TaxTMI 
TaxTMI 
1986 (2) TMI 331
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....legislative history; the nature and incidents of the impost and the constitutional validity of the charging section were considered by the Supreme Court in State of Karnataka v. Hansa Corporation AIR 1981 SC 463. The challenge to the constitutional validity of the charging section failed. 2.. Thereafter a number of amendments to the principal Act were effected from time to time. Some of these amendments were again challenged in a large batch of writ petitions before this Court. The validity of these amendments were considered by this Court in Jyothi Home Industries v. State of Karnataka (printed at page 254 infra) (1984) 1 Kar LJ 394. In that batch one point was held against the State. Section 7(1)(a) and 7(15) of the amending Act (Act 13 of 1982) which brought to tax additional items of goods were held unenforceable for want of Presidential assent under the proviso to article 304(b). All other contentions were repelled. Both petitioners, whose challenge to the validity of the Act had failed and the State which felt aggrieved by the finding that some provisions of the amending Act 13 of 1982 were unenforceable as imposing additional restrictions on the freedom under article 3....
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....ential character of this impost, generally known as "octroi", is that there should be an entry of goods into a definite "local area" for the purpose of consumption, use or sale therein. The goods must not only enter the "local area" but must be for the purpose of consumption, use or sale therein. Octrois are essentially different from taxes levied on "import and export" of goods from municipal limits, the latter being "terminal taxes". Both the levies concern the movement of goods; but in the case of "octroi " the entry into a municipal limits or local areas becomes the taxable event if-and only if-the goods so enter for purposes of consumption, use or sale therein. This element of the impost is satisfied by grant of exemptions and refunds respecting goods which do not come to repose in the "local area"; but enter it only in the course of their onward movement out of the local area either immediately or after an interval. Exemptions and refunds are, therefore, the distinguishing features of the octroi system. 5.. Section 2 is the interpretation clause. Clause (5) of section 2 defines "local area". Section 3 is the charging section. It authorises the levy of tax on the entry of s....
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....n regard to the contentions that require to be considered the present challenge to the provisions can be classified into three parts: In the first part falls the challenge to certain provisions introduced by the amending Act 12 of 1981. That amendment was brought about even before the Jyothi's case (printed at page 254 infra); (1984) 1 Kar LJ 394. Though a large batch of petitions had been filed even after the amending Act 12 of 1981 came into force challenging several provisions introduced by the said amending Act 12 of 1981, the points now urged, however, had not been taken though they were available to those petitioners. The two points which fall under this class are, first, that the State Legislature has no competence to levy entry tax on products of industries, the control of which by the Union is declared by law to be expedient in public interest pursuant to entry 52 of List I. The second point, which arises as an incident of the amendment to section 3(1) by the said Act 12 of 1981, is that the legislature, in delegating to the State Government, the power to issue a notification under section 3(1) "either prospectively or retrospectively" exceeded the permissible limits....
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.... petitioners, is the effect of "omission". Similar are the rival contentions respecting the "omission" by Karnataka Act 15 of 1984, of items 4 and 10 from the schedule. The State, in addition to contending that "omission" in this context does not carry with it the consequences attributed to it by the petitioners, has also brought out, said to be by way of abundant caution, an amendment to the Karnataka General Clauses Act, 1899, by introducing clause (32)(a) in section 3 with retrospective effect from 1st November, 1956, to say that "repeal" shall include "deletion" and "omission". Amending Act 38 of 1984 introduces two new items in the schedule. They are items 17 and 18, bringing, under item 17, "all industrial packaging materials" and under item 18 "all raw materials, component parts and any other inputs (e.g., processing or any other chemical solvents used in the solvent extraction or process, catalysts of and the like), which go into or may be used in the manufacture of an intermediate or finished product, when brought into local areas by an industrial unit or any other dealer", to tax. Some contentions are raised with respect to the permissibility of such omnibus-not mer....
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....ated 13th November, 1984, reads: "...in supersession of Notification-II, No. FD 76 CET 84 dated 13th November, 1984, the Government of Karnataka hereby specifies that, with effect from the 24th day of October, 1984, the tax shall be levied and collected under the said Act at the rates specified in column (3) of the Table below on the entry of the scheduled goods specified in the corresponding entries in column (2) thereof into every local area." (underlining *supplied). 7.. What, according to the Government, was intended to be achieved by the three notifications was that the Notification No. 1 should be operative from *Here italicised. 1st April, 1982 to 31st March, 1983, and should bring to tax the 16 items of scheduled goods which were set out in the schedule to that notification. The Notification-II was to operate from 1st April, 1983 to 23rd October, 1984. It brought to tax 10 items, from amongst the scheduled goods, and that the second notification would cease to be operative from 23rd October, 1984. Notification-III, also dated 13th November, 1984, would be operative from 24th October, 1984, onwards. Notification dated 31st March, 1983, and Notifications Nos. I and I....
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....ns, the one dated 31st March, 1983, and Notifications Nos. I and II having been "superseded" by the successive notifications, the charge under section 3(1) cannot be given effect to for any period prior to 24th October, 1984. Contention (d): Items 5, 6, 8, 12, 13, 14, 15 and 16, and items 4 and 10 having been omitted from the schedule by Act 38 of 1984 and Ordinance 15 of 1984, respectively, no tax can be levied on these items even in respect of the period prior to the dates of such omission. "Omission" does not amount to "repeal" and the previous operation of the statute respecting items so omitted, is not saved. Contention (e): The retrospective amendment to the Karnataka General Clauses Act, 1899, effective from 1st November, 1956, by which "repeal" is held to include "omission" and "deletion" is itself void for want of Presidential assent. Contention (f): At all events, the notifications dated 31st March, 1983, and the three Notifications I, II and III dated 13th November, 1984, even if otherwise valid, are violative of article 14 inasmuch as they seek to impose uniform rates of taxes in respect of all local areas irrespective of the innate differences in the....
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....d to the Union power in List I. Sri Ullal contended that the development and growth of industries is so vital that any law made by the Parliament under entry 52, List I, for the development of industries should not be whittled down or impaired by any legislation of the State. Referring to "control" in entry 52 of List I, Sri Ullal said that the expression connotes perfect control and the superior position of the Controller. Sri Ullal submitted that, in respect of the cement industry, one of the industries included in its schedule, the I.D.R. Act in its Chapter III-B and the Cement Control Order promulgated thereunder make elaborate provisions for control and development, including the fixation of price. If the raw material, industrial machinery and other industrial-inputs of controlled industries are taxed indiscriminately by the States that would impair the power to fix prices; and the control by the Union is undone. If the value of the raw material becomes a relevant statutory criterion under the law made by the Centre respecting controlled industries, the State's power to tax those material is taken away. Sri Ullal relied on the pronouncement of the Supreme Court in I.T.C. Lt....
