2005 (10) TMI 515 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of the Government Notification dated March 31, 2001.
2. Validity of entry 103 in the First Schedule to the Karnataka Tax on Entry of Goods Act, 1979.
3. Validity of the assessment order and demand notice dated September 16, 2002.
4. Whether the notification is ultra vires the powers of the State Government under section 3(1) of the Act.
5. Alleged violation of Articles 14, 19(1)(g), 301, and 304(b) of the Constitution of India.

Detailed Analysis:

1. Legality of the Government Notification dated March 31, 2001:
The petitioner challenged the notification on the grounds that it was ultra vires the powers of the State Government as it went beyond the powers delegated under section 3(1) of the Act. The notification aimed to levy entry tax on "corks" at the rate of two percent when brought into a local area. The petitioner argued that the charging section, section 3 read with the First Schedule, did not create a liability for such a levy on corks.

2. Validity of entry 103 in the First Schedule to the Karnataka Tax on Entry of Goods Act, 1979:
The petitioner contended that entry 103, a residuary entry, could only be worked upon by the State Legislature and not by the executive. The argument was that the State Government could not issue notifications under section 3(1) for goods not explicitly mentioned in entries 1 to 102, thus making the notification ultra vires.

3. Validity of the assessment order and demand notice dated September 16, 2002:
The petitioner sought to quash the assessment order and demand notice for the assessment year 2001-02, which relied on the impugned notification. The argument was that if the notification was invalid, the assessment order and demand notice based on it would also be invalid.

4. Whether the notification is ultra vires the powers of the State Government under section 3(1) of the Act:
The court examined whether the State Government had the authority to issue the notification under section 3(1). The State Government argued that entry 103 covered all goods not specified in entries 1 to 102, except those in the Second Schedule. The court found that the notification was within the powers conferred under section 3(1) and entry 103, as the Legislature had delegated the function of identifying goods and stipulating rates to the State Government.

5. Alleged violation of Articles 14, 19(1)(g), 301, and 304(b) of the Constitution of India:
The petitioner argued that the notification violated Articles 14 (equality before the law), 19(1)(g) (right to practice any profession or carry on any occupation), 301 (freedom of trade and commerce), and 304(b) (reasonable restrictions on trade and commerce). The court found these arguments unsubstantiated. It held that the levy of tax itself could not be characterized as a violation of Article 19(1)(g). The court also noted that the levy under the Act was compensatory, thus not attracting Articles 301 and 304(b).

Conclusion:
The court dismissed the writ petition, upholding the validity of the Government Notification dated March 31, 2001, and the assessment order and demand notice dated September 16, 2002. The court found that the notification was within the powers of the State Government under section 3(1) and entry 103 of the First Schedule. The arguments regarding the violation of constitutional provisions were also rejected. Thus, the rule was discharged, and the writ petition was dismissed.