TMI Blog1988 (9) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... 1955, or the Visakhapatnam Municipal Corporation Act, 1979, or the Vijayawada Municipal Corporation Act, 1981, as the case may be, a municipality as constituted or deemed to have been constituted under the Andhra Pradesh Municipalities Act, 1965, or any notified area, as declared under section 389-A of the Andhra Pradesh Municipalities Act, 1965 and includes such other area within the limits of one or more gram panchayats, as may be declared by the Government by notification to be a local area for the purposes of this Act". The expression "scheduled goods" is defined in clause (f) to mean goods specified in the Schedule to the Act. Sub-section (2) of section 2 says that all words and expressions used in the Act and not defined herein but defined in the Andhra Pradesh General Sales Tax Act, 1957, shall have the meanings respectively assigned to them in that Act. Section 3 in Chapter II specifies the authorities under the Act. Suffice it to say that section 3 contemplates authorising the Commissioner of Commercial Taxes and other officers of the Commercial Tax Department for the purpose of enforcing the provisions of this Act. Section 4 in Chapter III is the charging section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for penalties for not paying the tax, or for acting wilfully in contravention of the provisions of the Act or the Rules made thereunder. Section 23 provides for refund. Section 27 bars the jurisdiction of courts from entertaining any suit or other proceedings in respect of matters provided by the Act. Section 31 confers upon the Government the power to make Rules, while section 32 confers upon the Government the power to amend the Schedule. Section 33 is, what may be called the "Henry VIII" clause. The Schedule to the Act mentions three goods, namely: "1. All varieties of textiles manufactured either in mills or powerlooms other than those made wholly of cotton and hosiery cloth lengths other than those wholly made of cotton. 2.. Sugar other than levy sugar. 3.. All products of tobacco other than cigars/cheroots the value of which does not exceed ten paise per each cigar/cheroot and beedies." Rules were also made and published along with the Act. The Act was made applicable in the first instance to the local areas comprised in municipal corporations and first grade municipalities. By a subsequent notification the Act was extended to second and third grade munici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since it is contrary to the assurances given by the Prime Minister to the president of the petitioners' association; and (vii) the Rules have not been laid on the floor of the Legislature, as required by sub-section (3) of section 31 of the Act, though more than three sessions have taken place since they were made. For this reason the Rules must be deemed to have never come into force. Sri T. Anantha Babu, learned counsel appearing for the petitioners in one of the writ petitions, besides reiterating the above contentions, contended further that the absence of any indication in the Act that the tax collected is meant for the benefit of the local authorities-indeed giving a contrary indication by the Objects and Reasons appended to the Bill-makes the Act unconstitutional, inasmuch as the State Legislature has no power to levy the said tax for raising, or adding to its own revenues. Learned counsel also submitted that levying a uniform tax on entry of goods into all local areas, without making a distinction between the local area comprised within the Hyderabad Municipal Corporation and the local area comprised in a small gram panchayat in the corner of the State, amounts to treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich says that the Act is meant for raising additional revenues for the State. The petitioners' further contention is that the Act must itself indicate that the tax collected thereunder will be made over to the local authorities, and that absence of such a provision in the Act is fatal. This contention necessitates an enquiry into the genesis and the nature of the tax contemplated by entry 52 of List II. Section 80-A of the Government of India Act, 1915, dealt with the power of the local legislatures. Sub-section (3) provided that "the local Legislature of any Province may not, without the previous sanction of the Governor-General, make or take into consideration any law-(a) imposing or authorising the imposition of any new tax unless the tax is a tax scheduled as exempted from this provision by Rules made under this Act". Under this provision the Governor-General in Council had framed Rules on December 18, 1920, known as "Scheduled-Tax Rules". Schedule II of these Rules dealt with taxes for the benefit of local authorities, which the Legislative Council of a Province may impose without the previous consent of the Governor-General. It was open to the Legislative Council of a Prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, different in nature, though they resembled in one respect, namely, they were leviable in respect of goods brought into a local area. While terminal taxes were leviable on goods imported or exported from the municipal limits, denoting thereby that they were connected with the traffic of goods, octrois were leviable in respect of goods brought into a municipal area for consumption, or use, or sale. When the Government of India Act, 1935, was enacted, terminal taxes became a Central subject (entry 58 in List I), while "octroi" became a Provincial subject. This Act, however, omitted the use of the word "octroi" and in its place used the word "cess". Entry 49 in List II of the Seventh Schedule to the Government of India Act, 1935, read: "49. Cesses on the entry of goods into a local area for consumption, use or sale." When it came to the Constitution, it used the word "taxes" in place of the word "cesses" in the corresponding entry, i.e., entry 52 in List II. It is thus clear that the taxes contemplated by entry 52 of List II refer to, and include, what was known as "octroi"; the basic feature of this tax is that it is levied on goods entering a local area for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much importance to the averments in the counter-affidavit in this behalf. The Act speaks for itself, and it is not for the Government to say what the legislature meant. The Act itself does not say that the tax is not meant for local authorities but meant exclusively for the benefit of the State Government revenues. In any event, it is not for the petitioners to plead the case of the local authorities. So far as the constitutionality of the levy is concerned, it is not affected by the absence of a provision in the Act itself that the tax collected shall be made over, either in full or in part, to the local authorities. Similar Acts have been enacted by Karnataka, Madhya Pradesh, and other States, and it is not brought to our notice that those Acts contain such a provision, or that the absence of such a provision was found to invalidate the enactment. The local authorities in the State are there to safeguard their own interests, and it is not for the petitioners to espouse their cause. Even if we go by the Statement of Objects and Reasons appended to the Bill, it only says that since "it has become necessary to mobilise additional resources for the State to enable the