TMI Blog1986 (2) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... ging section were considered by the Supreme Court in State of Karnataka v. Hansa Corporation AIR 1981 SC 463. The challenge to the constitutional validity of the charging section failed. 2.. Thereafter a number of amendments to the principal Act were effected from time to time. Some of these amendments were again challenged in a large batch of writ petitions before this Court. The validity of these amendments were considered by this Court in Jyothi Home Industries v. State of Karnataka (printed at page 254 infra) (1984) 1 Kar LJ 394. In that batch one point was held against the State. Section 7(1)(a) and 7(15) of the amending Act (Act 13 of 1982) which brought to tax additional items of goods were held unenforceable for want of Presidential assent under the proviso to article 304(b). All other contentions were repelled. Both petitioners, whose challenge to the validity of the Act had failed and the State which felt aggrieved by the finding that some provisions of the amending Act 13 of 1982 were unenforceable as imposing additional restrictions on the freedom under article 301 and were unenforceable for want of Presidential assent, canvassed appeals before the Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinite "local area" for the purpose of consumption, use or sale therein. The goods must not only enter the "local area" but must be for the purpose of consumption, use or sale therein. Octrois are essentially different from taxes levied on "import and export" of goods from municipal limits, the latter being "terminal taxes". Both the levies concern the movement of goods; but in the case of "octroi " the entry into a municipal limits or local areas becomes the taxable event if-and only if-the goods so enter for purposes of consumption, use or sale therein. This element of the impost is satisfied by grant of exemptions and refunds respecting goods which do not come to repose in the "local area"; but enter it only in the course of their onward movement out of the local area either immediately or after an interval. Exemptions and refunds are, therefore, the distinguishing features of the octroi system. 5.. Section 2 is the interpretation clause. Clause (5) of section 2 defines "local area". Section 3 is the charging section. It authorises the levy of tax on the entry of scheduled goods into a local area for consumption, use or sale therein, at such rates not exceeding 2 per cent ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o three parts: In the first part falls the challenge to certain provisions introduced by the amending Act 12 of 1981. That amendment was brought about even before the Jyothi's case (printed at page 254 infra); (1984) 1 Kar LJ 394. Though a large batch of petitions had been filed even after the amending Act 12 of 1981 came into force challenging several provisions introduced by the said amending Act 12 of 1981, the points now urged, however, had not been taken though they were available to those petitioners. The two points which fall under this class are, first, that the State Legislature has no competence to levy entry tax on products of industries, the control of which by the Union is declared by law to be expedient in public interest pursuant to entry 52 of List I. The second point, which arises as an incident of the amendment to section 3(1) by the said Act 12 of 1981, is that the legislature, in delegating to the State Government, the power to issue a notification under section 3(1) "either prospectively or retrospectively" exceeded the permissible limits of delegation and parted with power to lay down the law as a binding rule of conduct which was its own primary and non-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items 4 and 10 from the schedule. The State, in addition to contending that "omission" in this context does not carry with it the consequences attributed to it by the petitioners, has also brought out, said to be by way of abundant caution, an amendment to the Karnataka General Clauses Act, 1899, by introducing clause (32)(a) in section 3 with retrospective effect from 1st November, 1956, to say that "repeal" shall include "deletion" and "omission". Amending Act 38 of 1984 introduces two new items in the schedule. They are items 17 and 18, bringing, under item 17, "all industrial packaging materials" and under item 18 "all raw materials, component parts and any other inputs (e.g., processing or any other chemical solvents used in the solvent extraction or process, catalysts of and the like), which go into or may be used in the manufacture of an intermediate or finished product, when brought into local areas by an industrial unit or any other dealer", to tax. Some contentions are raised with respect to the permissibility of such omnibus-not merely generic-description of goods in the schedule. However, there is one development in regard to this contention. Amending Act 32 of 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y specifies that, with effect from the 24th day of October, 1984, the tax shall be levied and collected under the said Act at the rates specified in column (3) of the Table below on the entry of the scheduled goods specified in the corresponding entries in column (2) thereof into every local area." (underlining *supplied). 7.. What, according to the Government, was intended to be achieved by the three notifications was that the Notification No. 1 should be operative from *Here italicised. 1st April, 1982 to 31st March, 1983, and should bring to tax the 16 items of scheduled goods which were set out in the schedule to that notification. The Notification-II was to operate from 1st April, 1983 to 23rd October, 1984. It brought to tax 10 items, from amongst the scheduled goods, and that the second notification would cease to be operative from 23rd October, 1984. Notification-III, also dated 13th November, 1984, would be operative from 24th October, 1984, onwards. Notification dated 31st March, 1983, and Notifications Nos. I and II were "superseded" by the immediately succeeding ones. What, according to the State Government, was intended to be achieved was that the three notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven effect to for any period prior to 24th October, 1984. Contention (d): Items 5, 6, 8, 12, 13, 14, 15 and 16, and items 4 and 10 having been omitted from the schedule by Act 38 of 1984 and Ordinance 15 of 1984, respectively, no tax can be levied on these items even in respect of the period prior to the dates of such omission. "Omission" does not amount to "repeal" and the previous operation of the statute respecting items so omitted, is not saved. Contention (e): The retrospective amendment to the Karnataka General Clauses Act, 1899, effective from 1st November, 1956, by which "repeal" is held to include "omission" and "deletion" is itself void for want of Presidential assent. Contention (f): At all events, the notifications dated 31st March, 1983, and the three Notifications I, II and III dated 13th November, 1984, even if otherwise valid, are violative of article 14 inasmuch as they seek to impose uniform rates of taxes in respect of all local areas irrespective of the innate differences in the conditions in the different areas. Contention (g): Notification No. FD 83 CET 84 dated 27th November, 1984, excluding "iron and steel" from "raw materials" and the Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment of industries should not be whittled down or impaired by any legislation of the State. Referring to "control" in entry 52 of List I, Sri Ullal said that the expression connotes perfect control and the superior position of the Controller. Sri Ullal submitted that, in respect of the cement industry, one of the industries included in its schedule, the I.D.R. Act in its Chapter III-B and the Cement Control Order promulgated thereunder make elaborate provisions for control and development, including the fixation of price. If the raw material, industrial machinery and other industrial-inputs of controlled industries are taxed indiscriminately by the States that would impair the power to fix prices; and the control by the Union is undone. If the value of the raw material becomes a relevant statutory criterion under the law made by the Centre respecting controlled industries, the State's power to tax those material is taken away. Sri Ullal relied on the pronouncement of the Supreme Court in I.T.C. Ltd. v. State of Karnataka (C.A. Nos. 605-2526, etc. of 1983) and certain observations of Sulaiman, J., in Subrahmanyan Chettiar v. Muttuswami Goundan AIR 1941 FC 47 which were referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in products of controlled industry" is within entry 52, List I, and that that becomes taxing entry under entry 52 read with entry 97, List I. This assumption, contends Sri Achar, is entirely erroneous. 