Giriraj Enterprises Vs State of Karnataka (Karnataka High Court)
HC held that The Notification impugned dated 1.10.2013 issued by the Government of Karnataka insofar it relates to the amendment made to the Notification dated 30.3.2002 for insertion of sub-item [ii] in Serial No.[5], specifying unmanufactured tobacco in ‘sealed container’ for levy of Entry Tax at 5% with effect from 02.10.2013 cannot be held to be unjustifiable and is accordingly upheld.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
The petitioners have challenged the Notification-III No.FD 208 CSL 2013 dated 1.10.2013 issued by the Government of Karnataka insofar as it relates to the amendment made to the Notification No.FD 11 CET 2002 dated 30.3.2002 for insertion of sub-item (ii) in Sl.No.(5) therein specifying “unmanufactured tobacco in sealed container” for levy of entry tax at 5% with effect from 2.10.2013.
2. The petitioners are dealers registered under the Karnataka Value Added Tax Act, 2003 (‘KVAT Act’ for short), Central Sales Tax Act, 1956 (‘CST Act’ for short) and Karnataka Tax on Entry of Goods Act, 1979 (‘KTEG Act’ for short).
3. The petitioners are engaged in the business of unmanufactured tobacco in the brand names Ghai Chhap Zarda, Thambaku, Badshaw, Singam. It is submitted that unmanufactured tobacco is obtained by beating, crushing and sieving the raw tobacco. The said unmanufactured tobacco is packed in sachets and sold.
4. It is submitted that the Notification issued by the State Government dated 1.10.2013 amending the Notification dated 30.3.2002 with effect from 2.10.2013 insofar as levying tax at 5% on sub-item (ii) of item No. 5 namely “unmanufactured tobacco in sealed container” is against the First schedule to the KTEG Act.
5. Learned counsel for the petitioners submitted that the State Government has no power to levy entry tax on the unmanufactured tobacco in sealed container contrary to Articles 301 and 304 (b) of the Constitution of India. Reliance was placed on the following judgments:
1. Avinyl Polymers Pvt. Ltd., Vs. State of Karnataka and others reported in (1998) 109 STC 26;
2. Commissioner of Central Excise, Kanpur Vs. Ravindra and Company reported in 2000(120) ELT 699 (Tri) Delhi;
3. M/s. Bellary Steels and Alloys ltd., and Others V/s. State of Karnataka reported in [2001] 123 STC 189 [Kar.HC]
6. It was further contended that sub item(i) in item No.5 of the Notification dated 30.3.2002 if to be construed as including all tobacco products of all description, no sub-item(ii) would have been specified by the State Government in terms of the notification dated 01.10.2013. The action of the State Government in classifying sub item(ii) separately would indicate that the said goods are not part of sub-item (i) of item No. 5 described. Unmanufactured tobacco would not come within the ambit of Entry 96 of the First Schedule. It was argued that by Act No.3 of 1995, with effect from 6.9.1994, First schedule to the KTEG Act has received the assent of the President. No sanction of the President is accorded to fix the tax liability on the unmanufactured tobacco in a sealed container. The item Nos.1 to 102 of the First schedule enumerates the goods leviable to entry tax. That being the position, no other goods are exigible to levy of entry tax even under item No.103 unless the assent of the President is accorded to. Further, no sanction is accorded by the President to any of the subsequent amendments post 2.10.2013. Hence, the Notification impugned is hit by Article 304[b] of the Constitution.
7. Learned counsel for the Revenue would submit that Sl. No. 96 of the First schedule is exhaustive and includes tobacco products of all descriptions both manufactured and unmanufactured. There is no cause of action for the petitioners to approach this court challenging the Notifications impugned.
8. Learned counsel referred to the Order of this court in the case of M/s Global Associates Vs. Union of India in W.P.Nos.56586-56588 of 2018 disposed of on 24.1.2019.
9. I have carefully considered the rival submissions of the learned counsel appearing for the parties and perused the material on record.
10. Section 3[1] of the KTEG Act provides that the tax on entry of goods specified in the First schedule into a local area for consumption, use or sale therein shall be levied at such rates not exceeding 5% of the value of the goods as may be specified retrospectively or prospectively by the State Government by Notification, with different dates and different rates specified in respect of different goods or different classes of goods or different local areas. Thus, the charging Section shall be effective only on the notification issued by the State Government under Section 3(1) of the KTEG Act in respect of any of the goods enumerated under the first schedule to the Act.
11. Entry 96 of the first Schedule reads thus:
“Tobacco products of all description including beedies, cigarettes, cigars, churuts, zarda, quimam, etc.,”
12. Notification dated 30.3.2002 was issued by the State Government levying entry tax on certain goods.
Entry 5 of the said notification is extracted hereunder:
“Tobacco products of all description including cigarettes, cigars, churuts, zarda, quimam, etc., but excluding snuff
[i] Gutka
[ii] Beedies.”
13. The said Notification has been amended by the Notification dated 1.10.2013 with effect from 2.10.2013. In the table, for Sl.No.5 and entries relating thereto, the following has been substituted.
