2000 (10) TMI 936 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the notification dated September 23, 1998.
2. Applicability of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 ("Entry Tax Act") to certain areas.
3. Constitutionality of the retrospective operation of the notification.
4. Whether the impugned notification exceeds the delegated powers under section 3(1) of the Act.
5. Discrimination under Article 304(a) of the Constitution.
6. Applicability of Entry Tax Act to industrial areas declared under section 3 of the Karnataka Industrial Areas Development Board (KIADB) Act.

Detailed Analysis:

1. Validity of the Notification Dated September 23, 1998:
The impugned notification was challenged on the grounds that it was issued in excess of the delegated powers under section 3(1) of the Act and was not traceable to the said section. The court held that the Legislature has the power to enact laws retrospectively and the notification issued to cover the period from April 1, 1994, to January 6, 1998, was valid. The power to enact laws retrospectively includes the power to enact laws for a fixed past period, especially when done to validate laws declared invalid by a judgment of the court.

2. Applicability of the Entry Tax Act to Certain Areas:
The appellants argued that the industrial areas declared under section 3 of the KIADB Act do not fall within the definition of "local area" as defined under section 2(A)(5) of the Entry Tax Act. The court referred to the division Bench judgment in Samyuktha Karnataka v. State of Karnataka and held that industrial areas, though not "local areas" themselves, fall within the limits of municipal or panchayat areas defined as "local areas" under the Entry Tax Act. Thus, goods brought into these industrial areas for consumption, use, or sale are exigible to tax under the Entry Tax Act.

3. Constitutionality of the Retrospective Operation of the Notification:
The appellants contended that the retrospective operation of the notification from April 1, 1994, to January 6, 1998, was unconstitutional as the amendment to section 3(1) of the Act by Karnataka Act No. 8 of 1993 did not receive the assent of the President as required under Article 304(b) of the Constitution. The court held that the subsequent assent given by the President to Acts Nos. 45 of 1994 and 3 of 1995 implied assent to Act No. 8 of 1993 as well, following the precedent set in Ferro Concrete Co. of India (Steels) Limited v. State of Karnataka.

4. Whether the Impugned Notification Exceeds Delegated Powers Under Section 3(1) of the Act:
The appellants argued that the notification was not issued either prospectively or retrospectively as required under section 3(1) of the Act. The court held that the Legislature has the power to enact laws with retrospective effect and validate laws declared invalid by the courts. The notification issued to cover the period from April 1, 1994, to January 6, 1998, was within the powers delegated under section 3(1) of the Act.

5. Discrimination Under Article 304(a) of the Constitution:
The appellants contended that the notification dated September 23, 1998, was discriminatory as it imposed tax on goods brought from outside the State while similar goods produced within the State were not taxed. The court held that the subsequent notification removed the discrimination pointed out by the division Bench in Avinyl Polymers Pvt. Ltd. v. State of Karnataka. The single Judge's declaration that tax shall not be levied or collected for the period from April 1, 1994, to January 6, 1998, for entry of goods meant for sale was to remove hardship and did not amount to striking down the notification.

6. Applicability of Entry Tax Act to Industrial Areas Declared Under Section 3 of the KIADB Act:
The appellants argued that the Entry Tax Act was not applicable to industrial areas declared under section 3 of the KIADB Act. The court held that industrial areas, though not "local areas" themselves, fall within the limits of municipal or panchayat areas defined as "local areas" under the Entry Tax Act. Goods brought into these industrial areas for consumption, use, or sale are exigible to tax under the Entry Tax Act.

Conclusion:
The court dismissed the appeals, upholding the validity of the notification dated September 23, 1998, and the applicability of the Entry Tax Act to industrial areas declared under section 3 of the KIADB Act. The court also held that the retrospective operation of the notification was constitutional and within the powers delegated under section 3(1) of the Act. The appellants were permitted to file objections or appeals within four weeks, and the concerned authorities were directed to dispose of them on merit.

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