TaxTMI 
TaxTMI 
2009 (7) TMI 1184
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....serted in the Act for the first time with effect from April 1, 1995 by the Karnataka Tax on Entry of Goods (Amendment) Act, 1994 (Karnataka Act No. 45 of 1994). Number of writ petitions were filed before the High Court challenging the constitutional validity of section 4B of the said Act on the ground that it is ultra vires articles 301 and 304(a) of the Constitution of India, as the tax was sought to be levied on the entry of motor vehicles brought from outside the State whereas locally manufactured motor vehicles were outside the charging section. In the case of Syndicate Bank v. State of Karnataka reported in [2000] 119 STC 155 (Karn), this court declared section 4B as violative of articles 301 and 304(a) of the Constitution of India. The appeal filed by the State in Writ Appeal Nos. 5593-5621 and 6429 of 1999 against the said decision of the learned single judge was dismissed by a Division Bench of this court vide order dated November 24, 1999. When the matter stood thus, the said section 4B was substituted by new sections 4B and 4BB with effect from April 1, 1995 by the Karnataka Tax on Entry of Goods (Amendment) Act, 2000 (Karnataka Act No. 3 of 2003). The petitioners subm....
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....ability of sales tax or the amount of sales tax already paid could be given adjustment under the provisions of the Entry Tax Act. The writ appeal preferred against this judgment was dismissed by this court on November 24, 1999. The State had filed a special leave petition before the Supreme Court in C.A. Nos. 8129-48 of 2000 and the same has been dismissed. In the meanwhile, considering the above suggestion of this court and similar scheme of Maharashtra State for levy of entry tax on motor vehicles from outside the State with the facility of reduction of entry tax liability to the extent of sales tax paid in other State on purchase of such motor vehicles (apart from reduction of entry tax payable to extent of tax paid under the Karnataka Sales Tax Act, 1957 and also reduction of sales tax payable under the Karnataka Sales Tax Act, 1957 to the extent of entry tax paid) which has been upheld by the honourable Supreme Court in the case of Shaktikumar M. Sancheti v. State of Maharashtra [1995] 96 STC 659, the Act was sought to be amended by the Karnataka Tax on Entry of Goods (Amendment) Bill, 2000. The Bill provided for substitution of section 4B with sections 4B and 4BB, retrospe....
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....the Constitution cannot be justified on the ground that the combined effect of two types of taxes imposed under different laws and having different taxing events which ultimately imposes the same amount of tax on both the importer and the local dealer. Sri Shivayogiswamy, the learned Government Advocate, stoutly defending the amendment contended that the said amendment is brought on the suggestion of this court in Syndicate Bank' case [2000] 119 STC 155 (Karn) to the effect that there could be a provision by which no discrimination between imported goods and locally manufactured goods is made and the amount of entry tax is given adjustment in the total liability of sales tax or the amount of sales tax already paid could be given adjustment under the provisions of the Entry Tax Act. The impugned provisions are in conformity with the said suggestion and therefore, it cannot be found fault with. Secondly, it was contended that the honourable Supreme Court in the case of Shakthikumar M. Sancheti v. State of Maharashtra [1995] 96 STC 659; [1995] 1 SCC 351 has upheld the constitutional validity of similar provision under the Maharashtra Tax on Entry of Motor Vehicles into Local Ar....
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.... filed by the State of Karnataka have become infructuous. It is because the aforesaid notifications of March 30, 1994 and March 31, 1997 were superseded by notification dated January 7, 1998 and notification dated September 23, 1998 which are retrospective in character. The later notifications are subject-matter of challenge before the Karnataka High Court. As far as the State of Karnataka is concerned, it is not seeking to realise any tax under the earlier notifications dated March 30, 1994 and March 31, 1997. Therefore, the appeals filed by the State of Karnataka have become infructuous and nothing more survives. The respondents also preferred an appeal challenging the portion of the order which held the entry tax was compensatory in nature. The said finding of the Division Bench was set aside without going into the merits and the High Court was given the opportunity to go into the said question afresh while deciding the writ petition which have been filed challenging the subsequent notifications. It was also made clear that the High Court while deciding the fresh petitions will not be bound by the earlier decision. Therefore, it is clear the legality of the judgment of the Di....
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....ould be given adjustment under the provisions of the Entry Tax Act." The aforesaid judgment of the single judge was challenged in appeal which came to be dismissed. Even the special leave petition filed against the said order came to be dismissed. It is thereafter acting on the aforesaid observations set out above the impugned provisions are enacted. It is in this background, we have to appreciate the impugned provisions. The impugned provisions read as under: "4B. Levy of tax.-(1) Notwithstanding anything contained in section 3, there shall be levied and collected a tax on the purchase value of a motor vehicle an entry of which is effected into a local area for use or sale therein and which is liable for registration or assignment of a new registration mark in the State under the Motor Vehicles Act, 1988, at such rate as may be fixed retrospectively or prospectively, by the State Government by notification but not exceeding the rates specified in respect of motor vehicles under the Karnataka Sales Tax Act, 1957 (or the Karnataka Value Added Tax Act, 2003): Provided that, no tax shall be levied and collected in respect of a motor vehicle which is registered in any Union te....
