Works contract taxation prevails over dominant intention test; unconstitutional provision does not revive automatically.

A later Supreme Court ruling on works contracts prevailed over Rainbow Colour Lab for photography-related processing contracts, because after the Forty-sixth Amendment the State may bifurcate a works contract and tax the value of goods involved in execution even where the goods element is incidental. A provision earlier declared unconstitutional does not revive merely because a later decision states a different principle for another enactment; revival requires the same provision to be upheld or the constitutional defect to be removed. On that basis, entry 25 of the Sixth Schedule remained unenforceable, and the circular and consequential proceedings could not be sustained.

---

---

Issues: (i) Whether the later Supreme Court decision in Associated Cement Companies Ltd. prevails over Rainbow Colour Lab on the levy of sales tax on photography-related processing contracts. (ii) Whether entry 25 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957, which had earlier been declared unconstitutional, stood automatically revived or restored to the statute book.

Issue (i): Whether the later Supreme Court decision in Associated Cement Companies Ltd. prevails over Rainbow Colour Lab on the levy of sales tax on photography-related processing contracts.

Analysis: The later decision specifically considered the effect of the Forty-sixth Amendment and held that the State is entitled to bifurcate a works contract for taxing the value of goods involved in its execution, even if the material element is small. The Court treated the discussion in Rainbow Colour Lab as contrary to the constitutional scheme explained in the larger Bench decision and held that the principle of dominant intention could not defeat the levy where transfer of property in goods is involved in the execution of a works contract.

Conclusion: The later Supreme Court decision prevails over Rainbow Colour Lab.

Issue (ii): Whether entry 25 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957, which had earlier been declared unconstitutional, stood automatically revived or restored to the statute book.

Analysis: A provision declared unconstitutional for want of legislative competence becomes void and does not revive merely because a later decision lays down a different principle in relation to another enactment. Revival occurs only when the very provision is later upheld or the constitutional defect is removed. Since entry 25 had attained finality as unconstitutional and had not been directly reconsidered and upheld, the later decision did not restore it to the statute book.

Conclusion: Entry 25 did not stand automatically revived or restored.

Final Conclusion: The impugned circular and consequential proceedings could not be sustained, and the assessees were entitled to relief on the footing that entry 25 remained unenforceable.

Ratio Decidendi: A later decision on a similar statutory scheme does not revive a provision previously struck down for want of legislative competence unless the very provision is subsequently upheld or the constitutional defect is removed; and after the Forty-sixth Amendment, transfer of property in goods involved in execution of a works contract is taxable even if the goods element is incidental.

---