13.. Sri Ullal referred to the observations of Sulaiman, J., made with reference to section 100 of the Government of India Act, 1935, in Subrahmanyan Chettiar's case AIR 1941 FC 47 which was referred to in I.T.C.'s case (C.A. Nos. 605-2526, etc of 1983-Supreme Court). "...On a very strict interpretation of section 100, it would necessarily follow that from all matters in List II which are exclusively assigned to Provincial Legislatures, all portions which fall in List I or List III must be excluded ................................. In its fullest scope, section 100 would then mean that if it happens that there is any subject in List II which also falls in List I or List III, it must be taken as cut out from List II............... If a subject falls exclusively in List II and no other list, then the power of the Provincial Legislature is supreme. But if it does also fall within List I, then it must be deemed as it is not included in List II at all. Similarly, if it also f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, List II, is excepted. Sri Srinivasan referred to us certain observations of the Supreme Court in Ishwari Khetan Sugar Mills (P.) Ltd. v. State of U.P. AIR 1980 SC 1955 in support of his proposition that entry 52, List I, includes "trade and commerce in the products of controlled industries". 14.. "Industries" as a topic of legislation occurs in the three Lists. The "raw materials" of industries are within entry 27 of List II. What falls within the sweep of entry 52 of List I is the "process of manufacture" where the industry is a controlled industry. The same topic otherwise falls within and is encompassed by entry 24 of List II where the industry is not a controlled industry. The topic of trade and commerce in products of controlled industries is assigned to entry 33 of List III; that would, otherwise, fall in entry 26 of List II, if the industry is not a controlled industry. In Tika Ramji v. State of U.P. AIR 1956 SC 676 at page 695 this interpretation of the entries in the three Lists is established. In para 24 of the pronouncement Bhagwati, J., said: "24. Industry in the wide sense of the term would be capable of comprising three different aspects; (1) raw materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower takes within it the power to cover all incidental and ancillary matters. The question whether a particular topic or subject of legislation, in its pith and substance or true nature, falls within an entry in a particular list is essentially a matter of construction. 18.. The position is summed up by the Supreme Court in Kerala State Electricity Board v. Indian Aluminium Co. Ltd. AIR 1976 SC 1031: "5. ......Now what is the meaning of the words 'notwithstanding' in clause (1) and 'subject to' in clause (3)? They mean that where an entry is in general terms in List II and part of that entry is in specific terms in List I, the entry in List I takes effect notwithstanding the entry in List II. This is also on the principle that the 'special' excludes the 'general' and the general entry in List II is subject to the special entry in List I.......................................... Furthermore, the word 'notwithstanding' in clause (1) also means that if it is not possible to reconcile the two entries the entry in List I will prevail. But before that happens attempt should be made to decide in which List a particular legislation falls. For deciding under which entry a particular leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it, and equally giving to the language of the Provincial Legislative List a meaning which it can properly bear...................." (emphasis* supplied) What emerges, therefore, is that the supremacy of the Federal power contemplated by article 246(1) is attracted only where there are irreconcilably overlapping fields of legislation between subjects in the Central and State Lists. If the field under entry 52, List I, is occupied, it excludes the State power respecting subjects in List II to the extent it is shown that between entry 52, List I, and entries in the State List, there are irreconcilably conflicting and overlapping areas. In such a case alone the overlapping areas in the State subject are excepted from the State power. 19.. We may now turn to Sri Srinivasan's first proposition. The assumption basic to the validity and acceptability of this argument is that the topic of "trade and commerce in products of controlled industries" is within entry 52 of List I. For this he relies on a passage at para 36 in Ganga Sugar Corporation Ltd. v. State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject of trade and commerce. A law which has an effect, even a serious effect, on a subject is not necessarily a legislation on that subject. Effect is not the same thing as subject-matter. In Kannan Devan Hills Produce Company Ltd. v. State of Kerala AIR 1972 SC 2301 the Supreme Court ruling that a State law for acquisition of the property of a controlled industry was not prohibited under entry 52 of List I, observed: "29. It seems to us clear that the State has legislative competence to legislate on entry 18, List II, and entry 42, List III. This power cannot be denied on the ground that it has-some effect on an industry controlled under entry 52, List I. Effect is not the same thing as subject matter..........." In Ganga Sugar Corporation's case [1980] 45 STC 36 (SC); AIR 1980 SC 286 the Supreme Court considering whether a law imposing purchase tax on sugarcane invades entry 52, List I, said: "28. ......If the impugned legislation invades entry 52 it must be repulsed by this Court. But entry 54 in List II of the Seventh Schedule empowers the State to legislate for taxes on purchase of goods and so if the Act under consideration is attracted, in pith and substance, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity which exercises it" and that "It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession"..." The power to tax" it is said "rests upon necessity, and is inherent in every sovereign". Cooley "On Taxation" states that the power to tax belongs "as a matter of right to every *See Cooley "Constitutional Limitations", page 479. independent government" and "that Constitutional provisions relating to the power of taxation do not operate as grants of the power of taxation to the government but instead merely constitute limitations upon a power which would otherwise be practically without limit". In the legislative Lists in the Seventh Schedule, taxation is treated as a distinct matter for purposes of legislative competence and is not intended to be comprised in the main subject in which it might, on an extended construction be regarded as included (see M.P.V. Sundararamier Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); AIR 1958 SC 468. In R.M.D.C. (Mysore) Private Ltd. v. State of Mysore AIR 1962 SC 594 the Supreme Court held that a resolution of the State Legislature under article 252 enabling the Parliament to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that this is not a case of conditional legislation but clearly one of excessive delegation. Very wide and uncanalised power, including matters which belong to essential legislative policy, such as retrospectively, are delegated to the State Government. Alternatively, it is contended that, at all events, the power to specify a date and rate with retrospective effect is a frank and irredeemable case of excessive delegation. In support of this contention learned counsel cited a large number of cases on the constitutional limitation on delegation of legislative powers: Vasanlal Maganbhai Sanjanwala v. State of Bombay (Now Maharashtra) AIR 1961 SC 4, Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC); AIR 1967 SC 1895, Gwalior Rayon Mills Manufacturing (Weaving) Company Limited v. Assistant Commissioner of Sales Tax [1974] 33 STC 219 (SC); AIR 1974 SC 1660, Avinder Singh v. State of Punjab AIR 1979 SC 321 and Lohia Machines Limited v. Union of India AIR 1985 SC 421. 26.. The argument is in two parts. The first part pertains to the constitutionality of section 3(1) as it stood prior to the amendment by amending Act 12 of 1981. Prior to that the section was simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised before this Court in Hansa Corporation's case ILR (1980) 1 Kar 165 and were held against the petitioners therein. We therefore, find no substance in these two contentions. 