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....le combinations 12% 3. Jeeps, trekkers and vans (all petrol driven) 12% 4. Light diesel vehicles 12% 5. Motor-lorries including motor omnibuses 12% 6. Three-wheeler motor vehicles (autorickshaws) 7. Chassis of motor vehicles 8% 8. Tractors and power tillers (other than those meant for use as agricultural machinery) and trailers of all kinds of tractors and power tillers 4% 9. Earth movers, such as dumpers, dippers, bulldozers and the like and adopted for use on road 8% 10. Truck-bus chassis with side bodies 12% 11. Any other motor vehicle not covered by items above 12% By order and in the name of the Government of Karnataka Sd/ (S. DIVAKAR) Under Secretary to Government Finance Department (CT)" The apex court in Shaktikumar M. Sancheti v. State of Maharashtra [1995] 96 STC 659, was called upon to decide the validity of a similar provision in the Maharashtra Tax on Entry of Motor Vehicles into Local Areas Act, 1987. The challenge to the said provision was on the following grounds: (a) That the incidence of tax being on the purchase value of the motor vehicle it ....
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....have been, or be treated as decided by this court. . ." Therefore, when the question whether the levy of tax under the Maharashtra Act is violative of articles 301 and 304(a) was not urged before the Supreme Court and it was never required to be decided by the Supreme court in the aforesaid case, the said decision cannot be treated as deciding the said question in the aforesaid decision. However, the said question is urged in these batch of writ petitions. Therefore, this court is called upon to decide the said question notwithstanding the pronouncement of the apex court in the aforesaid judgment on similar provision contained in the Maharashtra Act. In this regard it is useful to refer to the judgment of the apex court in the case of Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj [2001] 2 SCC 721, where it is held as under: ". . . A decision is an authority on the question that is raised and decided by the court. It cannot be taken as an authority on a different question though in some cases the reason stated therein may have a persuasive value." The Supreme Court in the case of Director of Settlements, A.P. v. M.R. Apparao [2002] 4 SCC 638, h....
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....te of Karnataka [2003] 6 SCC 697, has held as under: "Per Khare C.J. (for himself and for Variava, Balakrishnan and Pasayat, JJ.) The answers to the questions, in the majority judgment in Pai case [2002] 8 SCC 481 (in para 161 therein) are merely a brief summation of the ratio laid down in the judgment. The ratio decidendi of a judgment has to be found out only on reading the entire judgment. In fact, the ratio of the judgment is what is set out in the judgment itself. The answer to the question would necessarily have to be read in the context of what is set out in the judgment and not in isolation. In case of any doubt as regards any observations, reasons and principles, the other part of the judgment has to be looked into. By reading a line here and there from the judgment, one cannot find out the entire ratio decidendi of the judgment. Per Sinha, J. A judgment, it is trite, is not to be read as a statute. The ratio decidendi of a judgment is its reasoning which can be deciphered only upon reading the same in its entirety. The ratio decidendi of a case or the principles and reasons on which it is based is distinct from the relief finally granted or the manner adopt....
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....ted as an ex cathedra statement having the weight of authority." In a recent judgment in the case of Sanjay Singh v. U.P. Public Service Commission [2007] 3 SCC 720 dealing with the law of precedence, the Supreme Court observed as under: "10. The contention of the Commission also overlooks the fundamental difference between challenge to the final order forming part of the judgment and challenge to the ratio decidendi of the judgment. Broadly speaking, every judgment of superior courts has three segments, namely, (i) the facts and the point at issue; (ii) the reasons for the decision; and (iii) the final order containing the decision. The reasons for the decision or the ratio decidendi is not the final order containing the decision. In fact, in a judgment of this court, though the ratio decidendi may point to a particular result, the decision (final order relating to relief) may be different and not a natural consequence of the ratio decidendi of the judgment. This may happen either on account of any subsequent event or the need to mould the relief to do complete justice in the matter. It is the ratio decidendi of a judgment and not the final order in the judgment, which fo....
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....urse throughout the territory of India. The doctrine of the freedom of trade, commerce and intercourse enunciated by article 301 is not subject to the other provisions of the Constitution but is made subject to the other provisions of Part XIII; that means that once the width and amplitude of the freedom enshrined in article 301 are determined they cannot be controlled by any provision outside Part XIII. It is obvious that whatever may be the content of the said freedom it is not intended to be an absolute freedom; absolute freedom in matters of trade, commerce and intercourse would lead to economic confusion, if not chaos and anarchy; and so that freedom guaranteed by article 301 is made subject to the exceptions provided by the other articles in Part XIII. The freedom guaranteed is limited in the manner specified by the said articles but it is not limited by any other provisions of the Constitution outside Part XIII. That is why, article 301, read in its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII, must be regarded as imposing a constitutional limitation on the legislative power of Parliament and the Legislatures of the Sta....
