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TMI Blog1997 (8) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as first , second and third notifications respectively). 3.. The appellants had assailed the validity/enforceability of the impugned notifications on various grounds before the learned single Judge but to their dismay, none of those grounds found favour with him and thus all the writ petitions came to be dismissed by the impugned judgment. Hence, these appeals. 4.. The appellants have assailed the impugned notifications on the following grounds: (a) the impugned notifications having been issued under section 3 of the Act as amended by Karnataka Ordinance Nos. 2 of 1992 and 10 of 1992, with the expiry of the later Ordinance by efflux of time provided under article 213 of the Constitution of India that is on and after February 11, 1993, the impugned notifications also ceased to be in operation thereby disentitling the authorities under the Act to levy, assess or collect any tax under the Act; (b) the second notification was ab initio void since though it was purported to have been issued under section 3 of the Act as an amendment to the first notification for inclusion of raw material, etc., at serial No. 81 to the same, but it failed to specify a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a for consumption, use or sale therein. 7.. From the above noticed charging section 3 of the Act, it would appear that the tax is leviable on goods which is defined under clause (4-a) of section 2(A) and the taxable event is its entry into a local area which has been defined in clause (5) of the said section. Keeping in view the nature of discussion to be followed hereinafter, it will be more convenient to extract these definitions as well as those existed during the material period. Section 2(A)(4-a): goods means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock; Section 2(A)(5): local area means an area within the limits of a city under the Karnataka Municipal Corporations Act, 1976 (Karnataka Act 14 of 1977), a municipality under the Karnataka Municipalities Act, 1964 (Karnataka Act 22 of 1964), a Notified Area Committee, A Town Board, a Sanitary Board or a Cantonment Board constituted or continued under any law for the time being in force and a Mandal under the Karnataka Zilla Parishads, Taluk Panchayat Samithis, Mandal Panchayats and Nyaya Panchayats Act, 1983 (Karnataka Act 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Act as inserted by the Ordinances 2 of 1992 and 10 of 1992 referred to above. This notification reads as under: I. Notification No. FD 69 CET 92(I), Bangalore, dated the 30th April, 1992. Karnataka Tax on Entry of Goods Act, 1979 (Karnataka Act 27 of 1979), the Government of Karnataka in supersession of all notifications issued under section 3 of the said Act hereby specifies that with effect from 1st May, 1992 tax shall be levied and collected under the said Act on the entry of goods specified in column (2) of the table below into every local area for consumption, use or sale therein at the rates specified in the corresponding entries in column (3), thereof. TABLE Sl. No. Description of the Scheduled goods First Schedule Item No. Rate of tax 1 Air-conditioning plants, air-coolers and air-conditioners and parts thereof (1) 3% 2 .................. 80 X-ray apparatus (102) 2% 13. By the second notification, which was also purported to be issued under section 3 of the Act after serial No. 80 of the first notification, a new serial No. 81 was inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce No. 2 of 1992 was promulgated bringing about amendments as noticed above to the charging section which was repromulgated as Ordinance No. 10 of 1992 making it retroactive again from May 1, 1992. 16.. The second important feature of the amending history is that both before the promulgation of the Ordinances as also thereafter during their lifetime the State Government was empowered to specify rate of entry tax on the value of the goods but the only difference which the Ordinances made was that, but for the amendments made by the Ordinances, before its promulgation, the State Government had an absolute discretion to provide entry tax in respect of any goods covered by the definition of the word under section 2(A)(4-a) of the Act but after the said amendment, ostensibly the discretion of the Government became limited to the goods specified in the First Schedule only. Curiously, the entry at serial No. 103 of the First Schedule as inserted by the impugned Ordinances reads as goods other than those specified in any of the entries in this Schedule, but excluding those specified in the Second Schedule . If this entry is read with the amended section 3(1), it becomes difficult to un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstitution consists of two steps. First the old rule is made to cease to exist and, next, the new rule is brought into existence in its place. Even if the new rule be invalid, the first step of the old rule ceasing to exist comes into effect and it was for this reason that the court held that, on declaration of the new rule as invalid, the old rule could not be held to be revived. 21.. The above concept was again examined and explained by the apex Court in the case of State of Maharashtra v. Central Provinces Manganese Ore Co. Ltd. [1977] 39 STC 340 at page 348; AIR 1977 SC 879, wherein it was held that (paragraph 17): We do not think that the word substitution necessarily or always connotes two severable steps, that is to say, one of repeal and another of a fresh enactment even if it implies two steps. Indeed, the natural meaning of the word substitution is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective so as to leave intact what was sought to be displaced. That seems to us to be the ordinary and natural meaning of the words shall be substituted . This part could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution or, as the case may be, on the resolution being agreed to by the Council; and (b)................ 