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2009 Supreme(Kar) 503
High Court of Karnataka
THE HONOURABLE MR. JUSTICE N. KUMAR
M/s. L&T Case Equipment Pvt. Limited
Versus
State of Karnataka by its Finance Secretary & Another
W.P. No.39540 of 2003 (T-YET) C/w etc…..
Decided on : 24-07-2009
For the Petitioners:A. Rama, Niloufer Akber, AGA, M. Thirumalesh, Anand GP, K.M. Shivayogiswamy G.P, Prakasha Hedge. K, G.K.V. Murthy, Uday Kumar Singh, D.S. Joshi, S. Parthasarathi, Mahendranath Ramani, G. Rabinathan, Atul K Alur, S. Narayan, Krishnamoorthu. D, H.B.V. Paril, I.R. Biradar, M/s. Sundaraswamy Ramdas & Anand, E.R. Indra Kumar, C.H. Jadhav, Shalini Patil, M. Vishwajith Raj, Prasanna. V.R., M.B. Kulkarni, Raavi B. Naik, Ranga Ramu & Associaties, Ganesh Bhat, Y.H, Manjunath, G.P, Padma S. Uttur, Patel D Karegowda, Jagadish Patil, B.R. Sundaraja Gupta, Vani H, R.V. Prasad, M/s. M.R. Narayan & Co, Advocates, B.L. Sanjeev, G.P.
Headnote:
TAXATION - ENTRY TAX - CONSTITUTIONAL VALIDITY - SECTION 4B AND 4BB OF THE KARNATAKA TAX ON ENTRY OF GOODS INTO LOCAL AREA ACT, 1979 - HELD TO BE UNCONSTITUTIONAL - VIOLATIVE OF ARTICLES 301 AND 304(A) OF THE CONSTITUTION OF INDIA - DISCRIMINATION BETWEEN IMPORTED GOODS AND LOCALLY MANUFACTURED GOODS - REDUCTION OF TAX LIABILITY UNDER SECTION 4BB NOT SUFFICIENT TO CURE THE DEFECT - PROVISIONS QUASHED.
Fact of the Case:
The petitioners, who are dealers registered under the Karnataka Sales Tax Act, 1957 and Karnataka Tax on Entry of Goods into Local Areas Act, 1979, challenged the Constitutional validity of Section 4B and 4BB of the Karnataka Tax on Entry of Goods into Local Area Act, 1979, and the Notification No.FD41CET2003(iii) dated 26.07.2003 issued by the Government of Karnataka prescribing the rate of entry tax on the motor vehicles mentioned therein. The petitioners contended that the impugned provisions were violative of 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.
Finding of the Court:
The Court held that the impugned provisions were violative of Articles 301 and 304(a) of the Constitution of India. The Court found that the provisions discriminated between imported goods and locally manufactured goods, and that the reduction of tax liability under Section 4BB was not sufficient to cure the defect. The Court also held that the provisions were void, and unenforceable, and liable to be struck down as offending the constitutional right.
Issues: 1. Whether the impugned provisions were violative of Articles 301 and 304(a) of the Constitution of India? 2. Whether the reduction of tax liability under Section 4BB was sufficient to cure the defect?
Ratio Decidendi: 1. The impugned provisions discriminated between imported goods and locally manufactured goods, and thus violated Article 304(a) of the Constitution of India. 2. The reduction of tax liability under Section 4BB was not sufficient to cure the defect, as it did not remove the discrimination between imported goods and locally manufactured goods.
Final Decision: The Court allowed all the writ petitions, declared Sections 4B and 4BB of the Karnataka Tax on Entry of Goods into Local Areas Act, 1979, as ultra vires the Constitution of India, and quashed the same. The Court also quashed the Notification issued in pursuance of the impugned provisions, and ordered the refund of taxes paid, if any, in pursuance of the aforesaid provisions, assessment orders, and demands.
Kumar, J
In all these writ petitions the petitioners have challenged the Constitutional validity of Section 4-B and 4-BB of the Karnataka Tax on Entry of Goods into Local Area Act, 1979, for short, hereinafter referred to as the ‘Act’ and the Notification No.FD41CET2003(iii) dated 26.07.2003 issued by the Government of Karnataka prescribing the rate of entry tax on the motor vehicles mentioned therein.
2. The petitioners are all dealers registered under the provisions of the Karnataka Sales Tax Act, 1957 and Karnataka Tax on Entry of Goods into Local Areas Act, 1979. As the Constitutional validity of the aforesaid provisions are under challenge, it is not necessary to set out the facts of each case.
3. Section 4-B of the Act was the charging Section in respect of levy of entry tax on motor vehicles. The said Section was inserted in the Act for the first time with effect from 01.04.1995 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 4-B 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 vs. State of Karnataka and Others reported in 2000 STC 155 (Kar), this Court declared Section 4-B as violative of Articles 301 and 304(a) of the Constitution of India. The appeal filed by the State in Writ Appeal No.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 24-11-1999. When the matter stood thus, the said Section 4-B was substituted by new Section 4-B and 4-BB with effect from 01-04-1995 by the Karnataka Tax on Entry of Goods (Amendment) Act, 2000 (Karnataka Act No.3 of 2003).
4. The petitioners submit that the present Section 4-B and 4-BB also has in no way cured the defect which has been pointed out by this Court in the case of Syndicate Bank. It is virtually the same as the original Section 4B which has been struck down as unconstitutional by this Court. As per Section 4BB(2), if motor vehicles manufactured outside the State are brought into a local area, then the sales tax paid on it is liable to be deducted from the entry tax payable. The effect of Section 4-B and 4-BB is that when sales tax suffered by motor vehicles purchased inside the State are brought into a local area, no entry tax is payable on it. On the other hand, if a motor vehicle is brought into the State from outside the State, entry tax is payable on it irrespective of whether sales tax has been paid on it in the other state. Thus, there is clear discrimination against vehicles purchased from other States and brought into the State vis-à-vis vehicles purchased inside the State.
5. The respondents have filed counter stating that Chapter II-A which included Section 4-B was inserted in the Karnataka Tax on Entry of Goods Act, 1979 (the Act) by Karnataka Act 45 of 1994 dated 25th October 1994 providing for levy of tax on entry of motor vehicles from out side the state in to a local area for use or sale therein at rates not exceeding the rates specified under the Karnataka Sales Tax Act, 1957, to be fixed by Government by Notification. Karnataka Act 45 of 1994 was notified to come into force from 1st April, 1995 by Notification No.FD 43 CET 95(1) dated 31st March, 1995 and pursuant to the same, the Government issued Notification No.FD 43 CET 95(3) dated 31st March, 1995 specifying that tax shall be levied and collected from 1st April, 1995 on entry of motor vehicles at the rates specified. The validity of Section 4-B inserted by Karnataka Act 45 of 1994, was questioned before the High Court. This Court on 26th July, 1999 in the case of Syndicate Bank and Other
