TMI Blog2003 (8) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... ds "retrospectively or prospectively" in section 3(1) would not make the section restrictive which can be hit by article 301 of the Constitution nor the said part of the legislation could be held to be discriminatory. Once it is conceded that imposition of tax was compensatory or regulatory in nature, there is no question of obtaining the assent of the President under article 304(b) of the Constitution. - Civil Appeal No. 1366-1382, of 2001 - - - Dated:- 21-8-2003 - SHAH M.B. AND LAKSHMANAN AR.DR. JJ. Civil Appeal No. 2511, Civil Appeal No. 2512, Civil Appeal No. 2513, Civil Appeal No. 2514, Civil Appeal No. 2771, Civil Appeal No. 3279, Civil Appeal No. 3760, Civil Appeal No. 3761, Civil Appeal No. 3762, Civil Appeal No. 4761, Civil Appeal No. 4762, Civil Appeal No. 4763, Civil Appeal No. 4764, Civil Appeal No. 5595, Civil Appeal No. 7535 of 2001, Civil Appeal No. 645, Civil Appeal No. 646, Civil Appeal No. 647, Civil Appeal No. 1911, Civil Appeal No. 2183, Civil Appeal No. 2184, Civil Appeal No. 2552, Civil Appeal No. 2730, Civil Appeal No. 4148, Civil Appeal No. 4149, Civil Appeal No. 5095, Civil Appeal No. 5853, Civil Appeal No. 5854, Civil Appeal No. 8098, Civil Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable and in the public interest and the Act subsequently having received the assent of the President, the proviso to article 304(b) is complied with and, therefore, the Act was saved by article 304 and could not be struck down on the ground of its being violative of article 301. 3.. The title of the aforesaid Act was amended in 1992 and it was named as the Karnataka Tax on Entry of Goods Act, 1979 . Section 3 of the Act empowers the State Government to levy tax by issuing notification on the entry of any goods specified in the Schedule into a local area for consumption, use or sale therein. At present, sub-section (1) of section 3 reads as under: 3. Levy of tax.-(1) There shall be levied and collected a tax on entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein, at such rates not exceeding five per cent of the value of the goods as may be specified 'retrospectively or prospectively' by the State Government by notification, and different dates and different rates may be specified in respect of different goods or different classes of goods or different local areas. 4.. The controversy in these appeals cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, and notification dated March 31, 1997. The High Court arrived at the conclusion that the levy of tax on entry of goods was compensatory in nature and not restrictive requiring any previous sanction or assent of the President of India and, therefore, the said Act cannot be held to be illegal for want of the President's assent. However, the court arrived at the conclusion that the notifications were discriminatory for the reasons recorded therein and it was also held that the authority exceeded its powers conferred under section 3(1) of the Act and, therefore, the said notifications were ultra vires. The said judgment and order was challenged before this Court and the court finally passed the following order: C.A. No. 3958 of 1998 and Nos. 1819-1848 of 2000 be delinked and listed separately. Leave granted in S.L.P. (C) No. 134 of 1998. Counsel for the parties agree that the appeals filed by the State of Karnataka have become infructuous. These appeals arise out of judgment of the Karnataka High Court before whom the respondents had challenged the notification dated March 30, 1994, and the amendment made on March 31, 1997, pertaining to entry tax. The said n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods brought into a local area from outside for consumption, use or sale therein. 11.. Again, various writ petitions were filed before the High Court challenging the said notifications, which were dismissed by the single Judge by holding as under: 1.. The provisions of section 3(1) of the Act are not ultra vires the Constitution of India on the ground that no guidelines for prescribing rate of tax has been given and the provisions are compensatory in nature and do not require the assent of the President of India. 2.. Notifications dated March 31, 1998, and January 7, 1998, are valid pieces of legislation. 3.. Notification dated September 23, 1998, has not been issued under section 4B of the Act, but has been issued under section 3(1) and as such retrospective effect could have been given. 4.. Notification dated September 23, 1998, cannot be considered to be invalid on the ground that it was not in force on the date of issue and was made applicable for past transactions only. 5.. Notification dated September 23, 1998, is a valid piece of legislation. It is however declared that tax shall not be levied or collected for the period from April 1, 1994, to January 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition as it now stands is that tax could be levied on any items specified in the First Schedule from items Nos. 1 to 103. Item No. 103 is a residuary clause and confers power on the State Government to levy tax on: 'Goods other than those specified in any entries in this Schedule, but excluding those specified in the Second Schedule'. 14.. Further, in the High Court, the appellants did not challenge (a) the notification levying the tax with effect from January 7, 1998 (paragraph 12); and (b) the nature of the tax being compensatory or regulatory (paragraph 20). 