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....Supreme Court to support this stand. In regard to the first contention of Sri Srinivasan, Sri Achar urged that the assumption basic to this argument is that the topic of "trade and commerce in products of controlled industry" is within entry 52, List I, and that that becomes taxing entry under entry 52 read with entry 97, List I. This assumption, contends Sri Achar, is entirely erroneous. 13.. Sri Ullal referred to the observations of Sulaiman, J., made with reference to section 100 of the Government of India Act, 1935, in Subrahmanyan Chettiar's case AIR 1941 FC 47 which was referred to in I.T.C.'s case (C.A. Nos. 605-2526, etc of 1983-Supreme Court). "...On a very strict interpretation of section 100, it would necessarily follow that from all matters in List II which are exclusively assigned to Provincial Legislatures, all portions which fall in List I or List III must be excluded ................................. In its fullest scope, section 100 would then mean that if it happens that there is any subject in List II which also falls in List I or List III, it must be taken as cut out from List II............... If a subject falls exclusively in List II and no o....
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....rliament under article 246 by the 1975 Act." The above passages were cited to support by anology the contention that when there is a legislation under entry 52, List I, the taxing power under entry 52, List II, is excepted. Sri Srinivasan referred to us certain observations of the Supreme Court in Ishwari Khetan Sugar Mills (P.) Ltd. v. State of U.P. AIR 1980 SC 1955 in support of his proposition that entry 52, List I, includes "trade and commerce in the products of controlled industries". 14.. "Industries" as a topic of legislation occurs in the three Lists. The "raw materials" of industries are within entry 27 of List II. What falls within the sweep of entry 52 of List I is the "process of manufacture" where the industry is a controlled industry. The same topic otherwise falls within and is encompassed by entry 24 of List II where the industry is not a controlled industry. The topic of trade and commerce in products of controlled industries is assigned to entry 33 of List III; that would, otherwise, fall in entry 26 of List II, if the industry is not a controlled industry. In Tika Ramji v. State of U.P. AIR 1956 SC 676 at page 695 this interpretation of the ....
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.... emphasise, however, is that entries in the legislative lists do not deal with legislative competence. They merely indicate, broad fields of legislation, and are required to be construed very liberally. The legislative power takes within it the power to cover all incidental and ancillary matters. The question whether a particular topic or subject of legislation, in its pith and substance or true nature, falls within an entry in a particular list is essentially a matter of construction. 18.. The position is summed up by the Supreme Court in Kerala State Electricity Board v. Indian Aluminium Co. Ltd. AIR 1976 SC 1031: "5. ......Now what is the meaning of the words 'notwithstanding' in clause (1) and 'subject to' in clause (3)? They mean that where an entry is in general terms in List II and part of that entry is in specific terms in List I, the entry in List I takes effect notwithstanding the entry in List II. This is also on the principle that the 'special' excludes the 'general' and the general entry in List II is subject to the special entry in List I.......................................... Furthermore, the word 'notwithstanding' in clause (1) also means that if it is not ....
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....of Schedule 7, cannot fairly be reconciled, the latter must give way to the former. But it appears to them that it is right first to consider whether a fair reconciliation cannot be effected by giving to the language of the Federal Legislative List a meaning which, if less wide than it might in another context bear, is yet one that can properly be given to it, and equally giving to the language of the Provincial Legislative List a meaning which it can properly bear...................." (emphasis* supplied) What emerges, therefore, is that the supremacy of the Federal power contemplated by article 246(1) is attracted only where there are irreconcilably overlapping fields of legislation between subjects in the Central and State Lists. If the field under entry 52, List I, is occupied, it excludes the State power respecting subjects in List II to the extent it is shown that between entry 52, List I, and entries in the State List, there are irreconcilably conflicting and overlapping areas. In such a case alone the overlapping areas in the State subject are excepted from the State power. 19.. We may now turn to Sri Srinivasan's first proposition. The assumption basic to the validit....
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....d industries. This argument and the one advanced by Sri Ullal have common areas. The fallacy of this argument is that it equates the effect the impugned tax has on trade and commerce with a law which is in pith and substance a law on the subject of trade and commerce. A law which has an effect, even a serious effect, on a subject is not necessarily a legislation on that subject. Effect is not the same thing as subject-matter. In Kannan Devan Hills Produce Company Ltd. v. State of Kerala AIR 1972 SC 2301 the Supreme Court ruling that a State law for acquisition of the property of a controlled industry was not prohibited under entry 52 of List I, observed: "29. It seems to us clear that the State has legislative competence to legislate on entry 18, List II, and entry 42, List III. This power cannot be denied on the ground that it has-some effect on an industry controlled under entry 52, List I. Effect is not the same thing as subject matter..........." In Ganga Sugar Corporation's case [1980] 45 STC 36 (SC); AIR 1980 SC 286 the Supreme Court considering whether a law imposing purchase tax on sugarcane invades entry 52, List I, said: "28. ......If the impugned le....
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....this entry apart. "The power to impose taxes" it is stated* "is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever except such as rest in the discretion of the authority which exercises it" and that "It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession"..." The power to tax" it is said "rests upon necessity, and is inherent in every sovereign". Cooley "On Taxation" states that the power to tax belongs "as a matter of right to every *See Cooley "Constitutional Limitations", page 479. independent government" and "that Constitutional provisions relating to the power of taxation do not operate as grants of the power of taxation to the government but instead merely constitute limitations upon a power which would otherwise be practically without limit". In the legislative Lists in the Seventh Schedule, taxation is treated as a distinct matter for purposes of legislative competence and is not intended to be comprised in the main subject in which it might, on an extended construction be regarded as included (see M.P.V. Sundarar....
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....ether prospectively or retrospectively". It can also specify different local areas and different rates for them, so however, that it does not exceed 2 per cent ad valorem. It can also fix different dates and different rates for different local areas. The contention is that this is not a case of conditional legislation but clearly one of excessive delegation. Very wide and uncanalised power, including matters which belong to essential legislative policy, such as retrospectively, are delegated to the State Government. Alternatively, it is contended that, at all events, the power to specify a date and rate with retrospective effect is a frank and irredeemable case of excessive delegation. In support of this contention learned counsel cited a large number of cases on the constitutional limitation on delegation of legislative powers: Vasanlal Maganbhai Sanjanwala v. State of Bombay (Now Maharashtra) AIR 1961 SC 4, Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC); AIR 1967 SC 1895, Gwalior Rayon Mills Manufacturing (Weaving) Company Limited v. Assistant Commissioner of Sales Tax [1974] 33 STC 219 (SC); AIR 1974 SC 1660, Avinder Singh v. State of Punjab AIR 1979....
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....ection 3(1) prior to its amendment by Act 12 of 1981 is concerned, must fail. For the same reasons on which the question of excessiveness of delegation fails, the challenge to section 3(1) on the ground of arbitrariness must also fail. Indeed, similar contentions were, in a way, raised before this Court in Hansa Corporation's case ILR (1980) 1 Kar 165 and were held against the petitioners therein. We therefore, find no substance in these two contentions. 27.. What, however, survives for consideration is whether after the amendment by Act 12 of 1981 with the introduction of power to issue notification retrospectively the section suffers from such vice of excessive delegation. The basis of the doctrine of essential legislative functions not being amenable to be delegated to another authority is the doctrine of separation of powers itself. The rule against such delegation is a corollary to the doctrine of separation of powers. However, the pristine doctrine of separation of powers is not practicable in view of the increasing complexities of the business of the State. What emerges from a conspectus of the authorities cited is that while a legislature cannot abdicate its essential....
