Case Note & Summary
The writ petitions challenged Notification-III No.FD 208 CSL 2013 dated 1.10.2013 issued by the Government of Karnataka, which amended the earlier Notification dated 30.3.2002 to insert sub-item (ii) under Sl.No.5, levying entry tax at 5% on 'unmanufactured tobacco in sealed container'. The petitioners, dealers registered under the Karnataka Value Added Tax Act, 2003 and other statutes, were engaged in the business of unmanufactured tobacco sold in sachets under various brand names. They contended that unmanufactured tobacco is not covered by Entry 96 of the First Schedule to the Karnataka Tax on Entry of Goods Act, 1979 (KTEG Act), which specifies 'tobacco products of all description', and that the notification violates Articles 301 and 304(b) of the Constitution for want of Presidential sanction. The respondents, the State and the Commissioner of Commercial Taxes, argued that Entry 96 is all-encompassing and the amendment is clarificatory. The High Court relied on the Supreme Court's decision in Jindal Stainless Ltd. v. State of Haryana, which held that the validity of fiscal statutes is tested only under Article 304(a) for non-discrimination, not under Article 304(b) for reasonableness or Presidential sanction. The court further held that the phrase 'tobacco products of all description' in Entry 96 includes both manufactured and unmanufactured tobacco, and that unmanufactured tobacco obtained by beating, crushing and sieving raw tobacco qualifies as a product. Consequently, the impugned notification was held to be intra vires and within the scope of the Schedule. The writ petitions were dismissed, upholding the levy of entry tax on unmanufactured tobacco in sealed containers.
Headnote
A) Constitutional Law - Taxation and Freedom of Trade - Article 304(a) vs Article 304(b) - Constitution of India, Articles 301, 304(a), 304(b) - The Supreme Court in Jindal Stainless Ltd. v. State of Haryana held that fiscal statutes are tested only under Article 304(a) for non-discrimination, not under Article 304(b) for reasonableness or validity of Presidential sanction; thus the challenge based on want of Presidential sanction for the notification fails. (Paras 18-19) B) Taxation - Entry Tax - Scope of Entry 96 of First Schedule to KTEG Act - Karnataka Tax on Entry of Goods Act, 1979, Section 3(1), First Schedule Entry 96 - The expression 'tobacco products of all description' in Entry 96 is exhaustive and encompasses both manufactured and unmanufactured tobacco, including unmanufactured tobacco in sealed containers; the impugned notification inserting sub-item (ii) is merely clarificatory and not beyond the scope of the Schedule. (Paras 20, 24)
Issue of Consideration
Whether the notification dated 01.10.2013 inserting sub-item (ii) 'unmanufactured tobacco in sealed container' under Sl.No.5 for levy of entry tax is ultra vires the KTEG Act and violative of Articles 301 and 304(b) of the Constitution for want of Presidential sanction.
Final Decision
Writ petitions dismissed. Impugned notification held intra vires and valid; levy of entry tax on unmanufactured tobacco in sealed containers upheld.
Law Points
- Legal points not extracted
- Entry tax on goods specified in First Schedule can be levied under Section 3(1) of KTEG Act
- 'Tobacco products of all description' includes unmanufactured tobacco
- Fiscal statutes tested under Article 304(a) only not 304(b)
- Presidential sanction not required for fiscal measures under Article 304(b)
- Definition of 'product' includes processed goods