27.. What, however, survives for consideration is whether after the amendment by Act 12 of 1981 with the introduction of power to issue notification retrospectively the section suffers from such vice of excessive delegation. The basis of the doctrine of essential legislative functions not being amenable to be delegated to another authority is the doctrine of separation of powers itself. The rule against such delegation is a corollary to the doctrine of separation of powers. However, the pristine doctrine of separation of powers is not practicable in view of the increasing complexities of the business of the State. What emerges from a conspectus of the authorities cited is that while a legislature cannot abdicate its essential legislative functions, however, in the matter of the non-essentials and in effectuating and working-out the details of the law within the framework of the legislative policy laid down by the legislature, a wide range of delegation of powers is not only permissible but is, indeed, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail leaving nothing to subordinate agencies the annual output may be both unsatisfactory and negligible. The law-making is not a turnkey project, ready-made in all detail and once this situation is grasped the dynamics of delegation easily follows........" In the Delhi Laws Act case [1951] SCR 747 it was held that the doctrine of Constitutional Trust was applicable to our Constitution since it lay at the foundation of representative democracy and that, accordingly, the Legislature could not be permitted to abdicate its primary duty, namely, to determine "what the law shall be". This means that the legislature cannot self-efface its personality and make over, in terms plenary, its essential legislative functions. The three principles that govern delegation are: first, that doctrine of "Constitutional Trust" renders it imperative that the essential legislative functions shall be discharged by the legislature alone. This it cannot delegate or disown. Second, is the rule, which flows as corollary to the first, that while the essentials of legislation or policy cannot be delegated, the non-essentials, however numerous and significant they be, may be made over to appropriate agencies, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The legislatures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible." In Gwalior Rayon Mills' case [1974] 33 STC 219 (SC); AIR 1974 SC 1660, para 23, the Supreme Court held that the legislature, in conferring power upon a subordinate agency "must lay down policy, principle or standard for the guidance of the authority concerned". It was also held that the legislature cannot be said to retain enough control over the subordinate legislative authority by a mere power of "repeal" of the law. In Pandit Banarsi Das Bhanot v. State of M.P. [1958] 9 STC 388 (SC); AIR 1958 SC 909 it was held: "Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." In Lohia Machines Limited case AIR 1985 SC 421 this view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); [1958] SCR 1422; AIR 1958 SC 468, J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 (SC); AIR 1961 SC 1534, Chhotabhai Jethabhai Patel and Co. v. Union of India [1962] Supp 2 SCR 1; AIR 1962 SC 1006, Rai Ramkrishna v. State of Bihar [1964] 1 SCR 897; AIR 1963 SC 1667. In the last mentioned case it was specifically decided that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions." Of course, if a retrospective tax affects any fundamental rights, such as those under article 19(1)(g) of the Constitution, the tax may be bad as offending Part III of the Constitution. But the law of taxation itself does not fail on the ground alone that it is retrospective. Sequentially, it follows that if the legislature which could enact a law with retrospective effect could also in express terms confer upon on delegated authority a power to make a rule or frame a byelaw or issue a notification having retrospective operation. Indeed in Dr. Indramani Pyarelal v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. Referring to saving effect of such "watch-dogging" procedures on delegation, the Supreme Court in Lohia Machines case AIR 1985 SC 421 said: "...Parliament has thus not parted with its control over the rule-making authority and it exercises strict vigilance and control over the rule-making power exercised by the Central Board of Revenue. This is a strong circumstance which militates against the argument based on excessive delegation of legislative power. This view receives considerable support from the decision of the Privy Council in Powell v. Apollo Candle Co. Ltd. (1885) 10 AC 282......." Some submissions were made to the effect that the building-in of these "laying" procedures now would not cure section 3(1) of the vice of excessive delegation it suffered from when it was enacted. We have held that even otherwise section 3(1) was not bad for excessive delegation. 31.. We, accordingly, hold and answer contention (b) also against the petitioners. 32.. Re: Contention (c): The point is that the three notifications: one dated 31st March, 1983, and the two (Notifications Nos. I and II) dated 13th November, 1984, having been superseded, would not be available to support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstood to amount to repeal and that when what is repealed is a notification, section 6 of the General Clauses Act does not apply to notifications. The question whether statutory obligations subsist in respect of a period prior to the repeal of the provisions of a statute or any subordinate legislation promulgated thereunder has to be ascertained on legal considerations apposite to the particular context. The matter is essentially one of construction. Such problems do not admit of being answered on the basis of any single principle or legal consideration. There are no inflexible rules or any legal absolutes. Even in the case of a expiry of a temporary statute, the consequences that ensue are not uniform and inflexible. In State of Orissa v. Bhupendra Kumar AIR 1962 SC 945, para 21, Gajendragadkar, J. (as he then was), observed: "In our opinion, it would not be reasonable to hold that the general rule about the effect of the expiration of a temporary Act..............is inflexible and admits of no exceptions. It is true for instance that offences committed against temporary Acts must be prosecuted and punished before the Act expires. If a prosecution has not ended before that da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t something shall be deemed to have been done, which in fact and truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion [vide Lord Justice James in Ex parte Walton; In re levy (1881) 17 Ch D 746 at page 756(A)]. If the purpose of the statutory fiction mentioned in section 15 is kept in view, then it follows that the purpose of that fiction would be completely defeated if the notification was construed in the literal manner in which it was construed by the High Court." *Here italicised. The following observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 were referred to with approval: "If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it......... The statute says that you must imagine a certain state of affai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents were to be accepted the result would be startling. It would mean, for example, that when a notification has been issued under section 5(1) prescribing a rate of tax, and that notification is later superseded by another notification further enhancing the rate of tax, all tax liability under the earlier notification is wiped out and no tax can be collected by the State Government in respect of any transactions effected during the period when the earlier notification was in force." (Underlining* supplied) At para 127, summarising their conclusion, their Lordships say: "The word 'supersession' in the notifications dated December 29, 1977, is used in the same sense as the words 'repeal and replacement' and, therefore, does not have the effect of wiping out the tax liability under the previous notifications. All that was done by using the words 'in supersession of all previous notifications in the notifications dated December 29, 1977, was to repeal and replace previous notifications and not to wipe out any liability incurred under the previous notifications." Questioning the appositeness of this observation to the present case, Sri Srinivasan had two things to say: F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the charge under section 3(1) even in respect of the period when the notifications must be deemed to have been in force. The three notifications issued on 13th November, 1984, are somewhat inelegantly worded generating so much of debate and controversy on an aspect on which Government could have been more intelligible and made the position much clearer. But it is plain that the liability to tax arising prior to 13th November, 1984, was not altogether intended to be wiped out after 13th November, 1984. That was farthest from the mind of the Government. But the notifications did employ expressions which had a meaning previously attributed to it by judicial interpretation. As rightly submitted by Sri Srinivasan when a law making agency uses expressions whose import has previously received judicial interpretation, it is to be presumed that the law making agency used them in that very sense. The word "supersession" was judicially understood to mean "repeal". The notifications in this case were perilously close to the consequences arising out of a repeal without the benefit of a saving clause in respect of the obligations previously incurred but for the saving principle the Titaghu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge the restrictions imposed by the Entry Tax Act on the freedom under article 301. Even if the restrictions are reasonable and in public interest, they, yet, attract the proviso to article 304(b). The present amendment to the General Clauses Act would, therefore, be bad for want of Presidential assent. This is contention (e). 