1997 (3) TMI 580 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Karnataka Industrial Area Development Board (KIADB) is a "local area" under the Karnataka Tax on Entry of Goods Act, 1979.
2. The validity of the notifications issued under the Act following the lapsing of Karnataka Ordinance No. 2 of 1992.
3. The legality of the corrigendum notification dated August 19, 1992, correcting the omission in the notification dated July 30, 1992.
4. Whether Entry 81 of the First Schedule to the Act, as inserted by the notification dated July 30, 1992, is ultra vires of the Act.

Issue-wise Analysis:

1. Whether the Karnataka Industrial Area Development Board (KIADB) is a "local area" under the Karnataka Tax on Entry of Goods Act, 1979:

The court examined whether the KIADB industrial area falls under the definition of "local area" as per Section 2(5) of the Act. The term "local area" is defined to include areas within municipal corporations, municipalities, notified area committees, town boards, sanitary boards, cantonment boards, and panchayat areas. The court concluded that the KIADB does not qualify as a "local area" because it does not possess the characteristics of a local authority, such as having elected members, autonomy, or the power to levy taxes. The KIADB is a governmental agency without the attributes of a local authority, and thus, the area administered by it does not fall within the definition of "local area" under the Act. However, the court noted that if the KIADB area falls within the limits of a local body like a panchayat, the entry of scheduled goods into that area would attract the entry tax.

2. The validity of the notifications issued under the Act following the lapsing of Karnataka Ordinance No. 2 of 1992:

The court addressed the contention that the notification issued on April 30, 1992, pursuant to Ordinance No. 2 of 1992, lapsed along with the Ordinance. The court noted that the Ordinance was repealed by Karnataka Ordinance No. 10 of 1992, which was given retrospective effect from May 1, 1992, and included a saving clause. This saving clause ensured that actions taken under the earlier Ordinance were deemed to have been taken under the new Ordinance. Additionally, Karnataka Act No. 3 of 1995 further amended the principal Act with retrospective effect from May 1, 1992, and included a similar saving clause. Therefore, the notification issued under the repealed Ordinance continued to be in force and was deemed to have been issued under the new Ordinance and the amended Act.

3. The legality of the corrigendum notification dated August 19, 1992, correcting the omission in the notification dated July 30, 1992:

The court examined the corrigendum notification issued to rectify the omission of the tax rate for Entry 81 in the notification dated July 30, 1992. The court held that the corrigendum notification was a correction of a mistake in the original notification and thus dated back to the original notification. The court emphasized that the power to issue notifications includes the power to correct or vary them, and this power is ancillary to the substantive power conferred by the statute. Consequently, the corrigendum notification was valid and did not constitute a retrospective levy of tax.

4. Whether Entry 81 of the First Schedule to the Act, as inserted by the notification dated July 30, 1992, is ultra vires of the Act:

The court addressed the contention that Entry 81 of the First Schedule, which imposed a tax on raw materials, component parts, and inputs used in manufacturing intermediate or finished products, was beyond the competence of the rule-making authority. The court interpreted Entry 80 and Entry 81 of the First Schedule and concluded that the Legislature's intention was to levy tax on all goods entering the local area except those specified in the Second Schedule. The court held that the rule-making authority had correctly exempted only those raw materials specified in the Second Schedule and not those used in manufacturing Second Schedule goods. Thus, Entry 81 was not ultra vires of the Act and was within the competence of the rule-making authority.

Conclusion:

The court dismissed the petitions, holding that the KIADB area is not a "local area" under the Act, but the entry of scheduled goods into a panchayat area within the KIADB would attract the entry tax. The notifications issued under the repealed Ordinance continued to be valid due to the saving clauses in subsequent legislation. The corrigendum notification was a valid correction of the original notification, and Entry 81 of the First Schedule was within the rule-making authority's competence. The court permitted petitioners to file objections or appeals within specified time frames and directed the appellate authorities to decide the appeals on merits without reference to the period of limitation. Each party was directed to bear its own costs.

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