Scheduled Area terminal tax levy upheld as Fifth Schedule notification was absent and municipal laws continued to apply.

Levy of terminal tax in a Scheduled Area was upheld because the Fifth Schedule permits a Governor to exclude or modify the application of State or Parliamentary laws, and no such notification was shown. Article 243-ZC excludes Part IXA from Scheduled Areas, but that exclusion does not remove the State Legislature's competence to enact municipal law or authorise municipal taxation. The validity of the levy therefore depended on whether a valid Fifth Schedule notification existed, not on Part IXA. As no notification excluding the municipal enactments was produced, those laws continued to apply and the challenge to the tax failed.

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Issues: Whether the levy of terminal tax within a Scheduled Area was invalid for want of a Governor's notification under the Fifth Schedule and in view of the inapplicability of Part IXA of the Constitution to Scheduled Areas.

Analysis: Article 244 and the Fifth Schedule govern the administration of Scheduled Areas. Paragraph 5 empowers the Governor to direct that a State law or Parliamentary law shall not apply to a Scheduled Area, or shall apply subject to exceptions and modifications. In the absence of any notification excluding or modifying the municipal enactments, those laws continued to apply. Article 243-ZC excludes Part IXA from Scheduled Areas, but that exclusion does not denude the State Legislature of power to enact municipal law. The power to authorise municipal taxation under Article 243-X is therefore not the source of the State's legislative competence in such areas, and the validity of the levy depended on the absence or presence of a valid Fifth Schedule notification. No such notification was shown.

Conclusion: The challenge to the terminal tax levy failed and the levy was upheld.

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