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TMI Blog2005 (8) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on the business at different places within the State of Karnataka. They are registered as dealers under the Karnataka Sales Tax Act (for short, "the Act"). The petitioners operate photographic studios and are engaged in providing service to customers for processing and supplying photographs, photo prints and photo negatives. The petitioners submit that section 5-B of the Act provides for levy of tax on the taxable turnover relating to transfer of property in goods involved in the execution of works contracts that are specified in the Sixth Schedule to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or want of legislative competence, continues to be binding on the State Government. 4. The petitioners say that the State Government in the meanwhile proceeded to enact the Karnataka Taxation Laws Act, 2004 which came into force with effect from January 29, 2004. A copy of the Gazette Notification is at annexure "A". Section 2(3) of the said amendment seeks to reintroduce on retrospective effect entry 25 which is identical to the provision which was declared as unconstitutional for want of legislative competence in the aforesaid case. The amendment would be to make the processing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question in the case on hand. Ultimately, learned counsel says that in terms of Golden Color Lab & Studio v. Commissioner of Commercial Taxes [2004] 134 STC 570 (Kar); ILR 2003 Kar 4883, the impugned amendment is unconstitutional and liable to be set aside by this Court. Learned Senior Counsel says that there are no subsequent judgments considering entry 25 or a similar entry in any other judgment. Therefore, in terms of the Golden Color Lab decision [2004] 134 STC 570 (Kar); ILR 2003 Kar 4883, the amendment is to be declared as unconstitutional for want of legislative competence in the light 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entry 25 of the Sixth Schedule reads as under: Sl. No. Description of works contract Period Rate of tax Under Section 5-B 25 Processing and supplying photographs, photo prints of and photo negatives 1-7-1987 to 31-3-1996 10% 1-4-1996 to 31-3-1998 6% From 1-4-1998 8% 14. This entry 25 in the Sixth Schedule was challenged in this Court in the case of Keshoram Surindranath Photo-Mag (P.) Ltd. v. Assistant Commissioner of Commercial Taxes (LR), City Division, Bangalore [2001] 121 STC 175. The division Bench, after hearing, upheld the contention of the assessees and declared that entry 25 as unconstitutional 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 phot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Customs [2001] 124 STC 59. The Supreme Court in ACC's case [2001] 124 STC 59 ruled in para 26 reading as under: "In arriving at the aforesaid conclusion the court referred to the decisions of this Court in Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314; (1984) 1 SCC 706 and Everest Copiers [1996] 103 STC 360. But both these cases related to pre-forty-sixth Amendment era where in a works contract the State had no jurisdiction to bifurcate the contract and impose sales tax on the transfer of property in goods involved in the execution of a works contract. The Forty-sixth Amendment was made precisely with a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is declared constitutional and valid, in an appeal or otherwise, by a larger Bench or by the Supreme Court, such statute or its provision (which is declared unconstitutional) becomes enforceable. The restoration of the statute or its provision, is automatic, without any re-enactment. In the words of the Supreme Court, the statute or its provision, comes out of the eclipse. What if there is no such automatic restoration and the decision declaring the statute or its provision unconstitutional and void for want of legislative competence, attaining finality? Even in such a situation, in two circumstances, such statute or its provision can be brought back to 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 Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y revive entry No. 25. The decision in ACC [2001] 124 STC 59 (SC); (2001) 4 SCC 593 may at best enable the State to re-enact a provision similar to entry 25." 24. Ultimately, the division Bench in paras 26 and 27 has ruled as under: "26. We are therefore of the view that in spite of the enunciation of law in ACC [2001] 124 STC 59 (SC); (2001) 4 SCC 593, entry 25 has not stood revived or restored into the Sixth Schedule of the Act. Therefore, the authorities under the Act cannot levy tax under the Act in regard to transfer of property in goods involved in processing photo negatives and supplying of photo prints and photographs, as if entry 25 has stood restored in the Sixth 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. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entry 25 being invalid and unenforceable and only in the event of the Supreme Court re-considering or pronouncing a similar question in similar term as in entry 25 in terms of the findings in para 23. Admittedly, it is nobody's case before us that entry 25 was re-considered in any other judgment subsequent to Golden Color Lab [2004] 134 STC 570 (Kar); ILR 2003 Kar 4883. In these circumstances, the Golden Color Lab case [2004] 134 STC 570 (Kar); ILR 2003 Kar 4883 is binding on the parties. 28. In the light of our discussion with regard to legislative competence in terms of this order, it is unnecessary for us to consider the submission of Sri Naganand, learned Senior Counsel with regard to confiscation. In these circumstances and in the result, these petitions are accepted and we declare that the provisions of section 2(3) as unconstitutional. Respondents are hereby restrained from enforcing the provisions of the Karnataka Taxation (Amendment) Act, 2004. In the light of the declaration in term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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