STATE OF KARNATAKA Vs. HANSA CORPORATION

JUDGEMENT

(1.) Constitutional validity of Karnataka Tax on Entry of Goods Into Local Areas for Consumption, Use or Sale therein Act, 1979 ('Act' for short), and the Notification No. FD 66 CSL 79 dated May 31, 1979, issued by the State Government in exercise of the powers conferred by Section 3 of the Act is involved in this appeal by special leave at the instance of the State of Karnataka and one other.

(2.) Karnataka State enacted the Act to provide for the levy of tax on entry of goods into local areas for consumption, use or sale therein, being Karnataka Act No. 27 of 1979. Section 3 empowers the State Government to levy and collect tax on entry of scheduled goods into a local area for consumption, use or sale therein at such rate not exceeding 2% ad valorem, as may be specified by the State Government. Armed with the power conferred by S. 3, the State Government issued notification-l No. FD 66 CSL 79 dated May 31, 1979, specifying the local areas and the rates of tax at which the tax shall be levied and collected under the Act on the entry of scheduled goods mentioned in col. 2 of the table appended to the notification into local areas specified in the corresponding entries. Goods liable to levy of tax under the Act on entry in the specified local areas at the specified rates are those set out in the schedule annexed to the Act. They are (i) all varieties of textiles, viz., cotton, woollen, silk or artificial silk including rayon or nylon whether manufactured in mills, powerlooms or handlooms and hosiery cloth in lengths; (ii) tobacco and all its products; (iii) sugar other than sugar candy confectionery and the like. In all 27 local areas were specified for the purpose of levy of tax on entry of scheduled goods in the respective local areas at varying rates specified in the notification. The Act received the assent of the President on May 17, 1979, and it was published in the State Government Gazette on June 1, 1979, and came into force from that very day.

(3.) Numerous petitions were filed under Article 226 of the Constitution in the High Court of Karnataka contending that the Act and the Notification issued thereunder were unconstitutional on diverse grounds. As many as 24 different contentions were canvassed before the High Court. Of them two, viz., contention Nos. 13 and 19 found favour with the High Court with the result that the Act and the Notification issued thereunder were declared unconstitutional and a mandamus was issued directing the State Government and its officers to forebear from enforcing the provisions of the Act against the petitioners before the High Court.