36.. If, on contention (d) itself, the petitioners fail, then, it would, as a corollary, follow, that even without the amendment, the contention of the Government would succeed. The Supreme Court in Rayala Corporation's case AIR 1970 SC 494 said: "...........In the case before us, section 6 of the General Clauses Act cannot obviously apply on the omission of rule 132A of the Defence of India Rules for the two obvious reasons that section 6 only applies to repeals and not to omissions..........." Relying on this, Sri Srinivasan says that section 6 of the General Clauses Act applies only to "repeals" and not to "omissions". But the question is whether the liability to tax respecting these items incurred under the "Act" with respect to a period prior to the omission, could be enforced after the date of the omission of these items even without appealing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f recognises the need to fix different rates for different local areas on a consideration of the differences in the economic criteria relevant to the matter and that levy of uniform rates to all the local areas, irrespective and unmindful of the innate differences in the conditions of the local areas, would itself be violative of article 14 as it would treat unequals as equals. Sri Srinivasan submitted that the presumption of constitutionality of the Act and the initial burden on the petitioners are both removed by the observations of the Supreme Court which clearly indicate that the application of uniform rates to different local areas in the administration and enforcement of the provisions of the Act would be violative of the constitutional pledge of equality. 39.. In the context of the argument in Hansa Corporation's case AIR 1981 SC 463 that section 3(1) enables the State Government to pick and choose local areas and is, therefore, bad, the Supreme Court, dealing with possible effects of a uniform levy in all the local areas irrespective of the relevant conditions and the need to recognise different conditions prevailing in different local areas, said: "13.........It wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this stand, counsel says, it would be for the Government to justify the present uniform rates. This point, he said, fell for consideration before the Supreme Court as the petitioners sought to support the ultimate decision of the High Court striking down section 3(1) on points which had been negatived by the High Court. The point, however, is that though taxation laws are not outside article 14, however, legislature enjoins a wide latitude in the matter of relation of persons, territorial areas, rates and other incidents of a tax. In Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925: "..............Besides, the legislature which is competent to levy a tax must inevitably be given full freedom to determine which articles should be taxed, in what manner and at what rate: vide Raja Jagannath Baksh Singh v. State of U.P. [1963] 1 SCR 220; AIR 1962 SC 1563. It would be idle to contend that a State must tax everything in order to tax something. In tax matters, 'the State is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably. The Supreme Court of the United States of America has been practical and has permitted a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exercise of the powers vested in them under an enactment." In the concept of a tax, a wide range of economic criteria require to be collated. That, detailed economic surveys and investigations precede the formulation of a policy of a tax and its effectuation through legislative measures, is a recognised phenomenon. In the modern pluralist intensive welfare State, a taxing law is not merely a measure for raising funds to meet the expenses of government; but it has a fiscal mission and is a tool of economic regulation. State's role is not merely that of a tax collector but is also that of an economic controller and regulator. The economic criteria that a taxing measure takes into account are, indeed, too diverse to be susceptible to adjudicative disposition. Government has control of both the principle and the detail. In Twyford Tea Co. Ltd. v. Kerala State AIR 1970 SC 1133 it was observed: "18. ...when the legislature reasonably applies a uniform rate after equalising matters between diversely situated persons. Simply stated the law is this: Differences in treatment must be capable of being reasonably explained in the light of the object for which the particular legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending article 14. Contention (f) is also held against the petitioners. 41.. Re: Contention (g): This relates to the contention that the two notifications issued in exercise of the power under explanation II of item 18 exempting certain items from the purview of "raw materials" under the said item 18 must be held to be retrospective in their operation. Item 18 of the Schedule reads: "All raw materials, component parts and any other inputs (e.g., processing or any other chemical solvents used in the solvent extraction or process, catalysts of and the like), which go into or may be used in the manufacture of an intermediate or finished product, when brought into local areas by an industrial unit or any other dealer. Explanation I.-(Omitted as unnecessary). Explanation II.-The words "Raw materials, component parts and any other inputs" do not include sugarcane, cereals, oil-seeds, pulses, timber or wood of any species, silk cocoons raw, thrown or twisted silk, or such other inputs as may be notified by the State Government for purposes of exemption from tax under entry 18 from time to time; but include aluminium ingots and ores of all kinds." (emphasis* supplied) In exercise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have retrospective operation because of the retrospective operation of the enactment in respect of which it is made." Sri Srinivasan says that the principle in S.A.L. Narayan Row's case AIR 1965 SC 1818 that a rule which is not in terms retrospective may have retrospective operation because of the retroactivity of the enactment in respect of which it is made, is one eminently applicable to the two exemption notifications. The principle in S.A.L. Narayan Row's case AIR 1965 SC 1818 is not that wherever the statute is made retrospective every exertion of power of subordinate legislation made thereunder must necessarily be retrospective. The consideration which imparts retroactivity to a rule or a notification, not otherwise expressly so made, appears to be that where a statutory provision is given retrospective efficacy and the rule or notification is imperative to effectuate such statutory power, then the rule or notification may be related back to the time of commencement of the statutory power itself. This is because the power which was intended to be retrospective could not be effectuated without a corresponding retrospective effect given to the rule or notification without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lities or obligations or impose new duties in respect of transactions which were complete at the time the amending Act came into force." Indeed so far as the subject-matter of the second notification is concerned, the benefit of that notification is available to the petitioners by virtue of the amendment brought about by Bill No. 32 of 1983 which received the Presidential assent on 20th January, 1986. The examination of this question is really academic. Sri Srinivasan, however, submitted that amending Act 38 of 1984 was passed prior to 1st April, 1983 and was intended to be effective from 1st April, 1983, and that owing to the circumstance that the Presidential assent was given on 28th September, 1984 no notification in exercise of the power under the II explanation could be issued. The moment the Presidential assent was available the notifications were issued. Sri Srinivasan says that the intention of *Here italicised. the Government was that these exemptions should take effect from 1st April, 1983, itself. We find no support for it in the language of the notification. But that does not mean the Government should not consider the matter and afford any relief, if that had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article 255 which provides that no Act of Parliament or of the Legislature of a State and no provision in any such Act shall be invalid by reason only that some recommendation or previous sanction required by the Constitution was not given if assent to that Act was given by the President. Now in this case it is common ground that the President did accord his sanction to the impugned Act. Therefore, the requirement of the proviso is satisfied." This indeed concludes the matter. 44.. Accordingly, contention (h) is answered against the petitioners. 