STATE OF KARNATAKA & ANR. versus M/S. HANSA CORPORATION

Citation: [1981] 1 S.C.R. 823 · Decided: 25-09-1980 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

STATE OF KARNATAKA & ANR. 
v. 
MIS. HANSA CORPORATION 
Se,ptember 25, 1980 
[Y. V. CHANDRACHUD, C. J. AND D. A. DESAI, J.] 
Karnataka Tax on Entry of Goods into Local Areas for Consumption. Use 
er Sale therein Act, 1979-Section 3-Validity of-Power of State Government 
./9 levy tax on select goods entering some local areas--State if bound to impose 
iax on all goods entering any local area. 
The Karnataka Tax on Entry of Goods Into Local Areas for Consumption, 
Use or Sale therein Act 1979 was enacted by the State Legislature to levy tax 
"on certain select goods at the time of their entry into a local area. 
This tax 
was devised to off set the short fall in the funds of municipal and other local 
bodies by reason of the abolition of octroi which by experience was found 
to impede the development of trade and commerce. 
, Section 3 of the impugned Act provides that the tax shall be levied on 
entry of the sc11eduled goods into a local area for consumption, use or sale 
therein at such rate as may be specified by the State Government and different 
Tates may be specified for different local areas. 
By a notification issued under section 3 of the Act the State Government 
-specified 27 local areas in the State which could levy the· tax on scheduled 
:goods and specified the rate of tax for each such local area therein. The Sche" 
<luled goods are all varieties of textile; tobacco, sugar and the like. 
Upholding the two principal contentions, among others, raised by the 
appellants in their writ petitions before the High Court that (i) section 3 
·does not empower the State Government to apply the provisions of the Act 
to such local areas only and to exclude other local areas and (ii) the levy of 
tax on all dealers irrespective ·of the value of scheduled goods brought by 
them into a local area without exempting petty dealers imposes an unreasonable 
restriction on the right to carry articles, the High Court struck down the 
Act as invalid. 
Allowing the appeal 
HELD : The express pewer of choosing and specifying different 
rates 
subject to maximum for different local areas is conferred on the State Gov-
ernment not by the expression 'such rate' but by the expression 'rates' with 
the adjectival clause 'different rates may be specified for different local areas'. 
It was, therefore, not necessary to qualify the expression 'such rate' again by 
the expression 'as may be specified by the State Government' because that 
823 
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824. 
SUPREME COURT REPORTS 
[1981] 1 S.C.R.. 
A:. 
is covered by the express power conferred by the expression 'different rates' 
may be specified for different local areas'. 
The use of article 'a' before 'local' 
area' signifies not every local area but any local area. [831C-DJ 
B 
c 
D 
E 
F 
G 
H 
In l'e. Sanders; ex part~ Serqueant, Law Journal (1885). 54 Q.B. 331, The 
Queen v. Justices of Durham, [1895] 1 Q.B. 801, Coast Brick & Tile Works Ltd~ 
& Ors. v. Prem Chand Raicharnd & Anr. [1%7] 1 Appeal Cases 192 referred to. 
~ 
Although, the taxing event is entry of scheduled goods in a local area, 
section 3 empowers the State Government to specify different rates of tax. 
in respect of different scheduled goods for different local areas. A local area 
means an area in a city governed by the Karnataka Municipalities Act or a 
municipal corporation governed by the Karnataka Municipal Corporation Act. 
The local areas vary immensely 
both in dimension, 
population, 
industrial 
growth, and the scale and kind of municipal services rendered by them. If the 
argument that 'a local area' should be interpreted to mean 'every local 11.rea' 
is accepted it would be obligatory on the State Government to levy tax on entry 
of scheduled goods in every local area. It would be unjust and inequitable 
to levy tax on entry of goods at the same rates for a big municipal corporation 
and a small municipal area, 
each of which does not stand comparison with 
the other. The choice to select local areas is a necessary concomitant of a 
choice to select the rates which is a power conferred on the State Govemme~t. 
The purpose underlying the statute, namely, to provide financial assistance to 
the municipalities would be better effectuated if the tax realised considerably 
outweighs the administrative cost in collection. The High Court fell into an 
error because it adopted a literal, grammatical construction and overlooked 
the underlying object of the Act and the historical background in le

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