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....hey must directly and comprehensively handle legislative business in all their plenitude, proliferation and particularisation. Delegation of some part of legislative power becomes a compulsive necessity for viability. If the 500-odd parliamentarians are to focus on every minuscule of legislative detail leaving nothing to subordinate agencies the annual output may be both unsatisfactory and negligible. The law-making is not a turnkey project, ready-made in all detail and once this situation is grasped the dynamics of delegation easily follows........" In the Delhi Laws Act case [1951] SCR 747 it was held that the doctrine of Constitutional Trust was applicable to our Constitution since it lay at the foundation of representative democracy and that, accordingly, the Legislature could not be permitted to abdicate its primary duty, namely, to determine "what the law shall be". This means that the legislature cannot self-efface its personality and make over, in terms plenary, its essential legislative functions. The three principles that govern delegation are: first, that doctrine of "Constitutional Trust" renders it imperative that the essential legislative functions shall be dischar....
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....utely necessary for the legislatures to entrust more and more powers to the executive. Text book doctrines evolved in the 19th century have become out of date. Present position as regards delegation of legislative power may not be ideal, but in the absence of any better alternative, there is no escape from it. The legislatures have neither the time, nor the required detailed information nor even the mobility to deal in detail with the innumerable problems arising time and again. In certain matters they can only lay down the policy and guidelines in as clear a manner as possible." In Gwalior Rayon Mills' case [1974] 33 STC 219 (SC); AIR 1974 SC 1660, para 23, the Supreme Court held that the legislature, in conferring power upon a subordinate agency "must lay down policy, principle or standard for the guidance of the authority concerned". It was also held that the legislature cannot be said to retain enough control over the subordinate legislative authority by a mere power of "repeal" of the law. In Pandit Banarsi Das Bhanot v. State of M.P. [1958] 9 STC 388 (SC); AIR 1958 SC 909 it was held: "Now, the authorities are clear that it is not unconstitutional for the legislature....
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....o constitutional restrictions a power to legislate includes a power to legislate prospectively as well as retrospectively. In this regard legislative power to impose tax also includes within itself the power to tax retrospectively. See Union of India v. Madan Gopal Kabra [1954] SCR 541; AIR 1954 SC 158, M.P. Sundararamier & Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); [1958] SCR 1422; AIR 1958 SC 468, J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 (SC); AIR 1961 SC 1534, Chhotabhai Jethabhai Patel and Co. v. Union of India [1962] Supp 2 SCR 1; AIR 1962 SC 1006, Rai Ramkrishna v. State of Bihar [1964] 1 SCR 897; AIR 1963 SC 1667. In the last mentioned case it was specifically decided that where the legislature can make a valid law, it can provide not only for the prospective operation of the material provisions of the said law but it can also provide for the retrospective operation of the said provisions." Of course, if a retrospective tax affects any fundamental rights, such as those under article 19(1)(g) of the Constitution, the tax may be bad as offending Part III of the Constitution. But the law of taxation itself does not fail on the ground al....
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....the power to make or reopen assessments would itself, in practical terms, operate as a limitation on the extent and degree of the permissible retroactivity of the notifications. By a recent amendment the legislature has built-in certain procedures for "laying" the notifications issued under section 3(1) before the legislature. Referring to saving effect of such "watch-dogging" procedures on delegation, the Supreme Court in Lohia Machines case AIR 1985 SC 421 said: "...Parliament has thus not parted with its control over the rule-making authority and it exercises strict vigilance and control over the rule-making power exercised by the Central Board of Revenue. This is a strong circumstance which militates against the argument based on excessive delegation of legislative power. This view receives considerable support from the decision of the Privy Council in Powell v. Apollo Candle Co. Ltd. (1885) 10 AC 282......." Some submissions were made to the effect that the building-in of these "laying" procedures now would not cure section 3(1) of the vice of excessive delegation it suffered from when it was enacted. We have held that even otherwise section 3(1) was not bad for ex....
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....ct cannot be given effect to even for the period prior to the repeal, as the liability to tax incurred prior to 24th October, 1984, is not saved, after the three notifications were superseded. 33.. It is no doubt true that the authorities cited by Sri Srinivasan lend support to the contention that the word "supersession" has been understood to amount to repeal and that when what is repealed is a notification, section 6 of the General Clauses Act does not apply to notifications. The question whether statutory obligations subsist in respect of a period prior to the repeal of the provisions of a statute or any subordinate legislation promulgated thereunder has to be ascertained on legal considerations apposite to the particular context. The matter is essentially one of construction. Such problems do not admit of being answered on the basis of any single principle or legal consideration. There are no inflexible rules or any legal absolutes. Even in the case of a expiry of a temporary statute, the consequences that ensue are not uniform and inflexible. In State of Orissa v. Bhupendra Kumar AIR 1962 SC 945, para 21, Gajendragadkar, J. (as he then was), observed: "In our opinion,....
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....akes place only when Notification No. II becomes operative. So are the periods of operation and the points of time of supersession of Notification No. II superseded by Notification No. III. In State of Bombay v. Pandurang Vinayak AIR 1953 SC 244 referring to scope and effect of legal fictions, it was observed: "When a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion [vide Lord Justice James in Ex parte Walton; In re levy (1881) 17 Ch D 746 at page 756(A)]. If the purpose of the statutory fiction mentioned in section 15 is kept in view, then it follows that the purpose of that fiction would be completely defeated if the notification was construed in the literal manner in which it was construed by the High Court." *Here italicised. The following observations of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1952] AC 109 were referred to with approval: "I....
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....er 29, 1977, the expression 'in supersession of all previous notifications' all that was done was to repeal and replace the previous notifications by new notifications. By repealing and replacing the previous notifications by other notifications, the result was not to wipe out any liability accrued under the previous notifications. If this contention of the respondents were to be accepted the result would be startling. It would mean, for example, that when a notification has been issued under section 5(1) prescribing a rate of tax, and that notification is later superseded by another notification further enhancing the rate of tax, all tax liability under the earlier notification is wiped out and no tax can be collected by the State Government in respect of any transactions effected during the period when the earlier notification was in force." (Underlining* supplied) At para 127, summarising their conclusion, their Lordships say: "The word 'supersession' in the notifications dated December 29, 1977, is used in the same sense as the words 'repeal and replacement' and, therefore, does not have the effect of wiping out the tax liability under the previous notifications. All that wa....
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....o by Sri Srinivasan there are statements which admit of the construction that once a notification is "superseded" it amounts to "repeal" and that section 6 of the General Clauses Act has no application to such cases. If that principle is applied, then after 13th November, 1984, the three notifications become unavailable to the taxing authority to give effect to the charge under section 3(1) even in respect of the period when the notifications must be deemed to have been in force. The three notifications issued on 13th November, 1984, are somewhat inelegantly worded generating so much of debate and controversy on an aspect on which Government could have been more intelligible and made the position much clearer. But it is plain that the liability to tax arising prior to 13th November, 1984, was not altogether intended to be wiped out after 13th November, 1984. That was farthest from the mind of the Government. But the notifications did employ expressions which had a meaning previously attributed to it by judicial interpretation. As rightly submitted by Sri Srinivasan when a law making agency uses expressions whose import has previously received judicial interpretation, it is to be....
