Judgment

B.P. JEEVAN REDDY, J.- Leave granted in the SLP.

2. Entry 52 in List II of the Seventh Schedule to the Constitution, says Shri Narasimha Murthy, should not be confined to an impost, formerly known as octroi. He submits that since it is a legislative entry, it must be liberally construed and full effect must be given to the words used therein. He says that when Entry 52 speaks of a tax on the entry of goods into a local area for consumption, use or sale therein, the words sale therein must be given their due and natural meaning and should not be restricted to a sale for the purpose of consumption or use of the goods sold within the limits of the local area concerned. The submission is urged with reference to the scope and ambit of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1979.

3. The High Court of Karnataka has held following the decisions of this Court in Burmah Shell Oil Storage & Distributing Co. India Ltd. v. Belgaum Borough Municipality{1963 Supp (2) SCR 216, Hiralal Thakorlal Dalal v. Broach Municipality{(1976) 3 SCC 398} and Municipal Council v. Parekh Automobiles Ltd.{(1990) 1 SCC 367} that the levy created by Section 3 of the Karnataka Act on the sales effected within a local area is confined only to those sales of goods which are meant for consumption or use within such local area. In other words, it held that where the goods sold are not intended for use or consumption within the local area but are meant to be and are taken out of the area for use or consumption elsewhere, no levy is permissible under the said Act. It is this view Shri Murthy disputes. He submits that Burmah Shell{1963 Supp (2) SCR 216}, Hiralal Thakorlal{(1976) 3 SCC 398} and Parekh Automobiles{(1990) 1 SCC 367} dealt with cases where the levy was by the municipality/local authority, no doubt under an enactment of the State Legislature. In those cases, he says, there may be justification for taking a restrictive view and for construing the levy imposed by the municipality as one in the nature of octroi but where the levy is created by the State Legislature and the assessment and collection is also by the State Government, there is no reason to restrict the word sale occurring in Section 3 of the Karnataka Act to sale of goods intended for use or consumption within the given local area. It is true, says the counsel, that the levy is at the stage of entry of goods into a local area but the levy is not by the local authority. The Karnataka Act, he says, bears no resemblance or similarity to a levy in the nature of octroi imposed by the local authorities and, therefore, it should not be subjected to the limitations applicable to a levy by the local authorities.

4. On the other hand, it is contended by Shri Harish Salve, learned counsel for the respondents that all the submissions now raised by Shri Murthy are concluded against him by the several decisions of this Court. He points out that Hiralal Thakorlal{(1976) 3 SCC 398} first came up before a three-Judge Bench comprising K.K. Mathew, Krishna Iyer and A.C. Gupta, JJ. and the matter was referred to a Constitution Bench precisely to resolve and decide the true meaning and scope of the words sale therein occurring in Entry 52. Para 3 of the order of reference reads thus:

"3. The short point is whether a person who brings goods into a taxable territory and sells it there for being taken outside the territory for consumption or use is liable to pay octroi. We have been taken, by counsel on both sides, through the judgment of this Court and while we are inclined to the view that the thrust of the judgment is in favour of limiting taxability to such sales within the territory as are intended to be consumed or used in part or in whole within the territory there are observations which strike a different note. A plain reading of the words used impose no qualification of the expression sale therein but the judicial construction based on the history of o