Government to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts made under article 269, or the Income-tax Act, contain a provision specifically providing for such making over or sharing, or that the absence of such a provision was held to affect the competence of Parliament to levy the tax. How the tax collected will be utilised or apportioned is not a matter affecting the levy, nor is it a matter affecting the legislative power of the body enacting that law. As observed by the Supreme Court in Jaora Sugar Mills v. State of M.P. AIR 1966 SC 416, "it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the Constitution. The validity of the Act must be judged in the light of the legislative competence of the legislature which passes the Act and may have to be examined in certain cases by reference to the question as to whether fundamental rights of citizens have been improperly contravened, or other considerations which may be relevant in that behalf. Normally, it would be inappropriate and indeed illegitimate to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when the court is considering the question about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m/Vijayawada Municipal Corporation Act, or a municipality, notified area, or an area within the limits of a gram panchayat. We are also unable to see any substance in the argument that the levy of a uniform tax violates the equality clause in article 14. The argument is that there must be a different rate of tax for goods entering a local area like the Hyderabad Municipal Corporation area, than the rate of tax levied on goods entering a local area covered by a gram panchayat. It is argued that these two local areas are differently situated, that the facilities provided by them vary, and that in all relevant aspects these two local areas are differently situated. This argument ignores the fact that what is levied by the impugned Act is a tax, and not a fee. The tax is unrelated to the services rendered or facilities provided by a particular local authority. Suppose the local authorities had been empowered by law to levy this tax. Had a gram panchayat and the Hyderabad Municipal Corporation imposed such tax at the same rate, it could hardly be said that there is discrimination. If so, the said argument is not available even where the said tax is levied directly by the legislature i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e administrative cost in smaller areas with lower rates and negligible entry of scheduled goods in such areas would make the tax wholly uneconomic. It must, therefore, logically follow that choice to select local area is a necessary concomitant of a choice to select rates, which power is admittedly conferred on the State Government.............." We do not think that the said observations can be read as meaning that the levy of a uniform rate of tax upon goods entering any local areawhether it be a municipal corporation area, or a gram panchayat areais discriminatory or bad. Nor can the said passage be read as saying that there ought necessarily to be different rates of tax for different local areas, depending upon their importance. The observations made for sustaining the selection of certain municipal areas for levy of tax cannot be read as obligating such selection, or as prohibiting the levy of a uniform tax. We are also unable to see any substance in the argument of the learned counsel for the petitioners that because the Central Government had levied additional duty of excise in lieu of the State Government agreeing not to levy similar taxes, the Legislature of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was passed by the Legislature, it was reserved for, and obtained the assent of the President. As held by the Supreme Court in Atiabari Tea Company Ltd. v. State of Assam AIR 1961 SC 232 and Automobile Transport v. State of Rajasthan AIR 1962 SC 1406 such an assent cures the defect, if any, in not obtaining the previous sanction of the President before introducing the Bill. A good amount of debate took place before us whether the tax in question is a single point tax or a multi-point tax. In the counter-affidavit two contradictory statements are made on this score. In paragraph 9-A it is stated "if the goods from one local area enter into another local area, they are taxable again unless they are exempted specifically", while in paragraph 5 it is stated "once a tax is levied in any part of the State on any commodity as mentioned in the Schedule appended to this Act, the same commodity is not subjected to levy of entry tax once again..............." In our opinion, there is no room for this tax to be a multi-point levy. The tax can be levied only at one stage. We proceed to explain: The tax is leviable when any of the scheduled goods enter a local area for consumption, use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods in the way of use or consumption. It is an earlier stage, the ultimate destination of the goods being 'use or consumption'. The earlier stage, namely, the sale by him, does not save the person who brought the goods into the local area from liability to the tax if the goods were brought inside for consumption or use...........". It is thus clear that the word "sale" is not to be understood independently, but as a stage preliminary to consumption, or use within the local area levying the tax. Now, coming to the position obtaining under the impugned Act, it is important to remember that under the Act, the levy is upon the dealer alone. The proviso to section 4(1)-charging section-makes this position clear. If a dealer brings any of the scheduled goods into a local area for consumption, use or for sale to consumers/users, he is undoubtedly liable to pay the entry tax. But if he sells the said goods to a dealer, who takes them out of that local area, then in principle, no tax is leviable thereon. (Of course, if such purchasing dealer either consumes or uses them or sells to consumers/users within the same local area, the tax is leviable). Then, let us see how is this position dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, use or sale therein. But, as we have explained above, since this is an indirect tax intended to be passed on to the consumer, and also because the levy is not by each local area separately but by the State as such, it makes no difference in practical terms. As we have said above, the selling dealer would recover the said tax from the purchasing dealer who, in turn, will pass it on to the consumer. It is also made clear that where the goods merely pass through a local area, this tax is not leviable. Lastly, it was argued by Mr. S. Ramachandra Rao, learned counsel for the petitioners, that inasmuch as the Rules have not been laid before the Legislative Assembly soon after they were made as contemplated by sub-section (3) of section 31 of the Act, it must be held that the Rules are not in force. Firstly, this contention has not been raised in the writ petitions and, therefore, we see no reason to allow the petitioners to raise this contention. Even otherwise, the learned Government Pleader has informed us that the Rules were indeed laid before the Legislative Assembly in the first session after the Rules were made, i.e., on December 11, 1987. It is also stated that the Subordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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