9911796707
TMI Blog1997 (3) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992 inserting entry 81 which brought to effectuate the charge relating to entry 80 of the First Schedule to the Act is beyond the competence of the rule-making authority. Apart from all this, the petitioners have questioned the correctness or otherwise of the pre-assessment notices, assessment orders framed by the assessing authorities for the assessment years 1992-93, 1993-94 and 1994-95. 3.. Though the point for decision is a simple one lying in a very narrow compass, to reach it, one has to wade through various amendments, notifications and judicial pronouncements. To begin with we have the "Principal Act" known as "The Karnataka Tax on Entry of Goods Act, 1979" ("the Act" for short). The Act is made to provide for the levy and collection of tax on the entry of certain goods into local areas in the State for consumption, use or sale therein, at rates not exceeding five per cent of the value of the goods. The charging section under the Act is relatable to entry 52 of List II of the Seventh Schedule which speaks of "Taxes on entry of goods into local area for consumption, use or sale therein ". Section 2 of the Act defines certain expressions occurring in the Act. Subsection (5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed their objection statements and in that, they assert that the petitioners' industrial units come within the definition of "local area" and as such they are liable for payment of tax under the Act. 6.. Local area is defined under the Act. It means an area within the limits of city under the Corporation Act, 1976, a municipality, under Municipalities Act, a notified area committee, a town, sanitary and cantonment board, a mandal under 1983 Act and a panchayat area under the Panchayat Raj Act, 1993. The definition is very exhaustive. Local area in entry 52 of List II means an area administered by a local body or local authority, like a municipality, a district board, a local board, a Union board, a panchayat or the like. Earlier to the introduction of the Act, the earlier municipal laws provided for imposition of a duty of tax called "octroi". This "octroi" happened to be the main source of revenue to the local bodies. Explaining this octroi system, the Supreme Court in the case of Diamond Sugar Mills Ltd. v. State of Uttar Pradesh AIR 1961 SC 652 was pleased to observe thus: "Octroi is an old and well-known term describing a tax on the entry of goods into a town or a city ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y must not be mere Governmental agencies but must be a legally independent entities. It must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. It must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. It must be entrusted by statute with such Governmental functions and duties as are usually entrusted to municipal bodies. It must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority." 9.. Keeping in view, the precise meaning of expression "local authority", let me now advert to the contentions raised by the learned counsel for the petitioners. The KIADB is a statutory authority established under the Karn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporations Act, a municipality under the Karnataka Municipalities Act, a notified area committee, a town, sanitary or cantonment board, a mandal under Karnataka Zilla Parishads Act and a panchayat under Karnataka Panchayat Raj Act. These local bodies are political sub-divisions and agencies of the State Government which exercise a part of State functions. These bodies have the power to raise funds for furtherance of their activities and fulfilment of their projects by levying taxes, rates, charges or fees. These bodies are legally independent entities functioning in a defined area, enjoying certain degree of autonomy with freedom to decide for themselves questions of policy affecting the area administered by them. These local bodies are entrusted with the performance of civic duties and functions which is otherwise governmental functions and duties. These local bodies normally will consist of members elected from the area administered by them. These essential characteristics and important ingredients are conspicuously absent in the constitution and functioning of the Karnataka Industrial Areas Development Board. The Board does not have a separate legal existence and it is mere go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttract levy under Entry Tax Act cannot be accepted. 13.. The second contention of the learned counsel for the petitioners is that since Karnataka Ordinance No. 2 of 1992 which came into effect from May 1, 1992, having lapsed by efflux of time, the notification issued pursuant to amended charging section to effectuate the charge with respect to items mentioned under the First Schedule to the Act also gets lapsed and therefore becomes inoperative since there is no saving clause under the Ordinance. 14.. To appreciate the contention of the learned counsel, it would be useful to refer to some of the amendment in carried out in the Act during the relevant period. They are as follows: Karnataka Amendment Act No. 15 of 1992 received the assent of the President on February 12, 1992 and was published in the Gazette on May 1, 1992. By the said amendment charging provisions under the Act was drastically amended. Since charging provision is material for present discussion, it is necessary to refer to section 3 of the Act as amended by Act 15 of 1992. It is not necessary to notice the entire section. It will be sufficient if we notice sub-sections (1) and (6) of section 3 of the Act. Sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersession of all other earlier notifications specifying 80 commodities for the purpose of levy at the rates specified in the corresponding entries in column (3) of the Table. 17. In due course, Karnataka Ordinance No. 2 of 1992 was repealed by the Karnataka Tax on Entry of Goods (Amendment) (No. 2) Ordinance, 1992 (Karnataka Ordinance No. 10 of 1992) and that was published in the Karnataka Gazette on 20th August, 1992. The said Ordinance merely reproduced the clauses in the Karnataka Ordinance No. 2 of 1992. This Ordinance was given retrospective effect from May 1, 1992. Further in the Ordinance, repeal and saving provisions had been introduced to save anything done or any action taken under Ordinance No. 2 of 1992, is deemed to have taken under the present Ordinance. This Ordinance was first published in the Karnataka Gazette on August 20, 1992. 