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....nt is itself invalid for non-compliance with the requirements of the proviso to article 304(b) of the Constitution. General Clauses Act, it is urged, is to be read as the interpretation clause of every statute and is, therefore, a part of every statute. It would also be part, of the Entry Tax Act as well. Thus understood, the present amendment, would, in effect enlarge the restrictions imposed by the Entry Tax Act on the freedom under article 301. Even if the restrictions are reasonable and in public interest, they, yet, attract the proviso to article 304(b). The present amendment to the General Clauses Act would, therefore, be bad for want of Presidential assent. This is contention (e). 36.. If, on contention (d) itself, the petitioners fail, then, it would, as a corollary, follow, that even without the amendment, the contention of the Government would succeed. The Supreme Court in Rayala Corporation's case AIR 1970 SC 494 said: "...........In the case before us, section 6 of the General Clauses Act cannot obviously apply on the omission of rule 132A of the Defence of India Rules for the two obvious reasons that section 6 only applies to repeals and not to omissions.............
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....uncement of the Supreme Court in Hansa Corporation's case AIR 1981 SC 463. Section 3(1) gives to the State the power to specify "local areas"; to specify the goods from the schedule, and specify rates not exceeding 2 per cent ad valorem. The State Government is also given the power to fix different rates for different local areas. The contention is that the section itself recognises the need to fix different rates for different local areas on a consideration of the differences in the economic criteria relevant to the matter and that levy of uniform rates to all the local areas, irrespective and unmindful of the innate differences in the conditions of the local areas, would itself be violative of article 14 as it would treat unequals as equals. Sri Srinivasan submitted that the presumption of constitutionality of the Act and the initial burden on the petitioners are both removed by the observations of the Supreme Court which clearly indicate that the application of uniform rates to different local areas in the administration and enforcement of the provisions of the Act would be violative of the constitutional pledge of equality. 39.. In the context of the argument in Hansa ....
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....dered at para 77 of the High Court's judgment. Indeed, he referred to the stand taken by the State Government in the previous round of litigation (Hansa Corporation's case) to the effect that different rates for different local areas were the expression of a considered, deliberate and informed fiscal policy arrived at after consideration of the different conditions. In the light of this stand, counsel says, it would be for the Government to justify the present uniform rates. This point, he said, fell for consideration before the Supreme Court as the petitioners sought to support the ultimate decision of the High Court striking down section 3(1) on points which had been negatived by the High Court. The point, however, is that though taxation laws are not outside article 14, however, legislature enjoins a wide latitude in the matter of relation of persons, territorial areas, rates and other incidents of a tax. In Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925: "..............Besides, the legislature which is competent to levy a tax must inevitably be given full freedom to determine which articles should be taxed, in what manner and at what rate: vide Raja Jagannath Baksh....
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....to reflect the views of the legislature..............." In State of Punjab v. Khan Chand AIR 1974 SC 543 it was observed: "Considering the complex nature of problems which have to be faced by a modern State, it is but inevitable that the matter of details should be left to the authorities acting under an enactment. Discretion has therefore, to be given to the authorities concerned for the exercise of the powers vested in them under an enactment." In the concept of a tax, a wide range of economic criteria require to be collated. That, detailed economic surveys and investigations precede the formulation of a policy of a tax and its effectuation through legislative measures, is a recognised phenomenon. In the modern pluralist intensive welfare State, a taxing law is not merely a measure for raising funds to meet the expenses of government; but it has a fiscal mission and is a tool of economic regulation. State's role is not merely that of a tax collector but is also that of an economic controller and regulator. The economic criteria that a taxing measure takes into account are, indeed, too diverse to be susceptible to adjudicative disposition. Government has control of bo....
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....icle 14 to establish that. The observations of the Supreme Court in Hansa Corporation's case AIR 1981 SC 463 which were essentially made in the context of repelling the argument that the power to pick and choose local areas was itself discriminatory, cannot be considered to be a pronouncement on the question that levy of uniform rates is-by that reason alone and without more-unconstitutional as offending article 14. Contention (f) is also held against the petitioners. 41.. Re: Contention (g): This relates to the contention that the two notifications issued in exercise of the power under explanation II of item 18 exempting certain items from the purview of "raw materials" under the said item 18 must be held to be retrospective in their operation. Item 18 of the Schedule reads: "All raw materials, component parts and any other inputs (e.g., processing or any other chemical solvents used in the solvent extraction or process, catalysts of and the like), which go into or may be used in the manufacture of an intermediate or finished product, when brought into local areas by an industrial unit or any other dealer. Explanation I.-(Omitted as unnecessary). Explanation II.-The wo....
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.... been given with retrospective effect from 1st April, 1952, and as such power was not exercisable except with the aid of the rules, the rule itself must be held to be retrospective from 1st April, 1952. Sri Srinivasan also referred to the following passage in "Principles of Statutory Interpretation" by G.P. Singh (3rd Edition, page 683) which reads: ".......A rule, which is not in terms retrospective, may have retrospective operation because of the retrospective operation of the enactment in respect of which it is made." Sri Srinivasan says that the principle in S.A.L. Narayan Row's case AIR 1965 SC 1818 that a rule which is not in terms retrospective may have retrospective operation because of the retroactivity of the enactment in respect of which it is made, is one eminently applicable to the two exemption notifications. The principle in S.A.L. Narayan Row's case AIR 1965 SC 1818 is not that wherever the statute is made retrospective every exertion of power of subordinate legislation made thereunder must necessarily be retrospective. The consideration which imparts retroactivity to a rule or a notification, not otherwise expressly so made, appears to be that where a s....
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....ment) Order, 1964, to indicate that it was intended to have a retrospective effect. It is a well-recognised rule of interpretation that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date it is issued and not from any prior date. The principle is also well-settled that statutes should not be construed so as to create new disabilities or obligations or impose new duties in respect of transactions which were complete at the time the amending Act came into force." Indeed so far as the subject-matter of the second notification is concerned, the benefit of that notification is available to the petitioners by virtue of the amendment brought about by Bill No. 32 of 1983 which received the Presidential assent on 20th January, 1986. The examination of this question is really academic. Sri Srinivasan, however, submitted that amending Act 38 of 1984 was passed prior to 1st April, 1983 and was intended to be effective from 1st April, 1983, and that owing to the circumstance that the Presidential assent was given on 28th September, 1984 no notification in exercise of the power under the II explanatio....
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....sanction was not obtained before introducing the bill which was ultimately enacted into the impugned Act but after the bill was enacted into an Act the same was submitted to the President for his assent and it is common ground that the President has accorded his assent. If prior Presidential sanction is a sine qua non, the requirement of the proviso is not satisfied but in this context it would be advantageous to refer to article 255 which provides that no Act of Parliament or of the Legislature of a State and no provision in any such Act shall be invalid by reason only that some recommendation or previous sanction required by the Constitution was not given if assent to that Act was given by the President. Now in this case it is common ground that the President did accord his sanction to the impugned Act. Therefore, the requirement of the proviso is satisfied." This indeed concludes the matter. 44.. Accordingly, contention (h) is answered against the petitioners. 45.. Re: Contention (i): Sri Gandhi, who argued this point urged that the Presidential assent to Act 38 of 1984 was given only on 28th September, 1984 and the enactment could be said to be complete only wit....
