Judgment

DESAI, J.:- Constitutional validity of Karnataka Tax on Entry of Goods Into Local Areas for Consumption, Use or Sale therein Act, 1979 (Act for short), and the Notification No. FD 66 CSL 79 dated May 31, 1979, issued by the State Government in exercise of the powers conferred by Section 3 of the Act is involved in this appeal by special leave at the instance of the State of Karnataka and one other.

2. Karnataka State enacted the Act to provide for the levy of tax on entry of goods into local areas for consumption, use or sale therein, being Karnataka Act No. 27 of 1979. Section 3 empowers the State Government to levy and collect tax on entry of scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding 2 ad valorem, as may be specified by the State Government. Armed with the power conferred by S. 3, the State Government issued notification-l No. FD 66 CSL 79 dated May 31, 1979, specifying the local areas and the rates of tax at which the tax shall be levied and collected under the Act on the entry of scheduled goods mentioned in col. 2 of the table appended to the notification into local areas specified in the corresponding entries. Goods liable to levy of tax under the Act on entry in the specified local areas at the specified rates are those set out in the schedule annexed to the Act. They are (i) all varieties of textiles, viz., cotton, woollen, silk or artificial silk including rayon or nylon whether manufactured in mills, powerlooms or handlooms and hosiery cloth in lengths; (ii) tobacco and all its products; (iii) sugar other than sugar candy confectionery and the like. In all 27 local areas were specified for the purpose of levy of tax on entry of scheduled goods in the respective local areas at varying rates specified in the notification. The Act received the assent of the President on May 17, 1979, and it was published in the State Government Gazette on June 1, 1979, and came into force from that very day.

3. Numerous petitions were filed under Article 226 of the Constitution in the High Court of Karnataka contending that the Act and the Notification issued thereunder were unconstitutional on diverse grounds. As many as 24 different contentions were canvassed before the High Court. Of them two, viz., contention Nos. 13 and 19 found favour with the High Court with the result that the Act and the Notification issued thereunder were declared unconstitutional 466 and a mandamus was issued directing the State Government and its officers to forebear from enforcing the provisions of the Act against the petitioners before the High Court.

4. The contentions which found favour with the High Court, are : (i) Section 3 of the Act does not empower the State Government to apply the provisions of the Act to certain local areas only and to exclude other local areas; (ii) as the Act imposes the tax on dealers irrespective of the value of scheduled goods brought by them into a local area and does not exempt petty dealers, the Act imposes unreasonable restrictions on petty dealers. The remaining 22 contentions were rejected some of which were canvassed before us on behalf of the respondents to sustain the decision of the High Court.

5. It is necessary at this stage to notice the broad features of the Act. The long title and the preamble of the Act demonstrate the purpose for which the Act was enacted, it being to empower the State Government to levy tax on entry of goods specified in the schedule (scheduled goods for short) in local areas to be specified by the State Government in this behalf. Section 2, the dictionary clause of the Act, defines dealer in the Act to have the same meaning assigned to it in clause (k) of S. 2 of the Karnataka Sales Tax Act, 1957. Section 2, sub-section (5) defines local area as under :

"2 (5). Local area means the area within the limits of a city under the Karnataka Municipal Corporations Act 1976 (Karnataka Act 14 of 1977), or a municipality under the Karnataka