45.. Re: Contention (i): Sri Gandhi, who argued this point urged that the Presidential assent to Act 38 of 1984 was given only on 28th September, 1984 and the enactment could be said to be complete only with the Presidential assent. Amending Act itself provides that it shall come into force on 1st April, 1983. Certain new items were included in the schedule by amending Act 38 of 1984. In the interregnum, between 1st April, 1983, and 28th September, 1984, the operation of the Act is virtually one of retroactivity. According to Sri Gandhi there is really a retrospective tax on the new items because the Presidential assent was on 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout 3000 writ petitions challenging the provisions of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1979 (hereinafter to be referred to as the "Principal Act") as amended by: (i) The Karnataka Tax on Entry of Goods into a Local Area for Consumption, Use or Sale Therein (Repeal) Act, 1981 (Act 10 of 1981) "Repealing Act 10 of 1981" for short; (ii) The provisions of Karnataka Act 12 of 1981 "Amending Act 12 of 1981" for short and; (iii) The provisions of section 7 of the Karnataka Taxation and certain other laws (Amendment) Act, 1982, (Act 13 of 1982). "Amending Act 13 of 1982" for short. The Principal Act received the assent of the President on 17th May, 1979. It was published in the gazette on 1st June, 1979, and came into force that day. All the petitions in the batch were listed for hearing and heard together. The points raised in these 72 petitions cover, comprehensively, all the contentions raised in the course of the arguments and could be said to be representatives of the whole batch. The rest of the cases in the batch could be disposed of separately on the basis of this pronouncement. 2.. The tax under the "Princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, in exercise of powers under section 3 of the Principal Act, issued a notification bearing No. FD 66 ESL 79 dated 31st May, 1979, specifying the "local areas", the "goods" and the "rates of tax". A flood of writ petitions challenging the constitutional validity of that enactment followed. Writ Petition No. 7039 of 1979 preferred by M/s. Hansa Corporation ILR (1980) 1 Kar 165 was one amongst that batch of 1590 cases. The validity of the entry tax was challenged on as many as 24 grounds. A Division Bench of this Court, by its order dated 24th August, 1979, negatived all but two grounds. The two contentions accepted by the court were that section 3 of the Act does not empower the State Government to apply the provisions of the Act to certain local areas only and to exclude other local areas and that the Act in not exempting petty dealers, imposes unreasonable restriction on their trade. The Division Bench, accordingly, declared the Principal Act as unconstitutional and also quashed the notification dated 31st May, 1979. 4.. The State Government, inexplicably as it may seem and that is the genesis of one of the contentions here chose to prefer only one appeal before the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by which the State Government was authorised and empowered to issue notifications under section 3 "whether prospectively or retrospectively". Item No. 1 of the Schedule to the Principal Act was also substituted by a new item. The last of the legislative activities was the "Amending Act 13 of 1982" which came into force on 1st April, 1982. By this Act, which was a composite legislation, amendments to several taxation laws including the "Principal Act" were introduced. Section 7 which has 15 sub-sections pertains to the Principal Act. Inter alia, it seeks to expand the definition of "local area"; expand the definition of "dealer" and also add 13 new items to the schedule to the Act, namely: "4. Iron and steel, that is to say, (i) pig iron and cast iron including ingot moulds, bottom plates, iron scrap, cast-iron scrap, runner scrap, and iron skull scrap; (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes); (iii) skelp bars, tin bars, sheet bars, hoe bars and sleeper bars; (iv) steel-bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths); (v) steel structurals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1982, imposed new and additional restrictions-both as to areas and as to new items of goods-violative of article 301 and that even assuming that those additional restrictions are reasonable and in public interest, the amending Act had to comply with the requirements of article 304(b) proviso. 6.. "Repealing Act 10 of 1981 " brought forth a spate of writ petitions with the filing of the batch of writ petitions, viz., W.Ps. 21048, 21756, 21973, 22587 and 23373 of 1980 and W.Ps. 1 and 7040 of 1981 by traders, amongst whom were petitioners in the first batch of 1590 writ petitions in whose cases the writs of mandamus issued by this Court had not been appealed against. One of the grounds urged in this second round was that the judgment of the Supreme Court in M/s. Hansa Corporation's case AIR 1981 SC 463, confined as it was to W.P. 7039 of 1979, did not affect the writs of mandamus issued in favour of the petitioners in the earlier writ petitions; that accordingly those writs issued by this Court had become final and that the legislature could not, by its declaration in section 3 of the Repealing Act 10 of 1981, nullify the effect of these writs issued under article 226 of the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised and urged at the hearing. They admit of being formulated as follows: Point (i): That section 3 of the "Repealing Act, 1981" having been held in Narasimha Kamath's case (1983) 1 Kar LJ 135 to have re-enacted the "Principal Act" such re-enacted law in the absence of the prior sanction or subsequent assent of the President is void. Point (ii): That section 3 of the "Repealing Act 10 of 1981" is without legislative competence as its avowed object was to nullify the writs of mandamus issued by this High Court in exercise of its constitutional power under article 226 directing the State and its functionaries to forbear from enforcing the provisions of the Act. Point (iii): That as the date of commencement of the "Principal Act" from 1st June, 1979, originally declared was postponed by the Amending Act 12 of 1981 to 1st October, 1980, the notification No. FD 66 ESL 79, dated 31st May, 1979, issued under section 3 is without the authority of law, as the "Principal Act" was itself not in force on 31st May, 1979. Point (iv): That amendment of section 3 authorising retrospective notification came into force on 18th February, 1981, and that notification No. FD 14 CET 81, date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature is not competent to enact the "Principal Act". Point (xii): That during the debate in the legislature on the "Principal Act", it was allegedly assured by the Finance Minister that entry tax would be levied only on such goods not attracting sales tax, that inclusion in the schedule, by Act 13 of 1982, of items which are liable to sales tax also is not permissible. Point (xiii): That notifications issued under section 3 are bad for not complying with the procedure of prior publication; and that the proceeds of the tax being intended for the benefit of and assignable to local authorities, ought not to be levied directly by the State but should only empower the local authorities to levy and collect the same. Point (xiv): That Karnataka Act 13 of 1982, in so far as it introduces new items Nos. 4 to 16 into the Schedule and expands the definition of "local area" in section 2(5) results in the imposition of additional restrictions on the freedom of trade and commerce; that the imposition of the tax, which is non-compensatory in character, has the direct and immediate effect of impeding free flow of trade and violative of article 301. At all events, even if the additional rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1980) 1 Kar 165 was removed by the Supreme Court which reversed that decision of this Court. By such re-enactment, the writ of mandamus issued by this Court in Hansa Corporation case ILR (1980) 1 Kar 165 became ineffective." 14.. This observation of the Division Bench cannot, in our opinion, be read as a pronouncement that the legislative activity in enacting section 3 of the "Repealing Act, 1981" amounted to a formal re-enactment of the "Principal Act" with all that goes with a formal re-enactment. The Division Bench was merely referring to what, in the opinion, was the legal effect of section 3 of the Repealing Act, 1981, and its observations must be understood to mean that, in its opinion, the effect and consequences of the said section 3 were analogous and comparable to those that flow from a re-enactment. Indeed, a statute held to be constitutional by the Supreme Court does not need to derive its efficacy by any process of re-enactment. The concept and purposes of validation of laws is entirely different from those of re-enactment. In American Jurisprudence, Constitutional law, Vol. 16 at para 179, it is stated: "A statute once declared unconstitutional, and later held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Punjab v. Joginder Singh AIR 1963 SC 913, M.M. Pathak v. Union of India AIR 1978 SC 803, Maru Ram v. Union of India AIR 1980 SC 2147, A.V. Nachane v. Union of India AIR 1982 SC 1126 and of the Allahabad High Court in Indodan Milk Products v. State of U.P. [1981] 48 STC 197. 