24.. In the case of D.C. Wadhwa v. State of Bihar AIR 1987 SC 579, it has been held by the Supreme Court that (paragraph 7): ............every Ordinance promulgated by the Governor must be placed before the Legislature and it would cease to operate at the expiration of six weeks from the reassembly of the Legislature or if before the expiration of that period a resolution disapproving it is passed by the Legislative Assembly and agreed to by the Legislative Council, if any. The object of this provision is that since the power conferred on the Governor to issue Ordinances is an emergent power exercisable when the Legislature is not in session, an Ordinance promulgated by the Governor to deal with a situation which requires immediate action and which cannot wait until the Legislature reassembles must necessarily have a limited life. Since article 174 enjoins that the Legislature shall meet at least twice in a year but six months shall not intervene between its last sitting in one session and the date appointed for its first sitting in the next session and an Ordinance mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal death under article 213(2)(a). In the case of Gooderham and Worts Ltd. v. Canadian Broadcasting Corporation AIR 1949 PC 90 while dealing about the survival of the amendments effected by temporary legislations upon their expiry, it has been held by the Privy Council that: The repeal effected by the temporary legislation was only a temporary repeal. When by the fiat of Parliament the temporary repeal expired the original legislation automatically resumed its full force. No re-enactment of it was required. 28.. In the context of Ordinances issued under article 213(1) of the Constitution, there is another aspect of importance which justifies the taking of the view expressed by the Privy Council in the above case (Gooderham Worts and Ltd. v. Canadian Broadcasting Corporation AIR 1949 PC 90). If, notwithstanding the fact that even if an Ordinance made under article 213(1) expires by efflux of time but nonetheless the amendments sought to be effected by it to an Act of the Legislature are allowed to attain a permanent character, then virtually this will amount to giving plenary power of permanent legislation to the executive thus providing a convenient machinery to bypass th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 992 and subsequently passed the same on May 1, 1993. It was then sent for the President s assent. But for one or the other reason, the President gave his assent to the Bill only on September 6, 1994 and thereafter, it was published in the Karnataka Gazette on March 23, 1995 making the same retroactive from May 1, 1992, that is the date from which the two Ordinances intended to amend the Act. Therefore, after the commencement of the Karnataka Act No. 3 of 1995, it has to be presumed by all concerned as also a court of law that the amendments sought to be carried out by the Act of the Legislature had in fact taken effect on May 1, 1992. In the case of Mohd. Iqbal v. State of Maharashtra [1996] 1 SCC 722 (para 7), it has been held that Legislature can introduce a statutory fiction and the courts have to proceed on the assumption that such state of affairs exists on the relevant date, because when one is bidden to treat an imaginary state of affairs as real, he also has to imagine as real the consequences which shall flow from it unless prohibited by some other statutory provision . 30.. Sri Kantraju, learned Additional Government Advocate, has brought to our notice a judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of issuing a notification like the impugned corrigendum is traceable to section 3(1) of the Act it can have its effect only prospectively from the date of its publication that is August 19, 1992 and cannot have retrospective operation from July 30, 1992, and; (iv) the said notifications have not been laid before the State Legislature as required under section 31 of the Act. 35.. For substantiating the said contentions, the counsel appearing for the appellants/petitioners have placed reliance on various judgments. The first in the series is a judgment of the Supreme Court in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1; AIR 1985 SC 1041. In paragraph 6 of the Report (page 4 of STC), it has been held that: The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f some accidental slip the rate did not appear in the notification and therefore the mistake was rectified through the corrigendum. It is well-settled that once the court is able to gather the true intention of the law-maker then it becomes its duty to give force and life to the statutory instrument instead of trying to destroy the same by accepting technical pleas. But while undertaking such an exercise, the court has to be careful that it is not involving in any process of legislation by supplying casus omissus. 39.. So far as the challenge on the ground of retrospectivity of the third notification is concerned, in our opinion, that has to be upheld. Even the learned single Judge, has held that by this corrigendum notification, an ineffective notification has been made effective . We agree with the learned single Judge to this extent. But it has to be borne in mind that the charging section 3(1) of the Act becomes operative only on specification of the rate of entry tax in respect of the goods covered by Sl. No. 81 that is raw materials, etc., and the rate of tax was specified by the corrigendum notification which was published in the Karnataka Gazette on August 19, 1992. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 39 of the State Sales Tax Act. In our opinion, the said observation of the Division Bench in the case of Lipton India [1994] 95 STC 225 (Kar); ILR 1994 Kar. 1848, cannot be taken as a binding precedent for two reasons, namely; (i) on appeal the said decision has been set aside by the Supreme Court (Lipton India Ltd. v. State of Karnataka [1997] 104 STC 407) and has been remanded to this Court for re-consideration; and (ii) the Supreme Court has consistently held that the laying clauses of the nature contained in the State legislation are not mandatory [see Atlas Cycle Industries Ltd. v. State of Haryana [1979] 2 SCC 196; I.T.C. Bhadrachalam Paperboards v. Mandal Revenue Officer [1996] 6 SCC 634]. 