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....h Court consisting of M.N. VENKATACHALIAH and K.A. SWAMI, JJ., in Jyothi Home Industries and Others v. State of Karnataka and Others (Writ Petitions Nos. 18224 and 18225 of 1982 and connected writ petitions decided on 15th, 26th and 27th September, 1983) is printed below: ] JYOTHI HOME INDUSTRIES V. STATE OF KARNATAKA The order of the Court was made by M.N. VENKATACHALIAH, J.-These 2 writ petitions are amongst the large batch of about 3000 writ petitions challenging the provisions of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1979 (hereinafter to be referred to as the "Principal Act") as amended by: (i) The Karnataka Tax on Entry of Goods into a Local Area for Consumption, Use or Sale Therein (Repeal) Act, 1981 (Act 10 of 1981) "Repealing Act 10 of 1981" for short; (ii) The provisions of Karnataka Act 12 of 1981 "Amending Act 12 of 1981" for short and; (iii) The provisions of section 7 of the Karnataka Taxation and certain other laws (Amendment) Act, 1982, (Act 13 of 1982). "Amending Act 13 of 1982" for short. The Principal Act received the assent of the President on 17th May, 1979. It was published in the gaz....
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....at basis. Section 5, deals with the filing of returns and the final assessment. The point to notice is that both the concept of "local area" and "scheduled goods" are determinate and specifically defined by the statute itself. In the "Principal Act " the scheduled goods were limited to three items, viz., (i) "All varieties of textiles, etc., (ii) Tobacco and all the products and (iii) Sugar, other than sugar-candy, confectionary and the like". State Government, in exercise of powers under section 3 of the Principal Act, issued a notification bearing No. FD 66 ESL 79 dated 31st May, 1979, specifying the "local areas", the "goods" and the "rates of tax". A flood of writ petitions challenging the constitutional validity of that enactment followed. Writ Petition No. 7039 of 1979 preferred by M/s. Hansa Corporation ILR (1980) 1 Kar 165 was one amongst that batch of 1590 cases. The validity of the entry tax was challenged on as many as 24 grounds. A Division Bench of this Court, by its order dated 24th August, 1979, negatived all but two grounds. The two contentions accepted by the court were that section 3 of the Act does not empower the State Government to apply the provisions of....
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....valid and shall continue to be in force" The next amendment was by the "Amending Act 12 of 1981", which replaced an earlier ordinance in that behalf. It came into force with effect from 18th February, 1981, and amended certain provisions of the "Principal Act". By one of the amendments, the "Principal Act" was made operative only from 1st October, 1980, as against the 1st June, 1979, earlier notified. Another amendment was to section 3 of the Principal Act by which the State Government was authorised and empowered to issue notifications under section 3 "whether prospectively or retrospectively". Item No. 1 of the Schedule to the Principal Act was also substituted by a new item. The last of the legislative activities was the "Amending Act 13 of 1982" which came into force on 1st April, 1982. By this Act, which was a composite legislation, amendments to several taxation laws including the "Principal Act" were introduced. Section 7 which has 15 sub-sections pertains to the Principal Act. Inter alia, it seeks to expand the definition of "local area"; expand the definition of "dealer" and also add 13 new items to the schedule to the Act, namely: "4. Iron and steel, that is to s....
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.... and parts and accessories thereof. 13. Electrical goods, that is to say, electrically operated motors, fans, geysers, hot plates, ovens, heaters, mixers and grinders, including parts and accessories thereof and such other items as may be notified by the State Government from time to time. 14.. All kinds of automobiles excluding passenger buses, tractors, tractortrailers and power tillers. 15.. All kinds of ores. 16.. Jute." One of the contentions now urged is that the amending Act 13 of 1982, imposed new and additional restrictions-both as to areas and as to new items of goods-violative of article 301 and that even assuming that those additional restrictions are reasonable and in public interest, the amending Act had to comply with the requirements of article 304(b) proviso. 6.. "Repealing Act 10 of 1981 " brought forth a spate of writ petitions with the filing of the batch of writ petitions, viz., W.Ps. 21048, 21756, 21973, 22587 and 23373 of 1980 and W.Ps. 1 and 7040 of 1981 by traders, amongst whom were petitioners in the first batch of 1590 writ petitions in whose cases the writs of mandamus issued by this Court had not been appealed against. One of....
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....ion dated 2nd March, 1981, superseded the earlier two. The notification dated 2nd April, 1982, superseded the one dated 2nd March, 1981. 9.. Sriyuths K. Srinivasan, Indrakumar, B.P. Gandhi and Kashinathrao Patil, learned counsel, addressed arguments on behalf of the petitioners. The rest of the counsel appearing for the petitioners adopted the arguments of these learned counsel. Shri M.R. Achar, learned Government Advocate, addressed arguments on behalf of the respondents. 10.. A wide range of contentions were raised and urged at the hearing. They admit of being formulated as follows: Point (i): That section 3 of the "Repealing Act, 1981" having been held in Narasimha Kamath's case (1983) 1 Kar LJ 135 to have re-enacted the "Principal Act" such re-enacted law in the absence of the prior sanction or subsequent assent of the President is void. Point (ii): That section 3 of the "Repealing Act 10 of 1981" is without legislative competence as its avowed object was to nullify the writs of mandamus issued by this High Court in exercise of its constitutional power under article 226 directing the State and its functionaries to forbear from enforcing the provisions of the Act. &n....
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...., being applicable only to dealers in scheduled goods and not to the dealers in non-scheduled goods and not also to non-dealers, although all the three cause entry of goods into a local area for consumption, use or sale therein, the differentia of classification, though intelligible, has no nexus to the object of the legislation and that, therefore, section 3 brings about an unconstitutional discrimination and is violative of article 14 of the Constitution. Point (xi): That in view of article 277 of the Constitution, the State Legislature is not competent to enact the "Principal Act". Point (xii): That during the debate in the legislature on the "Principal Act", it was allegedly assured by the Finance Minister that entry tax would be levied only on such goods not attracting sales tax, that inclusion in the schedule, by Act 13 of 1982, of items which are liable to sales tax also is not permissible. Point (xiii): That notifications issued under section 3 are bad for not complying with the procedure of prior publication; and that the proceeds of the tax being intended for the benefit of and assignable to local authorities, ought not to be levied directly by the State but should onl....
