ITC LIMITED KOLKATA Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) In this writ petition, the petitioner has challenged the constitutional validity of Sub Section (5) of Section 4 of the Karnataka Value Added Tax Act, 2003 ('the KVAT Act' for short) which is inserted by the Karnataka Value Added Tax (Amendment) Act, 2010 (Karnataka Act No. 4 of 2010) with effect from the First day of April 2010. By consent of the learned Counsel on both sides, the writ petition is heard on merits. I have heard Shri K.G. Raghavan, learned Senior Counsel appearing for the petitioner and Shri K.M.Shivayogiswamy, learned Additional Government Advocate appearing for the respondents.

(2.) The impugned provision reads as follows:

(3.) Shri K.G. Raghavan, learned Senior Counsel submitted that the impugned provision provides for levy of tax on the sale of tobacco products by taking the maximum retail price (which is not the actual price) indicated on the label of the container or pack thereof as the measure of tax and as held by the Supreme Court in State of Rajasthan v. Rajasthan Chemists Association, 2006 6 SCC 773, such a taxing provision is beyond the Legislative competence of the State. According to the learned Senior Counsel, the State Legislature has no competence to levy tax on the sale or purchase of goods on any notional measure of tax i.e. on the basis of a notional price as a measure of tax. He further submitted that a similar provision had come up for consideration before the Rajasthan High Court in Rajasthan Chemists Association vs. State of Rajasthan, 2006 147 STC 476 which held the said provision as beyond the Legislative competence of the State as being outside the scope of Entry 54 of List II of the Seventh Schedule of the Constitution of India. The said judgment is affirmed by the Supreme Court in State of Rajasthan v. Rajasthan Chemists Association, 2006 6 SCC 773.