TMI Blog2007 (10) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-2007 - GOPALA GOWDA V. AND ARALI NAGARAJ , JJ. The judgment of the court was delivered by GOPALA GOWDA J. These matters are listed before this court pursuant to the order passed by the Supreme Court on July 14, 2006 in Civil Appeal No. 4476 of 2000 and connected matters. The operative portion of the said order reads as under: Since relevant data do not appear to have been placed before the High Courts, we permit the parties to place them in the concerned writ petitions within two months. The concerned High Courts shall deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts are requested to decide the aforesaid issue within five months from the date of receipt of our order. The judgment in the respective cases shall be placed on record by the concerned parties within a month from the date of the decision in each case pursuant to our direction. Ms. Vani, learned counsel for the appellant, filed a memo requesting this court to treat the application I.A. II/06, for production of additional documents, as having been filed in this appeal. The said application is opposed by the State Government by filing objections pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r providing municipal and civic amenities, now it has to be held that the tax in question is to be held as compensatory in nature requiring previous sanction or assent of the President of India to the Act and he also placed strong reliance upon the observation made by the Supreme Court at paragraphs 27 and 28 in the case of Widia (India) Ltd.'s case [2003] 132 STC 360. Further it is contended by the learned Senior Counsel placing strong reliance upon article 301 of the Constitution that it would be a barricade on free-flow of trade and commerce as enumerated in the aforesaid provisions of the Act to restrict the imports from outside the State and neutrals the advantage of lower tax in the other States and further placing strong reliance upon the decision of the Supreme Court in the case of Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232 (paragraph 34), whereunder the apex court held that when a law is made solely intended to protect the local or regional interest the same would jeopardize the free movement and exchange of goods throughout the territory of India and therefore the same is hit by article 301 of the Constitution of India. He, further contended that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 to the Karnataka Municipal Corporation Act, 1976, provides for levy of infrastructure and solid waste management, notwithstanding anything contained in section 19 of the Karnataka Motor Vehicles Taxation Act, 1957. Similar provision has been incorporated under the Municipalities Act, 1964. He further submits that section 3(b), by way of amendment to Karnataka Stamp Act, 1957, by Act No. 6 of 2001 dated April 1, 2001 with effect from April 1, 1988 provides for levy of additional duty on instrument of conveyance, gift or lease on immovable properties chargeable with duty under section 3 read with articles of the Schedule shall be chargeable with additional duty at the rate of 10 per cent on such duty. Section 19 of the Karnataka Motor Vehicles Taxation Act, 1957 which is similar provision is also incorporated. The State Government collects the compensatory tax for the developmental purposes under the impugned provision of the KTEG Act, which is not only arbitrary but also unreasonable. He has further submitted that under the statutes referred to supra the levy of same tax is unreasonable and unjustifiable. Therefore it is contended that the materials produced by the appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x collected under the impugned provision of the Act is made part of the State Finance Commission grant allocated as a part of the object exercised by the Finance Department and grants were devolved to urban local body and panchayath institutions on the recommendations of the State Finance Commission. To substantiate the same, the State has produced annexure R5, the scheme formulated and proceedings of the Government and its order dated April 12, 2006. The finance department gets monthly inputs from the Director of Municipal Taxation/Urban Development Department on salary requirements, water board dues, interest on loans, electricity dues payable to KPTCL, securitisation dues and the finance department realises the payment for one quarter at a time for Urban Development Department, Karnataka Rural Energy Development Department towards securitisation, in turn the Urban Development Department releases funds to water board dues and loans, urban local bodies' salary payments and for other developmental charges. After receipt of the funds from the State Finance Commission the respective local bodies spend that amount for providing services/facilities to the public. The statement show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obile Transport (Rajasthan) Ltd. referred to AIR 1962 SC 1406. In