18.. Sri Achar, learned Government Advocate, however, says that this proposition is concluded by the pronouncement of this Court in Narasimha Kamath's case (1983) 1 Kar LJ 135 itself and again M/s. Shantilal Bros. v. State of Karnataka [1985] 59 STC 178 (W.Ps. 19200 of 1982 and connected W.Ps. decided on 29th July, 1983). In the former case, though section 3 of the "Repealing Act, 1981" was not, in terms, challenged, the contention of the petitioners that the writs of mandamus issued in the earlier batch could not be done away with by the said section 3, rested on this very contention. That contention was not accepted and it was held that the ratio in Pathak's case AIR 1978 SC 803 and A.V. Nachane's case AIR 1982 SC 1126 was not applicable. 19.. Again this question, more directly arose in Shantilal's case [1985] 59 STC 178 (Kar) where a similar contention in the context of section 6B of the Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Even if section 3 of the Act seeks to take away the basis of the judgment of the Calcutta High Court, without mentioning it, by enacting what may appear to be a law, yet, I think that, where the rights of the citizen against the State are concerned, we should adopt an interpretation which upholds those rights............" (vide para 9) Sri Srinivasan strongly urged that the ground on which Pathak's case AIR 1978 SC 803 was sought to be distinguished in Shantilal's case [1985] 59 STC 178 (Kar) requires reconsideration. 21.. In Pathak's case AIR 1978 SC 803 certain Class III and Class IV employees in the Life Insurance Corporation of India (LIC) challenged the validity of the Life Insurance Corporation of India (Modification of Settlement) Act, 1976, which sought to withhold payment of bonus payable in accordance with certain earlier settlements entered into between the LIC on the one hand and its Class III and IV employees on the other and, in particular, the one reached on 24th January, 1974. However, before that Act was passed, on a writ petition filed by the Insurance Employees' Association, Calcutta, the Calcutta High Court had, on 21st May, 1976, issued a writ of mandam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the U.P. Sales Tax Act, 1948, had exempted milk and such other goods which the State Government may exempt. Later the State Government issued a notification exempting certain goods including milk products, but excluding those sold in sealed tins. A question having arisen in the case of the same assessee for the year 1965-66, "whether, or not condensed milk is milk within the meaning of section 4(1) and therefore exempt", a Full Bench of the Allahabad High Court held that condensed milk was "milk" within the meaning of the exempting provision. For a subsequent assessment year, i.e., 1967-68, the assessee filed a writ petition against an assessment bringing condensed milk to tax and the High Court, following its earlier Full Bench ruling, allowed the writ petition and directed the assessing authority to modify the assessment. The U.P. Sales Tax (Amendment) Act, 1974, which was enacted for the purpose of getting over the interpretation of the Full Bench, repealed and re-enacted section 4, with retrospective effect from 31st March, 1956, which exempted, inter alia, "milk other than condensed milk, milk powder or baby-milk". Section 12 of the amending Act sought to validate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aration. The effect of the writ, it is urged, can be altered or modified only in judicial proceedings of appeal or review. This proposition of Sri Srinivasan incurs the criticism of being stated too broadly and not apposite in all contexts. It is true that where a law is declared unconstitutional and struck down by the Courts, the effect of such judicial pronouncements cannot be rendered nugatory by a mere subsequent legislative declaration that the law shall, notwithstanding the judicial verdict invalidating it, be deemed to be valid. Such legislative overruling of and interference with the finality of a judicial verdict is impermissible having regard to the limitations on the legislature implicit in the separation of powers amongst the three organs of the State. 26.. However, if there is a pronouncement of the highest court of the land declaring a law to be bad for some constitutional infirmity noticed in it and a consequential writ issued, there can be no question of a further appeal from it and the subsequent act of the legislature curing the defect and validating the law with retrospective effect would only imply legislature's recognition of the efficacy and finality of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blems raised by the said judgment if the said problems and their proposed solutions are otherwise within their legislative competence. It would, we think, be erroneous to equate the judgment of the High Court under article 226 with article 226 itself and confer upon it all the attributes of the said constitutional provision." 27.. Consistent with this permissibility of validating retrospective legislation, the fundamental distinction, relevant to the present situation, that requires to be kept clearly distinguishable is this: If the judicial decision is merely a declaratory judgment and the issue of a writ of mandamus is merely consequential to that declaration, it would be permissible for the legislature to remove the defect or supply the basis, as the case may be, noticed in the judicial pronouncement and thus validate the law. If, on the other hand the judgment, inter-parties, is rendered on the basis of the substantive pre-existing rights of the parties which are crystallised in the writ issued, and the issuance of the writ is mode of enforcing such adjudicated pre-existing rights-as in the case of a judgment and decree inter-parties-then the effect of such adjudication canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance Corporation. Here, the judgment given by the Calcutta High Court, which is relied upon by the petitioners, is not a mere declaratory judgment holding an impost or tax to be invalid, so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax. But it is a judgment giving effect to the right of the petitioners to annual cash bonus under the Settlement by issuing a writ of mandamus directing the Life Insurance Corporation to pay the amount of such bonus. If by reason of retrospective alteration of the factual or legal situation, the judgment is rendered erroneous the remedy may be by way of appeal or review, but so long as the judgment stands, it cannot be disregarded or ignored and it must be obeyed by the Life Insurance Corporation......" (Underlining* supplied) (vide para 26) Sri Srinivasan does not dispute that in the present case we are dealing with a case of validation of a tax-law. After the Supreme Court reversed the decision of this Court in Hansa Corporation's case ILR (1980) Kar 165, there was no defect in it to be cured, no omission to be supplied and no lacuna to be fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these cases, this question is purely academic. We, therefore, decline to go into and decide it. 32.. Point No. (iii) is disposed of accordingly. 33.. Re: Point (iv): This relates to the validity of the notification dated 2nd March, 1981. Petitioners' contention is this: The amendment of section 3 of the Principal Act authorised the issue of retrospective notification was introduced on 18th February, 1981; that any exercise of that power cannot relate to a period anterior to 18th February, 1981, and that since the retrospectivity of the notification dated 2nd March, 1981, protects anterior to 18th February, 1981, the notification is ultra vires. 34.. This contention is, in our opinion, unsound. On 2nd March, 1981, when the notification was promulgated, there was power to issue it retrospectively. Section 4 of the amending Act 12 of 1981, had substituted the words "Whether prospectively or retrospectively" into section 3 of the Principal Act. The power of the State Government to make the notification retroactive is to be determined on the basis of its powers existing as on the date of the exercise of the power and not with reference to the period to which the retroactivity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to or does apply. It is contended, therefore, that the expression "into a local area" in the notification cannot mean "every local area". Sri Srinivasan sought to sustain this argument with reference to two circumstances. 37.. First, he referred to a fresh notification dated 31st March, 1983, issued under section 3 in which the expression "into every local area" is used which would, according to Sri Srinivasan, show that a different intention is implicit in the designedly different language occurring in the earlier notification. Secondly, Sri Srinivasan says that the expression "a" local area has been interpreted by the Supreme Court in Hansa Corporation's case AIR 1981 SC 463 as not to amount to "every" local area and that it is not therefore permissible to give a different meaning to that expression now. 38. It is difficult to accept both these contentions. On the first aspect, the circumstance that in a later notification, Government used the word 'every' does not, ipso facto, compel a construction that the words "into a local area" in the earlier notification necessarily excluded its application to "every" local area if, otherwise, in the context, they mean the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen applied to more than one individual object. The word "any", constructively, would mean also everyone of the sort named. It would, therefore, appear that though the wording of the notification is somewhat inelegant and unhappy, the intendment made manifest in the notification is that the provisions of the Act are to be applied to every local area. If any absurdity or inconsistency resulting from reading of the notification in a particular way could reasonably be avoided on the basis of an alternative construction which is not unreasonable on the plain language, then the Court should not be astute to defeat the notification by accepting a construction which would reduce it to an absurdity. On a reasonable construction of the language of the notification, the words "into a local area" mean "every local area" as defined in section 2(5) of the Act, and will apply to all such local areas. 