15.. Instead, it was contended that Act No. 8 of 1993 which introduces the words retrospectively or prospectively by the State Government by notification on different dates is neither reasonable nor in public interest and in any event if the said restriction could be said to be reasonable and in public interest, the same is unconstitutional and void as assent of the President was not obtained before enacting the same. 16.. Dealing with this contention, the High Court relied upon its earlier decision in Avinyl Polymers' case [1998] 109 STC 26 (Kar). as well as the decision rendered by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercised by the delegated authority, namely, the State Government. Hence, the notification dated September 23, 1998, cannot be justified. 19.. It is also submitted that the State cannot justify the validity of amending Act No. 8 of 1993 on the ground that since the subsequent amendments have received the President's assent, the impugned amendment is deemed to have received the President's assent, as it is against the law laid down by this Court in Kaiser-I-Hind Pvt. Ltd. v. National Textile Corporation Ltd. (2002) 8 SCC 182 and Gram Panchayat of Village, Jamalpur v. Malwinder Singh (1985) 3 SCC 661. It is contended that there was no proposal before the President to provide for levy of tax on entry of goods with retrospective effect when assent was given to Act No. 45 of 1994. 20.. Lastly, it is contended that most of the appellants in the appeals fall within the limit of industrial area as declared under section 3 of the Karnataka Industrial Areas Development Act, 1966. Hence, they would not be covered by the definition provided under section 2(A)(5) of the Act, which defines local area to mean: 'local area' means an area within the limits of a city under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted and goods manufactured or produced in the State. Hence, levy of tax normally by the State Legislature per se would not be, in any way, violative of article 301. (2) Further, article 304(b) empowers the State Legislature to impose reasonable restrictions on freedom of trade, commerce or inter-course with or within the State as may be required in the public interest. For such restrictions to be valid, the State must obtain previous sanction of the President before introduction of the Bill in the Legislature of State. 23.. On this aspect, it would be worthwhile to refer to the decision in Rattan Lal and Co. v. Assessing Authority [1969] 2 SCR 544 [1970] 25 STC 136 (SC). wherein the court held that where the general rate applicable to the goods locally made and on those imported from other States is the same nothing more normally and generally is to be shown by the State to dispel the argument of discrimination under article 304(a), even though the resultant tax amount on imported goods may be different. The aforesaid decision was referred to and relied upon in Video Electronics Pvt. Ltd. v. State of Punjab [1990] 77 STC 82 (SC). (1990) 3 SCC 87. In that case, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, for the tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of trade. So long as a tax remains compensatory it cannot operate as a hindrance. [Re. Sharma Transport v. Government of A.P. (2002) 2 SCC 188]. 26.. In these appeals, no contention is raised to the effect that levy of tax on goods by the impugned notification discriminates between the goods imported from other States and similar goods manufactured or produced within the State. Hence, it would be difficult to accept the contention that the sanction of the President was required to be obtained before amending and enacting Act No. 8 of 1993 whereby for the words by the State Government, by notification from time to time , the words retrospectively or prospectively by the State Government by notification and different dates were substituted. Addition of words retrospectively or prospectively in section 3(1) would not make the section restrictive which can be hit by article 301 of the Constitution nor the said part of the legislation could be held to be discriminatory. To clarify the situation, it can be stated that a subsequent notification issued in exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied with retrospective effect but at the same time to validate the tax which was levied, after removing the defects pointed out by the previous decision, the State Government could exercise its powers under section 3(1) of the Act and it cannot be said that it has acted beyond its jurisdiction. Therefore, it cannot be held that notification dated September 23, 1998, empowering the authority to levy and collect tax with effect from April 1, 1994, to January 6, 1998, is, in any way, illegal or erroneous. The defects pointed out in Avinyl Polymers' case [1998] 109 STC 26 (Kar). are removed and, therefore, it cannot be said that the notification dated September 23, 1998, is, in any way, illegal. In a situation like the present one where notifications levying tax were held to be illegal, for validating such levy, the State Government has issued the aforesaid notification. It is not pointed out that the said notification is discriminatory between the goods imported from other States and similarly goods manufactured or produced within the State. 30.. The last contention only requires to be narrated for being rejected, as it cannot be disputed that the industrial area is either wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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