2005 (11) TMI 459 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Tax liability on processing and supply of photographs under the Karnataka Sales Tax Act.
2. Validity of entry 25 of the Sixth Schedule to the Act.
3. Refund of taxes paid under invalidated tax provisions.
4. Application of the doctrine of unjust enrichment.
5. Timeliness of filing for refund under Section 25A of the Act.
6. Quashing of assessment orders and consequential relief.

Issue-wise Detailed Analysis:

1. Tax Liability on Processing and Supply of Photographs:
The petitioner, a dealer registered under the Karnataka Sales Tax Act, 1957, was involved in the processing and supply of photographs, photo prints, and photo negatives. The activity became taxable under Section 5B of the Act read with entry 25 of the Sixth Schedule from 1986. The petitioner was assessed and levied taxes for the assessment years 1989-90, 1990-91, and 1991-92, which were paid under the composition scheme of Section 17(6) of the Act.

2. Validity of Entry 25 of the Sixth Schedule to the Act:
The levy of tax on photography activities had been contentious, leading to chronic litigation. The Karnataka High Court, in the case of Keshoram Surindranath, Photo-mag (P) Ltd. v. Assistant Commissioner of Commercial Taxes, invalidated entry 25, leading to further legislative amendments. The State Legislature reintroduced the entry, which was again invalidated by the High Court in Pro Lab v. State of Karnataka in 2005.

3. Refund of Taxes Paid Under Invalidated Tax Provisions:
Following the invalidation of entry 25, the petitioner sought a refund of taxes paid under the now-invalid provisions by filing an application under Section 25A of the Act. The assessing authority rejected the application as it was filed beyond the five-year period, a decision upheld by the Joint Commissioner. The petitioner then filed the present writ petition seeking quashing of the assessment orders and a refund.

4. Application of the Doctrine of Unjust Enrichment:
The respondents argued that granting a refund would result in unjust enrichment, as the petitioner would have included the tax component in the price charged to customers. However, the court noted that similar refunds had been granted to other dealers, and applying the doctrine of unjust enrichment selectively would be unjust. The court rejected this defense in the petitioner's case.

5. Timeliness of Filing for Refund Under Section 25A of the Act:
The court considered the timeliness of the petition under Article 226 of the Constitution, noting that a petition filed within three years from the date of the declaration of law by the court is reasonable. The petitioner had approached the court within three years of the 1999 judgment, making the petition timely and not barred by laches.

6. Quashing of Assessment Orders and Consequential Relief:
The court quashed the assessment orders for the years 1989-90, 1990-91, and 1991-92, stating that the law enabling the levy had been declared invalid. Consequently, the court issued a mandamus directing the respondents to consider the petitioner's claim for a refund under Rule 20 of the Karnataka Sales Tax Rules, 1957, read with Section 12 of the Act. The assessing authority was instructed to pass orders for the refund within six weeks upon satisfactory proof of tax payment.

Conclusion:
The writ petition was allowed, quashing the assessment orders and directing the respondents to process the refund application upon proof of payment. The court emphasized that the law as declared by the High Court remains valid until reversed by the Supreme Court, and the petitioner's claim was timely and justified.