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....hat the E.T. Act 21 of 1980 shall be deemed never to have been enacted, proceeds to declare that the "Principal Act" shall be deemed always to have been valid and in force and shall continue in force. Adverting to the effect of this provision the Division Bench in Narasimha Kamath's case (1983) 1 Kar LJ 135 (Kar) said: "...as stated earlier, section 3 of the Repealing Act, 1981, should be regarded as having re-enacted the Entry Tax Act, 1979, after the basis for its invalidity, as held by this Court in Hansa Corporation case ILR (1980) 1 Kar 165 was removed by the Supreme Court which reversed that decision of this Court. By such re-enactment, the writ of mandamus issued by this Court in Hansa Corporation case ILR (1980) 1 Kar 165 became ineffective." 14.. This observation of the Division Bench cannot, in our opinion, be read as a pronouncement that the legislative activity in enacting section 3 of the "Repealing Act, 1981" amounted to a formal re-enactment of the "Principal Act" with all that goes with a formal re-enactment. The Division Bench was merely referring to what, in the opinion, was the legal effect of section 3 of the Repealing Act, 1981, and its observat....
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....ecame final and remained undisturbed. Section 3 of the "Repealing Act 10 of 1981" in effect seeks to set at naught these writs of mandamus issued in exercise of the constitutional power under article 226. The decision of the High Court in exercise of the constitutional power under article 226 cannot be equated to an ordinary adjudication or proceeding. The legislature has no competence by a legislative Act to set at naught writs issued under article 226. For the above contention strong reliance is placed on the decisions of the Supreme Court in State of Punjab v. Joginder Singh AIR 1963 SC 913, M.M. Pathak v. Union of India AIR 1978 SC 803, Maru Ram v. Union of India AIR 1980 SC 2147, A.V. Nachane v. Union of India AIR 1982 SC 1126 and of the Allahabad High Court in Indodan Milk Products v. State of U.P. [1981] 48 STC 197. 18.. Sri Achar, learned Government Advocate, however, says that this proposition is concluded by the pronouncement of this Court in Narasimha Kamath's case (1983) 1 Kar LJ 135 itself and again M/s. Shantilal & Bros. v. State of Karnataka [1985] 59 STC 178 (W.Ps. 19200 of 1982 and connected W.Ps. decided on 29th July, 1983). In the former case, though sec....
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....by the Calcutta High Court. Sri Srinivasan sought to derive support from the following observations in Pathak's case AIR 1978 SC 803: "I may, however, observe that even though the real object of the Act may be to set aside the result of the mandamus issued by the Calcutta High Court, yet, the section does not mention this object at all. Probably this was so because the jurisdiction of a High Court and the effectiveness of its orders derived their force from article 226 of the Constitution itself. These could not be touched by an ordinary act of Parliament. Even if section 3 of the Act seeks to take away the basis of the judgment of the Calcutta High Court, without mentioning it, by enacting what may appear to be a law, yet, I think that, where the rights of the citizen against the State are concerned, we should adopt an interpretation which upholds those rights............" (vide para 9) Sri Srinivasan strongly urged that the ground on which Pathak's case AIR 1978 SC 803 was sought to be distinguished in Shantilal's case [1985] 59 STC 178 (Kar) requires reconsideration. 21.. In Pathak's case AIR 1978 SC 803 certain Class III and Class IV employees in the Life Insurance Cor....
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....03 all the learned Judges subscribed to the view that the Modification Act was void as offending article 31(2). Four of the learned Judges were also of the view that the Modification Act did not have the effect of superseding the mandamus issued by the Calcutta High Court. 24.. As an instance as to how the principle and effect of Pathak's case AIR 1978 SC 803 and Nachane's case AIR 1982 SC 1126 would require to be understood, Sri Srinivasan referred to a decision of the Allahabad High Court in Indodan Milk Products' case [1981] 48 STC 197. In that case, section 4(1) of the U.P. Sales Tax Act, 1948, had exempted milk and such other goods which the State Government may exempt. Later the State Government issued a notification exempting certain goods including milk products, but excluding those sold in sealed tins. A question having arisen in the case of the same assessee for the year 1965-66, "whether, or not condensed milk is milk within the meaning of section 4(1) and therefore exempt", a Full Bench of the Allahabad High Court held that condensed milk was "milk" within the meaning of the exempting provision. For a subsequent assessment year, i.e., 1967-68, the assessee ....
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....ituation arose in Madan Mohan Pathak v. Union of India AIR 1978 SC 803.............." The pronouncement, it is true, does help Sri Srinivasan's contention. 25.. On a careful consideration of the matter, we are of the opinion that the conclusion reached by the two Division Benches on this point is correct. The thrust of Sri Srinivasan's argument is that when there is a judicial pronouncement in exercise of the extraordinary constitutional jurisdiction under article 226 by the High Court and a writ is issued, its efficacy and effect cannot be nullified by any legislative declaration. The effect of the writ, it is urged, can be altered or modified only in judicial proceedings of appeal or review. This proposition of Sri Srinivasan incurs the criticism of being stated too broadly and not apposite in all contexts. It is true that where a law is declared unconstitutional and struck down by the Courts, the effect of such judicial pronouncements cannot be rendered nugatory by a mere subsequent legislative declaration that the law shall, notwithstanding the judicial verdict invalidating it, be deemed to be valid. Such legislative overruling of and interference with the finality ....
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....nable, for it erroneously assumes that the judgment delivered by the High Court under article 226 has the same status as the provisions in the Constitution itself. In substance, the contention is that just as a provision in the Constitution like the one in article 226 cannot be amended by the Governor by issuing an ordinance, so a judgment under article 226 cannot be touched by the Governor in his ordinance making power. It is true that the judgment delivered by the High Court under article 226 must be respected but that is not to say that the Legislature is incompetent to deal with problems raised by the said judgment if the said problems and their proposed solutions are otherwise within their legislative competence. It would, we think, be erroneous to equate the judgment of the High Court under article 226 with article 226 itself and confer upon it all the attributes of the said constitutional provision." 27.. Consistent with this permissibility of validating retrospective legislation, the fundamental distinction, relevant to the present situation, that requires to be kept clearly distinguishable is this: If the judicial decision is merely a declaratory judgment and the issue ....
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....sregarded or ignored and it must be obeyed by the Life Insurance Corporation......" * * * "........Therefore, according to the interpretation I prefer to adopt the rights which had passed into those embodied in a judgment and became the basis of a mandamus from the High Court could not be taken away in this indirect fashion. " (Underlining* supplied) (vide para 9) The ground of distinguishment of the relevance of the decision on validation of laws was this: ".......It is difficult to see how this decision given in the context of a validating statute can be of any help to the Life Insurance Corporation. Here, the judgment given by the Calcutta High Court, which is relied upon by the petitioners, is not a mere declaratory judgment holding an impost or tax to be invalid, so that a validation statute can remove the defect pointed out by the judgment amending the law with retrospective effect and validate such impost or tax. But it is a judgment giving effect to the right of the petitioners to annual cash bonus under the Settlement by issuing a writ of mandamus directing the Life Insurance Corporation to pay the amount of such bonus. If by reason of retrospective alteration of ....