18.. By yet another amendment, Karnataka Act No. 3 of 1995, Legislature amended the principal Act. This amendment received the assent of the President on 6th September, 1994 and was published in the Karnataka Gazette on 23rd March, 1995. The Act was given retrospective effect from May 1, 1992, the day on which Karnataka Ordinance No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is certain that the Karnataka Ordinance No. 2 of 1992 was repealed by Karnataka Ordinance No. 10 of 1992 and was given effect to from 1st May, 1992; the day on which the Governor of State of Karnataka had issued Karnataka Ordinance No. 2 of 1992. This Ordinance provides for repeal and savings; to save all things done or all actions taken under the aforesaid Ordinance deemed to have been done or taken under the Ordinance No. 10 of 1992. This Ordinance reproduces merely Ordinance No. 2 of 1992 without any change or modifications. Section 24 of the Karnataka General Clauses Act provides that where any State Act is repealed and re-enacted with or without modifications, the notifications issued under the repealed State Act, are to continue in force and be deemed to have been issued under the provisions so re-enacted. In view of retrospective effect given to Ordinance No. 10 of 1992, w.e.f. May 1, 1992 and also in view of section 24 of the General Clauses Act, the notification issued under the repealed Ordinance will continue to be in force and be deemed to have been made under the Karnataka Ordinance No. 10 of 1992 and therefore, the Notification No. FD 69 CET 92(i) dated May 1, 1992 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es part of the law just as if the amendment has always been there. Without giving room for any doubt and discussion, whether this amendment will have any retrospective effect, the Legislature has given retrospective effect to the amendment w.e.f. May 1, 1992. The amendment to an Act should be considered as if embodied in the whole statute of which it has become a part. The amended statute is regarded as if the original statute has been repealed and the whole statute re-enacted with the amendment. Under the Ordinance, the principal Act had been amended and under the amended charging provisions of the principal Act, a Notification No. FD 69 CET 92(1) dated 30th April, 1992 had been issued specifying the commodities and the rate of tax. By virtue of Act No. 3 of 1995, which is introduced with effect from May 1, 1992 and in view of specific saving clause to save whatever that has been done under the principal Act as amended by Ordinance No. 10 of 1992 and since there is no inconsistency between the provisions of Ordinance No. 10 of 1992 and the repealing Act, in my view, all things done including notifications issued under those Ordinances should be treated as being continued right fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the rate of tax of 1 per cent for the entry at serial No. 81 is deemed always to have been inserted. 26.. Section 3 of the Act, which is the charging provision provides that to give effect to the charge, State Government should specify the rate of tax in respect of different goods or different classes of goods or different local areas by issuing necessary notification/notifications. The existing provision during the relevant time did not authorise the Government to issue notification retrospectively. 27.. By Notification No. FD 69 CET 92(III) dated July 30, 1992, the State Government, inserted a new entry into First Schedule to the Act, immediately after entry 80 of the Schedule. Notification did not specify the rate of tax applicable to the class of goods at column No. 2 of the Table. Omission could be mere accidental. To rectify the omissions/mistake, State Government brought out a corrigendum notification dated August 19, 1992 specifying the rate of tax on the class of goods in entry 81 of the Schedule. The notification was given effect from the date of original notification dated July 30, 1992. The corrigendum notification does not refer to any provisions of the Act under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted by Notification No. FD 69 CET 92(III) dated July 30, 1992 to effectuate the charge relating to entry 80 of the Schedule to the Act. 31.. Entry 80 of the First Schedule to the Act reads as under: "80. Raw materials, component parts and inputs which are used in the manufacture of an intermediate or finished product (other than those specified in the Second Schedule)." Entry 81 of the notification dated July 30, 1992 reads as under: "81. Raw materials, component parts and inputs (other than those specified in the Second Schedule) which are used in the manufacture of an intermediate or finished product." (Explanation is not extracted as it is not necessary for the purpose of this case). 32.. Entry 80 to the First Sschedule to the Act is mere topic of legislation and it must receive liberal construction. The entry merely says that the entry into local area the raw materials, component parts and inputs used in the manufacture of an intermediate or finished products other than raw materials, component parts and inputs specified in the Second Schedule are liable to tax under the Act. The expressions "other than those specified in the Second Schedule" refers to raw materials, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e raw materials which are used in the manufacture of Second Schedule goods. Alternatively, it can be said that it is not the raw material/s used in the manufacture of finished product which finds a place in the Second Schedule is exempted from levy but raw materials, components parts and inputs specified in Second Schedule are exempt from levy. Take for instance "cotton yarn" which is a Second Schedule commodity and this is a raw material used in the manufacture of textiles. Causing of entry of this raw material into local area for the manufacture of a finished product would have been exigible for levy of tax under the Act, since it is a Second Schedule goods exempt from levy, the Legislature has thought fit to exempt it even when it is used as a raw material for the manufacture of finished product. The intention of the Legislature seems to be that goods specified in the Second Schedule are exempt from levy under the Act and they are also exempt from levy even when they are used as raw materials. This intention of the Legislature is truly reflected in entry 81 of the notification dated July 30, 1992 by the rule-making authority while inserting the said entry under the First Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