42.. Therefore it has to be held that no entry tax was leviable on goods covered by Sl. No. 81 pursuant to the impugned notifications till August 18, 1992. Ground (d): 43.. This ground has been raised in the context of the facts appearing in W.A. No. 3020 of 1997. The appellant in the said appeal is a publisher of a newspaper Samyukta Karnataka . For the purpose of publishing the said newspaper, the appellant causes entry of newsprints in the local area which are used as an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed rule of interpretation that in the case of two plausible views regarding interpretation of a charging section in a taxing statute one that favours the tax payer should be adopted, it is declared that no tax on the entry of raw materials, component parts and inputs which are used in the manufacture of an intermediate or finished product specified in the Second Schedule can be levied by the State Government and the entry at Sl. No. 81 of the impugned first notification as inserted by the second and third notifications is held to be ultra vires the powers of the State Government to this extent as well. Ground (e): 46.. Admittedly, the present Act has been made by the State Legislature pursuant to entry 52 of the State List (List II of the Seventh Schedule to the Constitution). The said entry 52 reads tax on entry of goods into a local area for consumption, use or sale therein . In the case of Diamond Sugar Mills Ltd. v. State of Uttar Pradesh AIR 1961 SC 652, para 25, it has been held by the Supreme Court that the proper meaning to be attached to the words local area in entry 52 of the Constitution (when the area is a part of State imposing the law), is an area administere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave also the power to realise those taxes through coercive processes, if they are not paid immediately on demand. They have also the right to realise, built up and manage their local funds . 50.. In the case of Union of India v. R.C. Jain AIR 1981 SC 951, the Supreme Court has laid down the distinctive attributes and characteristics which a body should acquire and hold for being recognised as a local authority. It has been held that (para 2)- Let us, therefore, concentrate and confine our attention and enquiry to the definition of Local Authority in section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of section 3(31) suggests that an authority, in order to be a local authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area by the State Government for the purposes of this Act. As per section 5(2) of this Act, the Board is a body corporate with perpetual succession and be sued in its own name and subject to the provisions of the Act and the rules made thereunder is competent to acquire, hold and dispose of property, and to contract and to all things necessary for the purposes of the said Act. 53.. Section 6 provides for the constitution of the Board. It is to the following effect: Section 6: Constitution.-The Board shall consist of the following members, namely: (a) the Secretary to the Government of Karnataka, Commerce and Industries Department who shall ex-officio be the Chairman of the Board; (b) the Secretary to the Government of Karnataka, Finance Department; (c) the Secretary to Government, Housing and Urban Development Department; (ca) the Commissioner for Industrial Development and Director of Industries and Commerce; (cb) the Chairman and Managing Director, Karnataka State Industrial Investment and Development Corporation Limited; (cc) the Chairman, Karnataka State Pollution Control Board; (cd) the Director of Town Planning; (ce) the Managing Director, Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, including the right and power to evict the allottees concerned on breach of any of the terms and conditions of their allotment; (g) to delegate any of its powers generally or specifically to the Executive Member; (h) to enter into and perform all such contracts as it may consider necessary or expedient for carrying out any of its functions; and, (i) to do such other things and perform such acts as it may think necessary or expedient for the proper conduct of its functions, and the carrying into effect the purposes of this Act. 55.. The clause (c) of the above section 13 talks of providing amenities in the industrial areas. But amenities has been defined under section 2(1) of the said Act which includes road, supply of water or electricity, street lighting, drainage, sewerage, conservancy, and such other convenience, as the State Government may, by notification specify to be an amenity for the purposes of this Act. Section 17 of the Act empowers the State Government to issue direction to the Board as it may think necessary or expedient for the purpose of carrying out the purposes of this Act and the Board is bound to follow and act upon such directions. Section 19 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that: The assessee is a Road Transport Corporation constituted to render road transport services in the State. Sections 18 and 19 of the Road Transport Corporation Act which set out the general duty and powers of the Corporation establish clearly that the Corporation is meant mainly and only for the purpose of providing an efficient, adequate, economical and properly co-ordinated system of road transport services in the State or part of it, as the case may be. It has no element of popular representation in its constitution. Its powers and functions bear no relation to the powers and functions of a Municipal Committee, District Board or Body of Port Commissioners. 59.. Therefore, it is held that industrial area declared under the Industrial Areas Act is not a local area and therefore, its non-inclusion in the definition of local area under clause (5) of section 2(A) of the Act is of no consequence. It is further held that the appellants are liable to be taxed on entry of goods in the local areas as defined under the said clause. 60.. To sum up, it is held that- (i) the impugned three notifications did not cease to be operative because of the expiry of the Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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