42.. We, accordingly, hold and answer point (v) also against the petitioners. 43.. Re: Points (vi) and (vii): These two points admit of being considered and disposed of together. Petitioners contend that the amendment of section 3 of the Principal Act, by the "Amending Act 12 of 1981", empow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the facts of this case, it is not possible to hold that the issue of the notification of 2nd March, 1981, with some retrospectivity of its operation, offends petitioners' fundamental rights under article 19(1)(g) of the Constitution. By the notification, the State Government was seeking to effectuate the object of the taxing statute and was making, what may be called "small repairs" in the law. The following passage in 73 Harvard Law Review 692, "Retractive Legislation": Charles B. Hochman, referred to with approval in Assistant Commissioner of Urban Land Tax, Madras v. Buckingham and Carnatic Co. Ltd. AIR 1970 SC 169 is worth recalling: "It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs'. Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since, had the legislature's or administrator's action had the effect it was intended to and would have had, no such right would have arisen. Thus, the interest in the retroactive curing of such a defect in the administration of government outweighs the individual's inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is averred: ".........Major portion of goods purchased by petitioners and brought to their place of business at Bangalore is re-exported to persons outside the Corporation limit of Bangalore and outside the State of Karnataka. Petitioners' liability under section 3 of the Act, is therefore, hardly 10 per cent of the total goods brought into the area. However, section 7 of this Act seeks to oblige dealers to pay advance tax on the entire goods brought to the local area, irrespective of the fact whether such goods are meant for use or consumption or sale within the municipal area.............." Such transactions where goods are re-exported, according to Sri Gandhi, are not liable to tax for two reasons: First, the taxable event envisaged by the scheme of the law and the charging section 3 is entry of goods coupled with actual consumption, use or sale, the goods entering a local area for re-export are not liable to tax at all. It is, accordingly, urged that section 7 to the extent it makes the latter kind of goods also liable to tax is inconsistent with the charging section. 49.. For the first premise that the taxable event is not merely "entry of goods for consumption, use or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with-the taxable event. For the coming into being of the taxable event it would be sufficient if the goods entered into a local area for the purpose of consumption, use or sale therein. The idea of consumption connotes the goods being used up or wasted or destroyed or susceptible to use without being used up in the course of their use. The expression "use" is of wider import than "consumption". The expression "sale" in section 3 connotes merely a means for putting the goods in the way of consumption or use. The expressions "consumption" or "use" therefore imply the bringing in of the goods not with a view to taking them out again; but with a view to their retention either for use without using them up or for consumption in a manner which destroys, wastes or uses up the goods. The goods come to repose in the local area. Indeed, in Burmah-Shell Co. v. Belgaum Municipality AIR 1963 SC 906 Supreme Court held that when goods enter the "local area" for purposes of consumption, use or sale, it is not an ingredient of the taxable event that there should be actual consumption, use or sale. It was observed: "........It is sufficient if the goods are brought inside the area to be delivere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x is concerned such goods brought into a local area for re-export out of the local area would obviously not goods which enter the local area for consumption, use or sale therein. Referring to such cases of re-export Supreme Court in Burmah-Shell case AIR 1963 SC 906 observed: ".......The two expressions use and consumption together therefore, connote the bringing in of goods and animals not with a view to taking them out again but with a view to their retention either for use without using them up or for consumption in a manner which destroys, wastes, or uses them up........" (vide para-20) "......It was only when the goods were re-exported out of the area that the tax could not legitimately be levied and in this case the municipality has agreed to refund the amount of tax on goods re-exported without being used or consumed in the municipal area..............." (vide para-22) ".......The company was, however, not liable to octroi in respect of goods which it brought into the local area and which were re-exported. But to enable the company to save itself from tax in that case it had to follow the procedure laid down by rules for refund of taxes." (vide para-23) In the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of a particular month goods which upon their entry into the local area attract, prima facie, the taxable event, are actually re-exported out of the local area during that month itself, the "dealer" would be entitled to reduce his taxable turnover, to that extent, in the statement to be filed under section 7 and pay tax only on the residue of the turnover. Sri Achar says that rule 7 and the amended Form No. III, expressly enable this. This, Sri Achar says, is a case of exemption. Sri Achar further says that if a dealer causes entry of scheduled goods during a month and part of it is re-exported in the following month or a subsequent month, the dealer would, again be entitled to have the value of the turnover relating to such re-export deducted in the statement for the relevant month. This, Sri Achar says would really operate as a refund though the process is by a set-off against or deduction from, what is payable by way of tax for the concerned subsequent month. Sri Achar further stated that rule 30(2)(f) expressly enables making of rules for a direct refund also. Sri Achar states, rules covering such refunds would be framed expeditiously. Sri Achar has filed a memo in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws are not outside the purview of article 14, there is however a wide range of selections and freedom in appraisal available to the legislature in the objects and incidents of taxation. In formulating fiscal-policy the legislature has a wide latitude in the matter of choice of persons and things. The complexities involved in evolving a tax policy and the inter-play of diverse economic criteria that inform a fiscal-policy are such that in the matter of judicial review a meticulous scrutiny by the Court of the burden of the tax on different persons or interests can hardly be justified. The legislature is the best judge of these matters. The Court can strike down a tax law only if arbitrariness and hostile unequal treatment is writ-large. In view of the innate complexities of fiscal adjustments, the legislature necessarily enjoys a wide discretion in the matter of classification for the purpose of taxation. Besides the import into the "Principal Act" of the definition of "dealer" from the S.T. Act ensures that the logical bases of the distinctions underlying that definition would also inform the choice of the persons of incidence under the present Act. The definition of "dealer" is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be decided in the affirmative in a doubtful case. The court when impelled by duty to render such a judgment would be unworthy of its station could it be unmindful of the solemn obligation which that station imposes; but it is not on slight implication and vague conjecture that the legislature is to be pronounced to have transcended its power, and its acts to be considered as void. The opposition between the constitution and the law should be such that the judge feels a clear and strong conviction of their incompatibility with each other......................." Sri Indra Kumar has not been able to demonstrate how the law offends article 14. The distinction between "dealers" in scheduled goods and "nondealers" in scheduled goods is too obvious to admit of any possible doubt in regard to the permissibility of the classification. 