SHETTY LEASING INDIA LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) These petitions are filed challenging the constitutional validity of section 50-C of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"), by which the State levies tax on transfer of right to use any goods.

(2.) On behalf of the petitioners, it is urged that the legislative power under entry 54 of List II of the Seventh Schedule to the Constitution to impose to a tax on the transfer of any right to use any goods would not include the power to levy such tax in respect of transactions which are in the courses of sales in the course of inter-State trade or commerce or in the course of sales outside the State levying such tax or in the course of import or export inasmuch as it is beyond the legislative competence of the State Legislature to impose sales tax on inter-State sales or sales outside the State and also in the course of import or export. It is urged that the law made by the Parliament under article 286(2) and 286(3)(b) read with article 269(3) of the Constitution is a condition precedent for exercise of the legislative power of the State to impose tax on transactions involving transfer of right to use any goods for any purpose and since no law has been enacted by Parliament in that regard, it is not open to the State Legislative to exercise power to impose such tax. The definition of "sale" in the Central Tax Act has been amended after the 46th Amendment within its ambit a transfer of the right to use any goods for any purpose and it cannot be treated to be law made under articles 269(3) and 286(2) of the Constitution in relation to sales arising out of such transfers. In the absence of a common situs being involved in application of such legislative as in section 4 of the Central Sales Tax Act, levy under section 5C impermissible. It is submitted that it is not permissible for the State Legislature to expression "sale" so as to include within its ambit the sale or purchase of goods in the course of inter-State trade or commerce or in the course of import or export and thereby assume power to impose taxes on the same and the definition of us situs as contemplated in Explanation (3)(d) of section 2(t) is itself invalid being violative of article 286 of the Constitution of India.

(3.) We may now advert to the history of this legislation. Originally, by Act No. 27 of 1985, section 5C was amended to levy tax on the taxable turnover in respect Seventh Schedule. Now, tax is sought to be levied on total turnover in respect of transfer of right to use goods by amending the Act by Act No. 4 of 1992 with retrospective effect.