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.... Atiabari Tea Co.'s case AIR 1961 SC 232 is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by article 301 and such measures need not comply with the requirements of the proviso to article 304(b) of the Constitution. In the aforesaid judgment for the first time the concept of compensatory taxes was evolved by the apex court. The law laid down in the aforesaid two judgments held the field for more than three decades. Expanding the scope of this judicial concept of compensatory taxes, a three-judge Bench of the Supreme Court in the case of Bhagatram Rajeev Kumar v. Commissioner of Sales Tax [1995] 96 STC 654; [1995] Suppl 1 SCC 673 enunciated the text of "some connection" saying that even if there is some link between the tax and the facilities extended to the trade directly or indirectly, the levy cannot be impugned as invalid. The said judgment was followed by the apex court in the case of State of Bihar v. Bihar Chamber of Commerce [1996] 103 STC 1; [1996] 9 SCC 136. This view was doubted by yet another Bench of three judg....
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....h directly and immediately affect the movement of trade or declared by article to be ineffective. The only two exceptions under which the Part XIII of the Constitution held to be non-applicable are that when such levy of tax is in the nature of compensatory tax or regulatory in character. Therefore, first it is to be found out whether the levy of tax is regulatory in nature or is it a compensatory tax. In the budget speech of 1994-95 the then Chief Minister who was also the Finance Minister gave the following reason for imposition of the entry tax on motor vehicles which reads as under: "Tax holidays and lower tax rates prevailing in neighbouring areas have depleted our sales tax revenue from motor vehicles which are high value goods. I propose to counter this trend by imposing entry tax at such rates equal to the sales tax rates on motor vehicles entering our States. The States of Maharashtra and Tamil Nadu have already successfully levied a similar tax". The object behind this levy of tax is to augment the depleted sales tax revenue of the Government. This measure became necessary to counter the policies of the neighbouring States who have granted tax holidays and lowere....
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....that is intended to be saved and if any law imposes any direct restrictions on the very movement of such goods it attracts the provisions of article 301, and its validity can be sustained only if it satisfies the requirements of article 302 or article 304 of Part XIII. The said discriminatory tax directly and immediately restricts or impedes trade and commerce. It would fall within the purview of article 301 and will be valid only if it comes within the terms of article 304(a). Article 304(a) enables the Legislature of a State to make laws affecting trade, commerce and intercourse. It enables the imposition of taxes on goods from other States if similar goods in the State are subjected to similar taxes, so as not to discriminate between the goods manufactured or produced in that State and the goods which are imported from other States. The similarity contemplated by article 304(a) is in the nature of the quality and kind of goods and not with respect to whether they were already subject of tax or not. Clause (a) of article 304 authorises a State Legislature to impose a non-discriminatory tax on goods imported from the sister States, even though it interferes with the freedom of ....
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....onsideration is, whether the provisions made to equalise the tax taking into consideration the tax not paid under the Act but under other provisions of another enactment, would it save the legislation from the vice of unconstitutionality. If the tax is imposed on imported goods at the entry point and if the same tax is imposed on the local dealers at some other point, as both are levied under the same law it may not result in discrimination. But, if the levy is not under the Act, but under a different Act which is to be given deductions, the discrimination complied of is not wiped out. If that argument were to be accepted, the goods are subjected to several types of levies under several legislations. Then the said argument could be extended still further, thus making this constitutional provision otiose or useless. Such a construction would negate the very object of Chapter XIII of the Constitution which provides for free trade, commerce and intercourse. At the time of imposition of tax, under the Act, there should not be any discrimination. The tax levied under the Act on the goods imported from other States or the Union territories and similar goods manufactured or produced in th....
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....ted v. State of Assam AIR 1961 SC 232 held as under: "34. In drafting the relevant articles of Part XIII the makers of the Constitution were fully conscious that economic unity was absolutely essential for the stability and progress of the federal polity which had been adopted by the Constitution for the governance of the country. Political freedom which had been won, and political unity which had been accomplished by the Constitution, had to be sustained and strengthened by the bond of economic unity. It was realised that in course of time different political parties believing in different economic theories or ideologies may come in power in the several constituent units of the Union, and that may conceivably give rise to local and regional pulls and pressures in economic matters. Local or regional fears or apprehensions raised by local or regional problems may persuade the State Legislature to adopt remedial measures intended solely for the protection of regional interests without due regard to their effect on the economy of the nation as a whole. The object of Part XIII was to avoid such a possibility. Free movement and exchange of goods throughout the territory of India is e....
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....ke up to the hard realities of life, and reduce the tax burden and extend the same benefit to the people of the State, as the economy and revenue of the State also would improve. The said revenue loss, if at all, could be arrested by reducing the tax burden within the State, so that there is no occasion or reason for the people of the State to go to neighbouring State to purchase the motor vehicle. In the long run both the State and the people stand to gain. In the end it is the economy of the nation which would be the winner. Instead if they want to short circuit the process by taking away the said benefit by imposing tax and neutralise the said benefit, it would be only a short time gain. It would hamper free flow of trade and commerce enshrined in the Constitution. That is what is frowned upon under article 304(a), imposition of discriminatory tax. The State has the power to legislate and impose tax. But, then, it would be a case of exercising the said legislative power, against the interests of its own people, and in derogation of the constitutional philosophy as contained in article 301 of the Constitution, which is essential for the economy of the nation and sustaining and....