60.. Accordingly, point No. (x) is answered against the petitioners. 61.. Re: Point(xi): Sri Kashinath Rao Patil contended, quite seriously that in view of article 277 the State Legislature has no competence to make this law. Article 277 which is a saving clause says that any taxes, etc., which, immediately before the commencement of the Constitution, were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ought not to impose this levy directly but should authorise and empower the local authorities, by appropriate provision in the statutes governing their constitution and functioning, to levy and collect this tax. The argument is in the areas of policies of public finance. The argument, it is needless to say, is wholly irrelevant in judicial review of legislation. 66.. We, accordingly, hold and answer point (xiii) also against the petitioners. 67.. Re: Point (xiv): The contention is that Karnataka Act 13/82, in so far as it introduces new items, viz., items 4 to 16 to the Schedule to the Principal Act, and in so far it expands the definition of "local-area" in section 2(5) of the Act, results in the imposition of additional restrictions on the freedom of trade and commerce offending article 301; that these additional restrictions imposed by this non-compensatory tax are not reasonable nor in the public interest and that, at all events, even if the restrictions could be said to be reasonable and in public interest the amending Act 13 of 1982 not having been introduced or moved in the legislature with the previous sanction of the President and not having also subsequently receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to create facilities for trade and promote the free flow of trade and not to impede it. All the taxes have in some degree or other a compensatory element and if it had been contended that the tax was compensatory in character the argument might, perhaps, have had some interesting possibilities, though it is hardly permissible to speculate as to what the result might have been. That this tax, having regard to its nature and incidence and its effect on the movement of trade has been held in Hansa Corporation case AIR 1981 SC 463, to affect, directly and immediately, the movement of goods and, therefore, to be a restriction on the freedom conferred by article 301. Supreme Court said: "........To the extent the impugned tax is levied on the entry of goods in a local area it cannot be gainsaid that its immediate impact would be on movement of goods and the measure would fall within the inhibition of article 301........" (vide para-32). 71.. Sri Achar, learned Government Advocate, however, contended that the concept of freedom of trade and commerce in article 301 and as to what constitutes restrictions on that freedom must be understood in the context of trade and commerce as a whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an individual's right to carry on his trade. Such a distinction was negatived and the Privy Council pointed out that the redoubtable Mr. James who fought many a battle for the freedom of his trade and occupation was after all an individual..............." (vide para-15). Again in Syed Ahmed Aga v. State of Mysore AIR 1975 SC 1443 it is held: "........No doubt the restrictions contemplated by article 304(b) may be of a character different from those on an individual citizen's rights to trade but it cannot be denied that their impact on individual rights if often very direct................" (vide para-5) It appears that if the imposition of this tax, which affects the movement of goods in the course of inter-State or intra-State commerce, on three items of goods and in a specifically defined "local area" constitutes-as indeed it has been held to-a restriction on the freedom of trade and commerce from the special point of view of article 301, then, logically, the imposition of the tax in other areas not originally defined and on a number of new and different items would constitute additional restrictions also within the special meaning of article 301. In Syed Ahmed Aga's case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be levied. Section 97 of the Act gives the power to levy octroi duty on animals or goods without any exception which are brought within the octroi limits. Sections 98 and 130 lay down the procedure for the levying of taxes and impose a limitation on the extent of the tax to be levied and classes I to VII make certain articles taxable and class VIII makes other articles and goods taxable if they are approved by the Corporation...........................the combined effect of sections 97 and 130 and Part V of Schedule III including class VIII which have been set out above is that the words are of very general nature and would have the same effect as if all articles were intended to be and were included........" (vide para-8). Supreme Court referred to and placed reliance on its earlier decision in Anwar Khan Mehboob Co. v. State of Bombay [1960] 11 STC 698 (SC). In that case the assessee questioned the liability to purchase tax levied on certain goods on the ground that the goods had not been specified in the Sales Tax Act. The last entry in the Schedule of goods subject to sales and purchase tax was "all goods other than those specified from time to time in Schedule A (and secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was sought to be generated by levy of tax under the impugned legislation. No doubt, the tax levied was one on entry of Scheduled goods in local areas meaning thereby it had all the broad features of octroi, yet the manner of levy, the method of collection and the persons liable to pay the same were so devised by the impugned Act as to remove the obnoxious features of octroi..............." (vide para-8). "........Even apart from this, a levy which appears to be quite reasonable in its impact on the movement of goods and is imposed for the purpose of augmenting municipal finances which suffered a dent on account of abolition of octroi cannot be said to impose an unreasonable restriction on the freedom of interState trade, commerce and inter-course........" (vide para-34). The difference that the amending Act 13 of 1982 has brought about is a different of degree and not a difference of kind. Petitioners have not been able to show that there is any qualitative change brought about by the addition of new items to the Schedule so as to make the levy an unreasonable restriction on the freedom of trade and commerce. Moreover, there is no increase in the rate of tax. As to the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive provision void or merely unenforceable. The observations of the Supreme Court in Jawaharmal's case AIR 1966 SC 764 are instructive: "........The position with regard to the laws to which article 255 applies, therefore, is that if the assent in question is given even after the Act is passed, it serves to cure the infirmity arising from the initial non-compliance with its provisions. In other words, if an Act is passed without obtaining the previous assent of the President, it does not become void by reason of the said infirmity; it may be said to be unenforceable until the assent is secured. Assuming that such a law is otherwise valid, its validity cannot be challenged only on the ground that the assent of the President was not obtained earlier as required by the other relevant provisions of the Constitution. The said infirmity is cured by the subsequent assent and the law becomes enforceable......(vide para-16) Sri Srinivasan, however, relied upon the following observations of the Supreme Court in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232. "In the result we hold that the Act has put a direct restriction on the freedom of trade, and since in doing so it has not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 7(1)(a) is unenforceable, it must be held that it has not brought about a substitution of section 2(5) intended by it. The result is, the original definition of "local area" as obtaining under section 2(5) of the Principal Act, subsists and the notification dated 2nd April, 1982, must be read accordingly. 81.. In the result, for the foregoing reasons we allow these writ petitions in part and: (a) Declare that the provisions of section 7(1)(a) and section 7(15) of the Karnataka (Amending Act 13 of 1982) are unenforceable by reason of noncompliance with the requirement of the proviso to article 304(b) or article 255 of the Constitution, untill such compliance is shown; (b) Issue a writ of mandamus in each of these cases to the respondents directing them to forbear from enforcing the provisions of section 7(1)(a) and section 7(15) of the amending Act 13 of 1982, as long as non-compliance with the proviso to article 304(b) or with article 255(c) of the Constitution continues; (c) Quash that part of the Notification bearing No. FD 14 CET 82, dated 2nd April, 1982, which purports to bring to tax items 4 to 16 in the Schedule to the Principal Act. 82.. In the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
