax on the material used in such contract. The conclusion arrived at in Rainbow Colour Lab case [2000] 118 STC 9 (SC); (2000) 2 SCC 385, in our opinion, runs counter to the express provision contained in article 366(29A) as also of the Constitution Bench decision of this Court in Builders Association of India v. Union of India [1989] 73 STC 370; (1989) 2 SCC 645. 19. In the meanwhile, in Tata Consultancy Services v. State of Andhra Pradesh in [2001] 122 STC 198 (SC); (2001) 4 SCC 629, the Supreme Court notices ACC's case [2001] 124 STC 59 (SC). After noticing, the Supreme Court was of the view that the said decision is to be referred to a Constitution Bench. The Constitution Bench of the Supreme Court in Tata Consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... life, by re-enacting it. The first is when there is a constitutional amendment which removes the lack of legislative competence. The second is when the Supreme Court dealing with the constitutional validity of a similar enactment (or provision of an enactment) of another State, declares it to be constitutionally valid by applying or evolving a different legal principle. That is for example, if a provision of the sales tax law of State 'K' is declared to be beyond the legislative competence and void by the High Court or Supreme Court, and later an identical or similar provision of the sales tax law of State 'M' is declared by the Supreme Court to be valid by applying a different principle, then State 'K' can re-enact the provision (Note: for this purpose, where the earlier decision holding the provision of law of State 'K' to be void is of the Supreme Court, the later decision holding a similar provision of law of State 'M' to be valid should be of a larger Bench of the Supreme Court). In brief the principle emerging can be summarised thus: (i) Where the very provision, held to be constitutionally invalid is reconsidered in an appeal or otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixth Schedule to the Act. 25. In view of the foregoing, we allow these petitions with the following directions: (i) The Circular No. 17 of 2002-2003 dated September 27, 2002, issued by the Commissioner of Commercial Taxes, Karnataka is quashed; (ii) It is declared that the decision in Keshoram Surindranath Photo-Mag (P.) Ltd. v. Assistant Commissioner of Commercial Taxes (LR), City Division, Bangalore rendered on September 6, 1999 [2001] 121 STC 175 affirmed by the Supreme Court in S.L.P. (Civil) Nos. 6136-6163 of 2000 and connected cases decided on April 20, 2000, holding that entry 25 in the Sixth Schedule of the Act, is unconstitutional, for want of legislative competence, continues to be binding on the respondents. (iii) As a consequence, it is declared that the authorities under the Act cannot proceed on the basis that entry 25 is restored to the Sixth Schedule of the Act by virtue of the decision of the Supreme Court in Associated Cement Companies Ltd. reported in [2001] 124 STC 59; (2001) 4 SCC 593. Nor can they proceed with or decide any proceeding on the basis that entry 25 in the Sixth Schedule is restored to the Act. (iv) All proceedings initiated or orders passed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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