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....decision on the validity or otherwise of the notification dated 31st May, 1979, would be relevant in the context of the provisions of section 5(4) of the "Amending Act 12 of 1981" which, inter alia, provide for recovery of taxes actually collected or "deemed to have been collected" by any dealer for the period between 1st June, 1979, and 1st October, 1980, and for the period between 1st October, 1980, and 18th February, 1981, in excess of 1 per cent. But, none of the petitioners have challenged here any such proceedings for recovery. We agree with the learned Government-Advocate that in the facts of these cases, this question is purely academic. We, therefore, decline to go into and decide it. 32.. Point No. (iii) is disposed of accordingly. 33.. Re: Point (iv): This relates to the validity of the notification dated 2nd March, 1981. Petitioners' contention is this: The amendment of section 3 of the Principal Act authorised the issue of retrospective notification was introduced on 18th February, 1981; that any exercise of that power cannot relate to a period anterior to 18th February, 1981, and that since the retrospectivity of the notification dated 2nd March, 1981, pro....
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....------------------------------------------------------------------------------------ Sl. No. Description of the scheduled goods Rate of tax --------------------------------------------------------------------------------------- * * *" (underlining* supplied). The expression "local area" is defined in section 2(5) of the Act. The argument is that article "a" in the notification does not connote "every" local area and when article "a" qualifies "local area" is, the specification is vague and it would not be possible to predicate with any certainty to *Here italicised. which "local area" the notification was intended to or does apply. It is contended, therefore, that the expression "into a local area" in the notification cannot mean "every local area". Sri Srinivasan sought to sustain this argument with reference to two circumstances. 37.. First, he referred to a fresh notification dated 31st March, 1983, issued under section 3 in which the expression "into every local area" is used which would, according to Sri Srinivasan, show that a different intention is implicit in the designedly different language occurring in the earlier notification. Secondly, Sri Srinivas....
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....he way Sri Srinivasan wants it to be understood, it would then mean that the State Government would have no power to apply the provisions of the Act simultaneously to every local area even if it desired to do so. 41.. In our opinion, a proper construction would show that the article "a" prefixing the "local area" used in the notification, is not used as a definitenumeral. The word "a" has varying meanings and uses. "A" may mean, "one" or "any" depending on the context. It may mean one where only one is intended. It may mean "any" also, where the context is not repugnant to that import. It is often used in the sense of "any" and then applied to more than one individual object. The word "any", constructively, would mean also everyone of the sort named. It would, therefore, appear that though the wording of the notification is somewhat inelegant and unhappy, the intendment made manifest in the notification is that the provisions of the Act are to be applied to every local area. If any absurdity or inconsistency resulting from reading of the notification in a particular way could reasonably be avoided on the basis of an alternative construction which is not unreasonable on the pl....
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....to which date the retrospectivity of the notification extends, the Principal Act was in force and there were also earlier notifications applying its provisions from 1st June, 1979, itself. Indeed, the law gave a concession to the dealers, in making the law effective from 1st October, 1980, as against 1st June, 1979, earlier notified. In the case of a law validating a tax, the scope of examination of its retrospectivity in the context of article 19(1)(g) is quite limited. In this case, the period of retrospectivity is only a few months during which period also the taxing power and a notification exercising that power were both in operation. In the facts of this case, it is not possible to hold that the issue of the notification of 2nd March, 1981, with some retrospectivity of its operation, offends petitioners' fundamental rights under article 19(1)(g) of the Constitution. By the notification, the State Government was seeking to effectuate the object of the taxing statute and was making, what may be called "small repairs" in the law. The following passage in 73 Harvard Law Review 692, "Retractive Legislation": Charles B. Hochman, referred to with approval in Assistant Commissione....
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....be read down to mean that what is collected under section 7 is merely an "on account" payment to be appropriated towards tax to be levied after the actual consumption, use or sale. 48. Sri Gandhi says that his clients, who are wholesale dealers in textiles, purchase goods from up-country manufacturers and in case their entry into the local area with intent to re-export them out of the local area there is, thus, no consumption, use or sale of the goods within the local area. Only a small part of the goods so entering the local area are consumed, used or sold within the local area. In para 2 of the petition (Writ Petition No. 23710 of 1982), it is averred: ".........Major portion of goods purchased by petitioners and brought to their place of business at Bangalore is re-exported to persons outside the Corporation limit of Bangalore and outside the State of Karnataka. Petitioners' liability under section 3 of the Act, is therefore, hardly 10 per cent of the total goods brought into the area. However, section 7 of this Act seeks to oblige dealers to pay advance tax on the entire goods brought to the local area, irrespective of the fact whether such goods are meant for use ....
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....ule of the tax under the present Act, renders goods entering a local area exigible to tax only upon actual consumption, use or sale cannot be countenanced. We do not understand the observations in Writ Petitions Nos. 23701 to 23721 of 1982 to be susceptible of the construction that the taxable event was not entry of goods into a local area for consumption, use or sale, but the tax was exigible only on proof of actual consumption, use or sale. The taxable event is entry of goods for purposes of consumption, use or sale. The actual consumption, use or sale for the purposes of which the goods enter a local area would indeed be subsequent to and not contemporaneous with-the taxable event. For the coming into being of the taxable event it would be sufficient if the goods entered into a local area for the purpose of consumption, use or sale therein. The idea of consumption connotes the goods being used up or wasted or destroyed or susceptible to use without being used up in the course of their use. The expression "use" is of wider import than "consumption". The expression "sale" in section 3 connotes merely a means for putting the goods in the way of consumption or use. The expression....
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.... 53.. This takes us to cases where the goods though brought into the local area initially for purposes of consumption, use or sale, but later re-exported outside the limits of that local area. The case of Sri Gandhi's clients falls within this category. This class of goods must be distinguished from goods which enter a local area with the avowed and specific purpose-not of consumption, use or sale therein-of re-export outside the local area. In such latter cases, if the goods enter a local area, remain there for an indefinite or unexplained period, they might attract a terminal tax having regard to the character and incidents of that impost. However so far as entry tax is concerned such goods brought into a local area for re-export out of the local area would obviously not goods which enter the local area for consumption, use or sale therein. Referring to such cases of re-export Supreme Court in Burmah-Shell case AIR 1963 SC 906 observed: ".......The two expressions use and consumption together therefore, connote the bringing in of goods and animals not with a view to taking them out again but with a view to their retention either for use without using them up or for consumption ....
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....very "dealer" and every person liable to get himself registered as dealer shall send to the assessing authority monthly statements setting out the prescribed particulars and pay the amounts on the basis of the scheduled goods brought into the local area during the preceding month. Rule 7 says that the statement required to be filed under section 7 shall be in form No. III and shall be sent within 25 days after the close of the month to which such statement relates and shall be accompanied by the evidence of payment of "the full amount payable by him on the actual taxable turnover during the month to which it relates." 55.. Sri Achar, learned Government Advocate, stated that if, in the course of a particular month goods which upon their entry into the local area attract, prima facie, the taxable event, are actually re-exported out of the local area during that month itself, the "dealer" would be entitled to reduce his taxable turnover, to that extent, in the statement to be filed under section 7 and pay tax only on the residue of the turnover. Sri Achar says that rule 7 and the amended Form No. III, expressly enable this. This, Sri Achar says, is a case of exemption. Sri Achar....
