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2007 Supreme(Kar) 420
Karnataka High Court
Judges : D.V.Shylendra Kumar
SHREE RENUKA SUGARS LTD. - Appellant
Versus
STATE OF KARNATAKA - Respondent
W. P. 8859 Of 2007
Decided On : 07/15/2007
Advocates Appeared :
K.Navadgi, R.B.Sathyanarayana Singh, R.G.Raghavan
Headnote:Karnataka Value Added Tax Act - Schedule 4 - Deanatured spirit - Inclusion of - Legislative competence - Fact that petitioner was only the persons paying tax, is not a ground to hold that levy is discriminatiry. [D.V. Shylendra Kumar, J]: The rate of tax is within the legislative wisdom and it is not for the Court to examine the rate of tax, particularly for testing the legislative competence of the levy of tax. May be so ina given situation, the levy of tax would affect some individuals, some sectors, some manufacturers of as in the instant case only a single manufacturer but by such a possibility itself the legislation does not become unconstitutional or beyond the legislative competence. Even assuming as submitted by the learned counself for the petition the effect of levy of such tax can indirectly affect the business and manufacture of denaturd spirit and can also be characterized as a regulation which could be understood as a piede of legislation, which can indirectly, regulate the business activities of the petitioner, even then so long as the provisions of the statute is within the legislativice competence and in the instant case the levy of tax being onthe transaction of sale which is undiputedly within the legislative competence of the State and it is only the effect of levy of tax that is sought to be used to atttribute either lack of legislativie cojpetence or unconstitutionality through the device of colourable exercise of power, I am unable to accept the argument that the provision should be struck down as unconstitutional. The provision being a direct provision for levy of tax in respect of sale transaction etc. it cannot be held either as though it is one beyond the legislative competence or unconstitutional. In the light of the above position, the provision cannot be held to be discriminatory just because the petitioner is the only tax payer, who becomes liable to opay tax.
Cases Referred: 1997 (2) SCC 715; AIR 1990 SC 1927.
Karnataka Value Added Tax Act - Schedule 4 - Deanatured spirit - Inclusion of - Legislative competence - Fact that petitioner was only the persons paying tax, is not a ground to hold that levy is discriminatiry. [D.V. Shylendra Kumar, J]: The rate of tax is within the legislative wisdom and it is not for the Court to examine the rate of tax, particularly for testing the legislative competence of the levy of tax. May be so ina given situation, the levy of tax would affect some individuals, some sectors, some manufacturers of as in the instant case only a single manufacturer but by such a possibility itself the legislation does not become unconstitutional or beyond the legislative competence. Even assuming as submitted by the learned counself for the petition the effect of levy of such tax can indirectly affect the business and manufacture of denaturd spirit and can also be characterized as a regulation which could be understood as a piede of legislation, which can indirectly, regulate the business activities of the petitioner, even then so long as the provisions of the statute is within the legislativice competence and in the instant case the levy of tax being onthe transaction of sale which is undiputedly within the legislative competence of the State and it is only the effect of levy of tax that is sought to be used to atttribute either lack of legislativie cojpetence or unconstitutionality through the device of colourable exercise of power, I am unable to accept the argument that the provision should be struck down as unconstitutional. The provision being a direct provision for levy of tax in respect of sale transaction etc. it cannot be held either as though it is one beyond the legislative competence or unconstitutional. In the light of the above position, the provision cannot be held to be discriminatory just because the petitioner is the only tax payer, who becomes liable to opay tax.
Cases Referred: 1997 (2) SCC 715; AIR 1990 SC 1927.
( 2 ) IT is the apprehension of the writ petitioner that the provisions of this Act was brought into force in terms of the notification dated 30-3-2007 published by the 2nd respondent will be an act adverse and in fact detrimental to the industrial and business activity of the petitioner and having regard to the background leading to this legislation, petitioner has approached this Court questioning the constitutional validity of the Act as amended in Amendment Act 6/2007 insofar as it relates to the inclusion of the denatured spirit at Serial no. 4 to the IV schedule of the Karnataka value Added Tax Act, 2003, contending that inclusion of denatured anhydrous alcohol at serial No. 3 in Schedule-IV to the said Act as unconstitutional and ultra vires of the Constitution of India. Petitioner has also sought for an incidental prayer to quash the notification (column-2) at Annexure-J bearing No. FC 115 csl 2007 (5) dated 30-3-2007 published by respondent No. 2, which is one for withdrawing an earlier exemption, which the petitioner enjoyed prior to the introduction of this amending Act.
( 3 ) SUBMISSION of Sri. K. G. Raghavan, learned Sr. Counsel for the petitioner, is that if one should look at the background of the facts and circumstances leading to the above legislation and also the background of litigation that ensued between the petitioner and the State, it is very obvious that the demand is nothing but an attempt to regulate the activity of manufacture the denatured spirit by the writ petitioner, which is clearly an instance of colourable exercise of legislative power as the State Government does not have the legislative competence to regulate either the manufacture or the trade of denatured spirit which is exclusively within the province of the union parliament.
( 4 ) ELABORATING learned counsel submits that it is clearly an instance of colourable exercise of legislative power, and in this regard relies upon the judgment of this Court rendered in w. A. No. 1824/2006 on 15-11-2006 copy at annexure-E to the petition, which was again challenged in appeal by the very writ petitioner in the context of attempt on the part of the State to regulate the distribution of the denatured spirit manufactured by the writ petitioner.
( 5 ) LEARNED counsel for the petitioner submits that the denatured spirit is essentially used as industrial alcohol which cannot be subject matter for legislation for levy of tax or regulation by the State Government; that the denatured spirit which was being manufactured and sold by the writ petitioner found a new customer when it was found that it can be used for producing alternative fuel and as a part of it, in the manufacture of 5% ethanol-based petroleum product, which perhaps has better efficiency or more conducive to environmental protection and as such there was great demand from this sector for supply of denatured spirit, that the State Government, which was worried about the inadequate supply of potable spirit i. e. , alcohol to the liquor manufacturing units in the State which in turn gives considerable revenue to the State Exchequer was keen on diversion of denatured spirit manufactured by the writ petitioner not going this way i. e. , towards the persons manufacturing ethanol-based petroleum products and to ensure that has come up with the present amendment to the Act, which is though sought to be projected as a revenue raising measure in letter and spirit and in ef
