Manipal Academy of Higher Education, Manipal, Udupi District vs State of Karnataka and Others

The validity of the notifications dated 31-3-1998 and 23-9-1998 issued under Section 3(1) of the Karnataka Tax on Entry of Goods Act, 1979 have been assailed on the ground that they are violative of Article 286(1)(b) of the Constitution. Article 286(1)(b) provides that no law of a State shall impose, or authorise the imposition of a tax on the sale or purchase of goods if such sale or purchase takes place in the course of import of the goods into or export of the goods out of the territory of India. Section 3 of the Karnataka Tax on Entry of Goods Act authorises levy of tax on the Entry of Goods, which provides that there shall be levied and collected a tax on entry of goods specified in the First Schedule into a local area for consumption, use or sale therein at such rates not exceeding five per cent of the value of the goods as may be specified retrospectively or prospectively by the State Government by notification, and different goods or different classes of goods or different local areas. The charge is not in respect of sale or purchase and therefore the assistance from the provisions of Article 286(1)(b) cannot be taken. Learned Counsel for the petitioner has relied the decision given in the case of Fazalil Ahammed v State of Kerala, (1998)6 KTR 174 (Ker.), where it was observed that there are no limitations on the State''s power to legislate which is covered by Item 52 of List II of the VII Schedule of the Constitution. It was observed that the tax is due on entry of goods into the local area but however in the case of goods brought from abroad their entry into the local area was found outside the scope of the Act which is confined only to those brought from outside the State and would not include the goods brought from outside the borders of the Country.

The judgment relied by the learned Counsel of the petitioner is not applicable because under the Kerala Entry Tax Act, it was found by the Division Bench that in clause (n) of Section 2, while defining the purchase value, there is no reference to Customs and other duties. Entry 2(d) defines ''entry of goods into a local area'' which means entry of goods from any place outside the State but not outside the country. It was in this context, it was observed that in respect of the goods which are imported from out of the country, the provisions of the Entry Tax are not applicable. Under the Karnataka Entry Tax Act, Section 2(A)(8-a) is as under:

"8-a. ''Value of the goods'' shall mean the purchase value of such goods, that is to say, the purchase price at which a dealer has purchased the goods inclusive of charges borne by him as cost of transportation, packing, forwarding and handling charges, commission, insurance, taxes, duties and the like, or if such goods have not been purchased by him, the prevailing market price of such goods in the local area".

In the value of the goods, cost of transportation, packing, forwarding and handling charges, duties and the like, are to be included. Thus the custom duties will form part of value of the goods. The interpretation of the words ''from any place outside the State'' therefore cannot be restricted to a place within the country of India. Even if the goods are imported from other foreign country, they are outside the State of Karnataka. The charge under Section 3 is on the Entry of Goods into a local area.

Article 286(1)(b) of the Constitution of India also does not support the contention of the petitioner because, in this Article, the prohibition is with regard to imposition of tax on the sale or purchase of goods, which takes place outside the State or in the course of import of goods into or export of goods outside the territory of India. The prohibition contained under Article 286 therefore could not apply in respect of the entry of the goods into the local area, for which, Entry 52, List II of VII Schedule is very clear enabling the State Legislature to legislate on taxes on the entry of goods into a local area for consumption, use or sale therein. The charge thus is in respect of the goods which enters into the local area and are meant for consumption, use or sale therein. sic [Since the goods which are imported from other countries are entering into the local area and are meant for consumption, use or sale thereunder, provisions of Section 3 of the Karnataka Entry Tax Act could not be invoked].

Writ petition having no force is dismissed.