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.... same meaning assigned to that expression in section 2(k) of the Karnataka Sales Tax Act, 1957. The definition of "dealer" under the said section 2(k) is wide and comprehensive. Section 28 of the Principal Act exempts persons who are not dealers in scheduled goods. Sri Indra Kumar's contention is that a person who may not be a dealer in scheduled goods and who, nevertheless, causes entry of scheduled goods into a local area for consumption, use or sale and that placing such dealers outside the purview of the tax brings about a hostile discrimination. These are matters which belong to the area of the policy of taxation. Legislature does not have to tax everything to tax something. Though tax laws are not outside the purview of article 14, there is however a wide range of selections and freedom in appraisal available to the legislature in the objects and incidents of taxation. In formulating fiscal-policy the legislature has a wide latitude in the matter of choice of persons and things. The complexities involved in evolving a tax policy and the inter-play of diverse economic criteria that inform a fiscal-policy are such that in the matter of judicial review a meticulous scrutin....
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....ith great caution, examine it in every possible aspect, and ponder upon it as long as deliberation and patient attention can throw any new light upon the subject and never declare a statute void, unless the nullity and invalidity of the act are placed, in their judgment, beyond reasonable doubt. A reasonable doubt must be solved in favour of the legislative action,..........." Learned author refers also to the passage in the judgment of Chief Justice Marshall in Fletcher v. Peck (6 Cranch, 128, Per Marshall, Ch. J) which is also worth recalling: "The question whether a law be void for its repugnancy to the constitution is at all times a question of much delicacy, which ought seldom, if ever, to be decided in the affirmative in a doubtful case. The court when impelled by duty to render such a judgment would be unworthy of its station could it be unmindful of the solemn obligation which that station imposes; but it is not on slight implication and vague conjecture that the legislature is to be pronounced to have transcended its power, and its acts to be considered as void. The opposition between the constitution and the law should be such that the judge feels a clear and strong....
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....nath Rao Patil is that the successive notifications issued under section 3 are bad for non-compliance with the procedure of prior publication. Section 3 does not envisage or require prior publication so as to attract the provisions of section 23 of the General Clauses Act. There is no substance in this contention. The second aspect is that under section 29 of the "Principal Act", avowedly, entry tax is intended for the benefit of and assignable to local authorities. Sri Kashinath Rao Patil says that in view of the circumstance that the levy is intended for the benefit of local authorities and consistent with the need to nurture, what Sri Kashinath Rao Patil calls, "Democracy at the gross roots", legislature ought not to impose this levy directly but should authorise and empower the local authorities, by appropriate provision in the statutes governing their constitution and functioning, to levy and collect this tax. The argument is in the areas of policies of public finance. The argument, it is needless to say, is wholly irrelevant in judicial review of legislation. 66.. We, accordingly, hold and answer point (xiii) also against the petitioners. 67.. Re: Point (xiv): The co....
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....reasonable and in public interest, require compliance with article 304(b). It is not disputed that the amending Act 13 of 1982 was not introduced or moved in the legislature of the State with the previous sanction of the President and the "Act" was not also subsequently reserved for the assent of the President. 70.. The statute in question is a taxing statute. Taxation laws are not outside Part XIII of the Constitution. The words of article 301, are so wide and unambiguous that a taxing law which impedes the free flow of trade and commerce clearly falls within it. The tax in question was not sought to be supported as a compensatory tax. A compensatory tax is outside the purview of article 301 as the tax is intended to create facilities for trade and promote the free flow of trade and not to impede it. All the taxes have in some degree or other a compensatory element and if it had been contended that the tax was compensatory in character the argument might, perhaps, have had some interesting possibilities, though it is hardly permissible to speculate as to what the result might have been. That this tax, having regard to its nature and incidence and its effect on the movemen....
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....o not think that this distinction, if any such distinction at all exists, is material in the present cases, because an individual trader may complain of a violation of his freedom guaranteed under article 19(1)(g) and he may also complain if the freedom assured by article 301 has been violated. In a particular set of circumstances the two freedoms need not be the same or need not coalesce. In some of the Australian decisions a distinction was sought to be drawn between the free flow of the same volume of inter-State trade and the individual's right to carry on his trade in more than one State and it was argued that section 92 of the Australian Constitution related to the free flow of the volume of trade as distinguished from an individual's right to carry on his trade. Such a distinction was negatived and the Privy Council pointed out that the redoubtable Mr. James who fought many a battle for the freedom of his trade and occupation was after all an individual..............." (vide para-15). Again in Syed Ahmed Aga v. State of Mysore AIR 1975 SC 1443 it is held: "........No doubt the restrictions contemplated by article 304(b) may be of a character different from those on an ind....
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.... goods which were classified as items I to VIII. After enumeration of classes I to VII, the last item i.e., class VIII, provided "other articles which are not specified above and which may be approved by the Corporation by an order in this behalf". Cotton and wool were brought to duty from January, 1955. It was urged that the impost must be held to be a new and post-constitutional one and was not saved by article 305. For the Corporation it was contended that there was no new imposition as there was sufficient specification of those goods in the Act itself. Supreme Court upheld the levy observing: "...........It was firstly submitted that there is sufficient specification in the Act itself of the articles on which the octroi duty could be levied. Section 97 of the Act gives the power to levy octroi duty on animals or goods without any exception which are brought within the octroi limits. Sections 98 and 130 lay down the procedure for the levying of taxes and impose a limitation on the extent of the tax to be levied and classes I to VII make certain articles taxable and class VIII makes other articles and goods taxable if they are approved by the Corporation..........................
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....public interest is concerned, it is appropriate to recall what the Supreme Court said in Hansa Corporation's case AIR 1981 SC 463. It was observed: ".........However, no one was in doubt that octroi was a major source of revenue to municipalities and its abolition would cause such a dent on municipal finances that compensation for the loss would be inevitable. Accordingly, the State Government undertook a policy of compensating the municipalities year by year. For generating funds for this compensation, rates of sales tax were raised and in some cases a surcharge was levied. The amount so collected was not sufficient to bridge the gap in municipal budget. To further augment the finances for compensating the municipalities, additional fund was sought to be generated by levy of tax under the impugned legislation. No doubt, the tax levied was one on entry of Scheduled goods in local areas meaning thereby it had all the broad features of octroi, yet the manner of levy, the method of collection and the persons liable to pay the same were so devised by the impugned Act as to remove the obnoxious features of octroi..............." (vide para-8). "........Even apart from this, a levy....
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.... 1982 alone stand affected for want of prior sanction or subsequent assent of the President. The view we take is supportable on the language of article 255, which says: "No Act of Parliament or of the Legislature of a State, and no provision in any such Act, shall be invalid by reason only that some recommendation or previous sanction required by this Constitution was not given if assent to that Act was given...............". (Underlining* ours) The words "no provision in any such Act", would suggest that the invalidity, depending upon the facts and circumstances of a particular case, could be confined only to a provision and not to the whole Act. 78.. The next question is whether this non-compliance with article 304(b) makes the legislative provision void or merely unenforceable. The observations of the Supreme Court in Jawaharmal's case AIR 1966 SC 764 are instructive: "........The position with regard to the laws to which article 255 applies, therefore, is that if the assent in question is given even after the Act is passed, it serves to cure the infirmity arising from the initial non-compliance with its provisions. In other words, if an Act is passed without obtaini....