that case at paras 17 and 19 wherein it has referred another Constitutional Bench decision, i.e., Atiabari Tea Co. case referred to AIR 1961 SC 232 and came to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are acceptable. The majority view in the Atiabari Tea Co. case referred to AIR 1961 SC 232, is accepted as correct and the same is subject to the clarification made in the said case stating that the regulatory measures imposing compensatory taxes for the use of trading facility do not come within the purview of the restrictions contemplated by article 301 and such measures need not comply with the requirements of the proviso to article 304(b) of the Constitution. The relevant portion of paras 17 and 19 reads thus: . . . The interpretation which was accepted by the majority in the Atiabari Tea Co. case [1961] 1 SCR 809; AIR 1961 SC 232 is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by article 301 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purpose of clause (b) of article 304. Since the President has accorded his sanction to the impugned Act the apex court has held that the constitutional requirement of the proviso to article 304(b) as satisfied, the impugned Act is saved by article 304 and it was not struck down on the ground it is violative of article 301. Further, the learned Advocate-General has rightly placed reliance upon another decision of the Supreme Court in the case of Widia (India) Ltd. v. State of Karnataka [2003] 132 STC 360. In the said case the notification issued on September 23, 1998 specifying rates of tax for a period April 1, 1994 to January 6, 1998 on the entry of goods into a local area for consumption or use or sale therein was challenged. The apex court was examining the correctness of the dismissal of the writ petition of the assessee holding that it was settled law that if tax is compensatory in nature it would be immune from challenge under article 301 of the Constitution of India. Further levy of tax by notification at the relevant time was not discriminatory in character as envisaged by article 304(a), the restrictions imposed were reasonable and in public interest. The Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil 0.00 0.00 34.24 1981-82 5.00 5.19 0.00 38.11 1982-83 8.00 11.10 0.00 39.03 1983-84 10.00 11.16 0.00 46.54 1984-85 18.00 17.24 0.00 63.47 1985-86 30.00 25.69 0.00 50.85 1986-87 37.00 32.02 0.00 60.2 1987-88 35.00 41.47 0.00 61.59 1988-89 49.90 47.41 0.00 79.82 1989-90 52.00 56.90 0.00 83.86 1990-91 58.00 65.49 0.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are mentioned including the compensatory grants to municipalities, grant out of motor vehicle tax collection, development grants to municipalities, prize amount awarded to best local bodies, recommendation of the State Finance Commission of ULBs and surcharge on stamps and registration. The octroi compensation grants to municipalities for the period 1992-93 to 1996-97 is Rs. 14,219 lakhs. Annexure R5 is the proceedings of the Karnataka State Government regarding scheme of devolution of funds to Urban Local Bodies on the recommendations of the second State Finance Commission. The basis is the population, area, road length, illiteracy and normative gap of O M and per capita property tax based on demand. The G.O. dated April 12, 2006 was passed following the scheme for devolution of SFC grants to ULBs budget allocation made in the budget for the year 2005-06 onwards. Various particulars on the basis of global level provisioning aspects are mentioned in the Government Order, which are extracted hereunder: (i) The requirement towards shortfall in ULB share for water supply and sewerage projects should be earmarked. (ii) Shortages in externally aided projects arising out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Sl. Nos. 1 to 13 such as water supply, street light, storm water drainage, SWM, education public health, UGD, maintenance of roads, electricity charges, expenditure on discretionary, maintenance of parks, roadside plantation, etc., cess paid to Government, infrastructure, is Rs. 442.35 lakhs. Further, in the said statement it is stated at Note No. 1 that Manipal area water supply is maintained by CMC Udupi. Annexure R14 is the particulars of entry tax paid by M/s. Kasturba Hospital, Manipal, under KTEG Act, for the years 1996-97 to 2005-06. For the years 2003-04 to 2005-06 no entry tax is paid. The aforesaid particulars are furnished by the State Government regarding the receipt of tax under the KTEG Act, Motor Vehicles Tax Act, Sales Tax Act, Municipal Corporation Act, and Karnataka Stamp Act as compensatory tax in addition to the local taxes collected, the grants received from SFCs and the amount allocated to various Urban Local Bodies for the purpose of providing various services, referred to supra. Levy of compensatory tax under various provisions of the Act in addition to the regular taxes is to provide services to the community as a whole as held by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
