2022 (11) TMI 287 - SC - CST, VAT & Sales Tax
Levy of entry tax - Interpretation of “local area” occurring under Entry 52 of List II of the Seventh Schedule to the Constitution - whether the exclusion of an industrial area or areas from the limits of municipal councils or municipalities under the state laws in exercise of statutory power or by virtue of a declaration under proviso to Article 243-Q, would result in that area ceasing to be a “local area” within Entry 52 of List II and consequently precluding State from levying and collecting entry tax from those areas?
HELD THAT:- In the present case, two or more sets of law, operate within the two states. The first set of statutes are the enactments, that impose the levy, which is entry tax. The incidence is entry into a local area. A “local area” is defined as including industrial establishments, or estates. The second set of laws that are involved, are the concerned municipalities laws, such as the Orissa Act of 1950- which by proviso to Section 4 (1) excludes industrial areas, from the rigours and requirements of the municipalities’ enactments - the provisions in Part IX-A of the Constitution provide for constitution of municipalities, their duration, powers and responsibilities of authorities of the municipalities. Municipalities were conceived as vibrant democratic units of self-governance. Their term or duration was provided to be for five years; regular elections, to elect representatives of municipalities was contemplated. The special features of the municipalities contemplated by the provisions contained in Part IX-A, however need not be present in other bodies created by law, such as Boards, etc. Such statutory bodies, like industrial estates may perform some municipal functions. However, that some municipal functions are performed by such bodies ipso facto does not result in their acquiring the features of municipalities which are contemplated by Part IX-A of the Constitution.
The burden of the appellants’ song, so to say, is that when a notification is issued, excluding industrial areas or estates from municipal areas, they cease to be local areas, and cannot be treated as such for the purpose of levy of entry tax - The focus of provisions of Part IX-A of the Constitution inserted through the 74th Amendment was on local self-governance and all provisions concerning it. It had no relevance to the issue of State taxation. Furthermore, the exercise of power by the Governor to exclude from the limits of a municipal area, industrial estates or large areas that were predominantly industrialised areas is upon the condition that such areas provided a minimum modicum of municipal services. The pattern of State enactments – which emerges from a reading of various decisions of this Court is that every State has a set of municipal or local self-governance laws, such as those dealing with municipalities, cantonments, panchayats, gram panchayats, etc., on the one hand, and those that deal with industrial areas – as for instance, the UPIAD Act, Gujarat Industrial Development Act, 1962 etc. on the other.
The object of the levy, i.e., entry tax, is the regulation of entry of goods in a regular area for consumption, i.e., manufacture, use or sale. There is no dispute that entry of goods into an industrial area or estate is for their use for manufacturing or for processing or for the purposes of their delivery as their ultimate point of destination, i.e. for the purpose of their “consumption, use or sale” within that area. It could even be that the goods enter within the industrial area or estate, as the ultimate point of destination for their use. In any case, the levy would be attracted because the incidence is the entry into the local area.