M/S. WIDIA (INDIA) LTD. AND ORS. versus THE STATE OF KARNATAKA AND ORS.

Citation: [2003] SUPP. 2 S.C.R. 822 · Decided: 21-08-2003 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Dismissed

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Judgment (excerpt)

A 
M/S. WIDIA (INDIA) LTD. AND ORS. 
v. 
THE ST A TE OF KARNA T AKA AND ORS. 
AU(JUST 21, 2003 
B 
[M.B. SHAH AND DR. AR. LAKSHMANAN, JJ.] 
Karnataka Tax on Entry of Goods Ayt, I979 (as amended): 
Section 3-Amendment of section 3 of I979 Act by Act No. 8 of 1993 
C empowering imposition of tax on entry of goods retrospectively or prospectively 
by State Government by notification on different dates-However sanction of 
the President not obtained-Constitutional validity of-Held: levy of tax 
retrospectively or prospectively in section 3(1) would not make the section 
restrictive which can be hit by Article 301 requiring sanction of President 
D under Article 304(b)-However subsequent notification issued may in some 
cases amount to restriction to free trade and commerce-Furthermore, once 
it is conceded that the imposition of tax is compensatory or regulatory in 
nature, sanction of the President under Article 304(b) is not required-
Constitution of India, I950-Articles 301 and 304(b) proviso. 
E 
Section 3(/)-Notification of 23.9. 1998 empowering the authority to 
levy and collect tax from 1.4. 1994 to 6. 1.1998 after removing the defects 
pointed out in previous notifications of 30.3.1994 and 31.3.1997-
Constitutional validity of-Held: Normally State Government in exercise of 
its powers under Section 3(1) would not levy tax with retrospective effect but 
F it can do the same to validate the tax levied earlier by removing the defects 
pointed out by the previous decision and it cannot be said that it has acted 
beyond its jurisdiction. 
Section 2(A)(5)-Karnataka Industrial Areas Development Act, 1966-
Section 3-.lndustrial area declared under Section 3-Whether covered under 
G local area under Section 2(A)(5)--Held: Such area does not cease to be part 
of municipal corporation'or area of municipality or panchayat-:- Hence 
covered by the definition of 'local area' under Section 2(A)(5) of the Act. 
The constitutional validity of the Karnataka Tax on Entry of Goods into 
Local Areas for Consumption, Use or Sale Therein Act, 1979 and also the 
H 
822 
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WIDIA(INDIA) LTD. v. STATE 
823 
notifications issued under Section 3 of the Act were challenged. This Court A 
in Hansa Corporation's case held that the Act having received the assent of 
the President was saved by Article 304 and could not be struck down on the 
ground of being violative of Article 301. Later on the Act was amended and 
named as Karnataka Tax on Entry of Goods Act, 1979. Section 3 of the Act 
empowered the State Government to levy entry tax on goods by issuing B 
notification. Section 3 was amended by Act No. 8of1993 whereby for words 
'by the State Government by notification from time to time', words 
'retrospectively or prospectively by the State Government tiy notification and 
different dates' were substituted. Governor's assent was obtained but not the 
assent of the President. Thereafter Act No. 45 of 1994 was enacted after 
obtaining assent of the President and also Act No. 3 of 1995. 
C 
Government ofKarnataka issued a notification levying tax on the entry 
of goods brought into local area from any place outside the State for 
consumption and use therein. The notification was challenged and during 
pendency of the writ petitions, the said notification was amended and for the D 
words 'from any place outside the State for consumption or use' the words 
'where such entry is for consumption or use of such goods and such goods 
have not suffered tax under the Karnataka Sales Tax Act, 1957' was 
substituted. This notification was also challenged. High Court held that the 
levy of tax on entry of goods was compensatory in nature and not restrictive 
E 
requiring any previous sanction or assent of the President and hence not 
illegal for want of assent; and that the notifications were discriminatory and 
ultra vires. Thereafter, appeals were filed. Since the above notifications were 
already superseded by notifications of7.l.1998 and 23.9.1998 which were 
retrospective in character, State's appeal became infructuous. In the other 
appeal this Court set aside the High Court's order that the entry tax was p 
compensatory in nature and granted liberty to the High Court to examine the 
question afresh while deciding the writ petition filed challenging the 
subsequent notifications. The subsequent notification of7.1.1998 provided rate 
of tax on entry of goods into a local area for consumption, use or sale therein 
which was brought in consonance with

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