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Karnataka High Court
Judges : M.K.Srinivasa Iyengar,M.Rama Jois
GURUSIDDAPPA NURANDAPPA UPPIN - Appellant
Versus
STATE OF KARNATAKA - Respondent
Writ Petition 16631 Of 1979
Decided On : 03/24/1981
Advocates Appeared :
A.JAYRAM, S.G.DODDAKALE GOWDA, S.S.UJJANNAVAR, T.S.Pai
The Karnataka Forest Act, 1963 (hereinafter referred to as 'the Act'), inserted into it by the Karnataka Forest (Amendment) Act, 1976, with effect from 24th December, 1975, which imposes a tax called forest development tax on the consideration paid for the forest produce disposed of by the State Government, is constitutionally valid.
Fact of the Case:
The petitioners, who are forest contractors, have been called upon to pay the tax on the amount of consideration payable by them to the State Government towards the forest produce disposed of in their favour at the rate prescribed in the above section. The petitioners in the first batch of writ petitions were called upon to pay tax under section 98a of the Act at the rate prescribed in the said section on the whole of the consideration amount. In the other writ petitions in which the contracts were entered into prior to 24th December, 1975, the petitioners were called upon to pay tax under section 98a on the balance of the consideration which was payable after 24th December, 1975.
Finding of the Court:
The court held that the disposal of forest produce in favour of the petitioner was by way of sale and accordingly they have to pay sales tax at the rate prescribed under section 5 (1) of the Karnataka Sales Tax Act and have not questioned the said levy. Similarly, the court considered it unnecessary to examine the alternative contention urged for the State that even if section 98a of the Act provides for the imposition of tax on disposal of forest produce otherwise than by sale the power to impose such tax flows from entry 49 of List. II.
Issues: 1. Whether section 98a of the Karnataka Forest Act, 1963 (hereinafter referred to as 'the Act'), inserted into it by the Karnataka Forest (Amendment) Act, 1976, with effect from 24th December, 1975, which imposes a tax called forest development tax on the consideration paid for the forest produce disposed of by the State Government, is constitutionally valid? 2. Whether the tax imposed by section 98a of the Act which came into force from 24th December, 1975, is leviable on the balance of the amount of consideration due and paid after that date, in respect of the sale of forest produce concluded before 24th December, 1975?
Ratio Decidendi: 1. The court held that section 98a of the Act, which imposes tax on the purchase price of forest produce disposed of by sale by the State Government whatever be the method of sale is within the legislative competence of the State under entry 54 of List II and is constitutionally valid. The court did not express any opinion on the question of the validity of the section, if it is used to levy tax on transactions other than sale. 2. The court held that the contract of sale in each case was one and indivisible. Provision for payment of sale consideration in instalments did not have the effect of splitting the contract into as many sales as there were instalments. Section 98a of the Act came into force on 24th December, 1975, and has not been given retrospective effect. Under these circumstances, the contention of the State that forest development tax is payable on instalments outstanding on or after 24th December, 1975, even in respect of contracts of sale entered into earlier to that date is untenable.
Final Decision: The court held that the disposal of forest produce in favour of the petitioner was by way of sale and accordingly they have to pay sales tax at the rate prescribed under section 5 (1) of the Karnataka Sales Tax Act and have not questioned the said levy. Similarly, the court considered it unnecessary to examine the alternative contention urged for the State that even if section 98a of the Act provides for the imposition of tax on disposal of forest produce otherwise than by sale the power to impose such tax flows from entry 49 of List. II.
( 1 ) IN this batch of 22 writ petitions filed by the forest contractors, the following questions of law arise for consideration :
" (i) Whether section 98a of the Karnataka Forest Act, 1963 (hereinafter referred to as 'the Act'), inserted into it by the Karnataka Forest (Amendment) Act, 1976, with effect from 24th december, 1975, which imposes a tax called forest development tax on the consideration paid for the forest produce disposed of by the State Government, is unconstitutional ?
(ii) Whether the tax imposed by section 98a of the Act which came into force from 24th december, 1975, is leviable on the balance of the amount of consideration due and paid after that date, in respect of the sale of forest produce concluded before 24th December, 1975 ?"
( 2 )
(i) Section 98a was introduced into the Act by the Karnataka Forest (Amendment) ordinance, 1975, promulgated by the Governor, in the first instance. Subsequently, the ordinance was replaced by Amendment Act 15 of 1976. Section 98a reads as follows : "98a. Levy of forest development tax.- (1) Notwithstanding anything contained in this Act, in respect of forest produce disposed of by the State Government by sale or otherwise, there shall be levied and paid to the State Government a tax at the rate of five per cent on the amount of consideration paid therefor.
(2) The said tax shall be collected along with such consideration.
(3) It is hereby declared that the said tax shall be in addition to and not in lieu of any tax payable in respect of such produce under any other law in force. " rate of tax was increased from five per cent to eight per cent by an amendment made to section 98a (1) by Act 14 of 1980.
(ii) The petitioners, who are forest contractors, have been called upon to pay the tax on the amount of consideration payable by them to the State Government towards the forest produce disposed of in their favour at the rate prescribed in the above section.
(iii) In W. P. Nos. 16614 to 16631 of 1979, the contracts for the disposal of forest produce have been entered into by the petitioners on dates subsequent to the date of introduction of section 98a. The contracts entered into for the same purpose by the petitioners in other petitions were earlier to the insertion of section 98a into the Act. The petitioners in the first batch of writ petitions were called upon to pay tax under section 98a of the Act at the rate prescribed in the said section on the whole of the consideration amount. In the other writ petitions in which the contracts were entered into prior to 24th December, 1975, the petitioners were called upon to pay tax under section 98a on the balance of the consideration which was payable after 24th december, 1975.
( 3 ) SHRI S. S. Ujjannavar, the learned counsel appearing for the petitioners in the first batch of writ petitions, submitted that section 98a of the Act was unconstitutional and therefore it should be declared invalid and made unenforceable. In support of this submission he raised the following contentions :
(i) Section 98a of the Act is invalid for want of legislative competence; (ii) The said section suffers from the vice of double taxation and therefore invalid; (iii) The impost under section 98a is in the nature of fee or compensatory tax and it is invalid for want of quid pro quo;
(iv) The levy under section 98a is in substance an excise duty and therefore it was not competent for the State Legislature to enact the section;
(v) Section 98a lacks essential ingredients of tax law, namely, provision for levy and assessment of tax as also the designation of the authority to collect the tax are not provided for, and, therefore the section is invalid; and
(vi) Section 98a is violative of article 14 of the Constitution as the tax is required to be paid only on the forest produce purchased from the State and not on the forest produce purchased from private individuals. Shri Tukaram Pai and Shri Jayaram, the learned counsel for the petitioners in o
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