STATE OF KARNATAKA versus M/S PRO LAB & ORS. ETC.

Citation: [2015] 1 S.C.R. 808 · Decided: 30-01-2015 · Supreme Court of India · Bench: H.L. DATTU · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
[2015] 1 S.C.R. 808 
STATE OF KARNATAKA 
V. 
MIS PRO LAB & ORS. ETC. 
(Civil Appeal No. 1145 of 2006) 
JANUARY 30, 2015 
[H.L. DATTU, CJI, A.K. SIKRI, ARUN MISHRA, JJ.] 
Kamataka Sales Tax Act, 1957.· Entry 25 of Schedule VI 
- Constitutional validity of - Legislative competence of State 
C Legislature to levy tax for processing and supply of 
photographs, photo prints and photo negatives challenged -
Challenge also to the retrospective effect given to said entry 
- Held: By virtue of clause 29-A of Article 366, the State 
Legislature is empowered to segregate the goods part of the 
o Works Contract and impose sales tax thereupon - Entry 54, 
List II empowers the State Legislature to enact a law taxing 
sale of goods - Sales tax, being a subject-matter into the 
State List, the State Legislature has the competency to 
legislate over the subject -
Thus, Entry 25 of Schedule VI 
E which makes that part of processing and supplying of 
photographs, photo prints and photo negatives, which have 
"goods" component exigible to sales tax is constitutionally 
valid - In Rainbow Colour Lab case, Entry 25 of Schedule VI 
was declared unconstitutional -
The said judgment was 
F declared as not a good law in ACC Ltd. - Thus, the very basis 
on which Entry 25 of Schedule VI was declared as 
unconstitutional, was found to be erroneous -
In such 
circumstances, the legislature will be justified in enacting the 
law from the date when such a law was passed originally i.e. 
G 01.07.1989 - Constitution of India, 1950 - Articles 366(29A), 
List II, entry 54 - Taxflaxation - Sales Tax. 
Allowing the appeal, the Court 
Held: 1. After insertion of clause 29-A in Article 366 
H 
808 
STATE OF KARNATAKA v. PRO LAB & ORS. ETC. 809 
of the Constitution of India, the Works Contract which 
A 
was indivisible one by legal fiction, altered into a contract, 
is permitted to be bifurcated into two: one for "sale of 
goods" and other for "services", thereby making goods 
component of the contract exigible to sales tax. While 
going into this exercise of divisibility, dominant intention 
B 
behind such a contract, namely, whether it was for sale 
of goods or for services was rendered otiose or 
immaterial. It follows, as a sequitur, that by virtue of clause 
29-A of Article 366, the State Legislature is now 
empowered to segregate the goods part of the Works c 
Contract and impose sales tax thereupon. Entry 54, List 
II of the Constitution of India empowers the State 
Legislature to enact a law taxing sale of goods. Sales tax, 
being a subject-matter into the State List, the St<:!te 
Legislature has the competency to legislate over the 
0 
subject. [Paras 21, 22] [833-F-H; 834-A, B] 
ACC Ltd. v. Commissioner of Customs (2001) 4 SCC 593 
: 2001 (1) SCR 608; Gannon Dunkerley and Co. and others 
v. State of Rajasthan and others (1993) 1 SCC 364 : 1992 
(3) Suppl. SCR 103; Builders Association of India and 
E 
others v. Union of India and others (1989) 2 SCC 645 : 1989 
(2) SCR 320; Mis Larsen Toubro and another v. State of 
Karnataka and another (2014) 1 SCC 708; C.K. Jidheesh v. 
Union of India (2005) 13 SCC 37 : 2005 (4) Suppl. SCR 862 
- relied on. 
F 
Rainbow Colour Lab and Another v. State of Madhya 
Pradesh and others (2000) 2 SCC 385 2000 (1) SCR 594 
- overruled. 
Mis Keshoram Surindranath Photo Bag (P) Ltd. and G 
others v. Asstt. Commissioner of Commercial Taxes (LR), City 
Division, Bangalore and others 121 (2001) STC 175; Mis 
Golden Colour Labs and Studio and others v. The 
Commissioner of Commercial Taxes ILR 2003 Kar 4883 -
referred to. 
H 
810 
SUPREME COURT REPORTS 
[2015] 1 S.C.R. 
A 
2. Entry 25 was inserted for the first time by 
amendment of the Act w.e.f. 01.07.1989. This amendment 
was post 46th Constitutional Amendment. However, the 
High Court of Karnataka declared the said Entry to be 
unconstitutional and the SLP was also dismissed. 
B Undoubtedly, it was because of the judgment in Rainbow 
Colour Lab, which judgment was declared as not a good 
law in ACC Ltd. Thus, the very basis on which Entry 2F 
of Schedule VI was declared as unconstitutional, has 
been found to be erroneous. In such circumstances, the 
c legislature will be justified in enacting the law from the. 
date when such a law was passed originally and that date 
is 01.07.1989 in the instant case. [para 25] [836-F-H; 837-
A-B] 
National Agricultural Co-operative Marketing Federation 
D of India Ltd. and Anr. v. Union of India (2003) 5 SCC 23: 2003 
(3) SCR 1;
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