Court upholds validity of Notification amending entry tax on unmanufactured tobacco. State power affirmed.

The court upheld the validity of the Notification dated 1.10.2013, which amended the entry tax on unmanufactured tobacco in sealed containers. It ruled in favor of the State Government, stating that the amendment was within its power and did not contravene constitutional provisions. The court considered the classification of unmanufactured tobacco under the KTEG Act and concluded that the amendment was clarificatory. The petitioners' arguments were dismissed, with the court referencing the Jindal Stainless Limited case. The court did not comment on pending reassessment orders and statutory appeals.

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Issues Involved:
1. Validity of the Notification dated 1.10.2013 amending the Notification dated 30.3.2002.
2. Power of the State Government to levy entry tax on unmanufactured tobacco in sealed containers.
3. Compliance with Articles 301 and 304(b) of the Constitution of India.
4. Classification of unmanufactured tobacco under the KTEG Act.

Issue-wise Detailed Analysis:

1. Validity of the Notification dated 1.10.2013 amending the Notification dated 30.3.2002:
The petitioners challenged the Notification-III No.FD 208 CSL 2013 dated 1.10.2013, which amended the Notification No.FD 11 CET 2002 dated 30.3.2002, by inserting sub-item (ii) in Sl.No.(5) to levy entry tax at 5% on "unmanufactured tobacco in sealed container" effective from 2.10.2013. The petitioners argued that this amendment was against the First Schedule to the KTEG Act and lacked the President's assent, thus violating Article 304(b) of the Constitution.

2. Power of the State Government to levy entry tax on unmanufactured tobacco in sealed containers:
The petitioners contended that the State Government had no authority to levy entry tax on unmanufactured tobacco in sealed containers, as it was contrary to Articles 301 and 304(b) of the Constitution. They relied on previous judgments, such as Avinyl Polymers Pvt. Ltd. Vs. State of Karnataka and others, and M/s. Bellary Steels and Alloys Ltd. Vs. State of Karnataka, to support their claim that the State Government exceeded its legislative power by specifying tax rates for different groups of a given commodity.

3. Compliance with Articles 301 and 304(b) of the Constitution of India:
The petitioners argued that the notification violated Articles 301 and 304(b) of the Constitution, which ensure freedom of trade and commerce and restrict states from imposing discriminatory taxes on goods from other states. They claimed that the notification did not have the President's assent, making it unconstitutional. However, the court referred to the constitutional bench decision in Jindal Stainless Limited Vs. State of Haryana, which clarified that fiscal statutes should be tested under Article 304(a) for non-discrimination and not under Article 304(b) unless they impose non-fiscal restrictions.

4. Classification of unmanufactured tobacco under the KTEG Act:
The court examined the classification of unmanufactured tobacco under Entry 96 of the First Schedule to the KTEG Act, which includes "tobacco products of all description." The court found that this entry was exhaustive and encompassed both manufactured and unmanufactured tobacco. The amendment to the notification was deemed clarificatory in nature. The court also discussed the definition of 'product' and 'agricultural produce' under the KTEG Act and concluded that unmanufactured tobacco in sealed containers, having undergone a physical process and packaging, ceased to be agricultural produce and fell under Entry 96.

Conclusion:
The court dismissed the writ petitions, upholding the validity of the Notification dated 1.10.2013. It ruled that the amendment to levy entry tax on unmanufactured tobacco in sealed containers was within the State Government's power and did not violate Articles 301 or 304(b) of the Constitution. The court also noted that the petitioners' arguments were not applicable in light of the Supreme Court's ruling in Jindal Stainless Limited. Additionally, the court acknowledged that reassessment orders had been passed by the Assessing Authority, and statutory appeals were pending, but did not express any opinion on their merits.

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