Orissa Entry Tax Act, 1999 – Orissa Municipal Act, 1950 The Constitution of India – Article 243Q, Schedule 7th Entry 52 of List II – Whether the exclusion of an industrial area or areas from the limits of municipal councils or municipalities under the state laws in exercise of statutory power or by virtue of a declaration under proviso to Article 243Q, would result in that area ceasing to be a “local area” within Entry 52 of List II and consequently precluding State from levying and collecting entry tax from those areas – Held: The nature of services provided in industrial areas are relevant factors taken into account by the State or Governor while issuing exemptions under municipal laws or proviso to Article 243Q (1) – These, however, do not in any manner impact or undermine the fact that such industrial areas or estates are equally “local areas” – Diamond Sugar Mills itself acknowledged that the word “local” means relating to or “pertaining to a place” – Supreme Court also very pertinently held that a local area is one which is administered by municipal law, district board or a local board, union board, a panchayat or some body constituted by the Government for the governance of local affairs of any part of the State – The application of state laws regarding industrial areas, therefore, squarely falls within the expression “description of a body constituted for the purposes of local affairs of the State” since no one denies that industrial areas are also part of the State - The object of the levy, i.e., entry tax, is the regulation of entry of goods in a regular area for consumption, i.e., manufacture, use or sale – There is no dispute that entry of goods into an industrial area or estate is for their use for manufacturing or for processing or for the purposes of their delivery as their ultimate point of destination, i.e. for the purpose of their “consumption, use or sale” within that area – It could even be that the goods enter within the industrial area or estate, as the ultimate point of destination for their use – In any case, the levy would be attracted because the incidence is the entry into the local area.
Dismissing the special leave petition and appeals, the Court
HELD:
1.1 The provisions in Part IX-A of the Constitution provide for constitution of municipalities, their duration, powers and responsibilities of authorities of the municipalities. Municipalities were conceived as vibrant democratic units of self-governance. Their term or duration was provided to be for five years; regular elections, to elect representatives of municipalities was contemplated. The special features of the municipalities contemplated by the provisions contained in Part IX-A, however need not be present in other bodies created by law, such as Boards, etc. Such statutory bodies, like industrial estates may perform some municipal functions. However, that some municipal functions are performed by such bodies ipso facto does not result in their acquiring the features of municipalities which are contemplated by Part IX-A of the Constitution. [Para 43][691-FH; 692-A]
1.2 The introduction of Part IX-A by the 74th Amendment to the Constitution was with the intention of strengthening units of local self-government, and ensuring that they were subjected to minimum democratic standards. The proviso to Article 243-Q (1), therefore, has to be read in context, that industrial areas and estates, administered in terms of some legal regime, where some municipal services were provided, could be exempt from the requirements spelt out in Part IX-A of the Constitution. These provisions spell out the elements of democratic governance, such as representation of different Sections of society, regularity of elections, a three-tier structure of local government, reservation, mechanism for deciding election disputes, and elected bodies which were tasked with decision making in regard to various heads or subject matter, that concerned people at village, taluk and District levels. [Para 44][692-B-E]
1.3 The focus of provisions of Part IX-A of the Constitution inserted through the 74th Amendment was on local self-governance and all provisions concerning it. It had no relevance to the issue of State taxation. Furthermore, the exercise of power by the Governor to exclude from the limits of a municipal area, industrial estates or large areas that were predominantly industrialised areas is upon the condition that such areas provided a minimum modicum of municipal services. The pattern of State enactments - which emerges from a reading of various decisions of this Court is that every State has a set of municipal or local self-governance laws, such as those dealing with municipalities, cantonments, panchayats, gram panchayats, etc., on the one hand, and those that deal with industrial areas - as for instance, the UPIAD Act, Gujarat Industrial Development Act, 1962 etc. on the other. The latter enactments prescribe the kind of services (analogous to the municipal services provided by the municipalities) that every industrial area has to provide. Given these circumstances, the exemption from application of municipality laws or such enactments in relation to industrial areas - as also the exemption from the application of Part-IX A by virtue of proviso to Article 243-Q (1) is to exclude the application of certain requirements, such as election etc. As far as the nature of services provided in industrial areas are concerned, those are relevant factors taken into account by the State or Governor while issuing exemptions under municipal laws or proviso to Article 243Q (1). These, however, do not in any manner impact or undermine the fact that such industrial areas or estates are equally “local areas”. Diamond Sugar Mills Ltd. and Ors. v. The State of Uttar Pradesh and Ors [1961] 3 SCR 242. itself acknowledged that the word “local” means relating to or “pertaining to a place”. This Court also very pertinently held that a local area is one which is administered by municipal law, district board or a local board, union board, a panchayat or somebody constituted by the Government for the governance of local affairs of any part of the State. The application of state laws regarding industrial areas, therefore, squarely falls within the expression “description of a body constituted for the purposes of local affairs of the State” since no one denies that industrial areas are also part of the State. The record in the present case indicates that the areas excluded from the municipality in OCL’s case comprise of several villages. The material on record placed by SAIL also acknowledges that not less than 24,000 houses exist in its industrial area. Likewise in the case of HINDALCO as also SAIL indicate that the industrial estates or area cover large areas. If one keeps these facts in mind, there can be no doubt that such areas would fall within the description “local areas” [Para 45][692-E-H; 693-A-E]
1.4 The object of the levy, i.e., entry tax, is the Regulation of entry of goods in a regular area for consumption, i.e., manufacture, use or sale. There is no dispute that entry of goods into an industrial area or estate is for their use for manufacturing or for processing or for the purposes of their delivery as their ultimate point of destination, i.e., for the purpose of their “consumption, use or sale” within that area. It could even be that the goods enter within the industrial area or estate, as the ultimate point of destination for their use. In any case, the levy would be attracted because the incidence is the entry into the local area. [Para 48][694-D-E]
Sri Prithvi Cotton Mills v. Baroda Borough Municipality & Ors. [1970] 1 SCR 388; Diamond Sugar Mills Ltd. & Anr. v. State of Uttar Pradesh & Anr. (1961) 3 SCR 242; State of Karnataka v. Hansa Corporation [1981]
1 SCR 823; Shaktikumar M. Sancheti & Anr. V. State of Maharashtra & Ors. (1995) 1 SCC 351 : [1994] 6 Suppl. SCR 98; Saij Gram Panchayat v. State of Gujarat & Ors. (1999) 2 SCC 366; MGR Industries Association & Anr. V. State of Uttar Pradesh & Ors. (2017) 3 SCC
494 : [2017] 1 SCR 604; Kishansing Tomar v. Municipal Corporation of the City of Ahmedabad & Ors. (2006) 8 SCC 352 : [2006] 7 Suppl. SCR 454; Navinchandra Mafatlal v. Commissioner of Income Tax [1955] 1 SCR 829; New Okhla Industrial Development Authority v Commissioner of Income Tax (2018) 9 SCC 351; Jindal Stainless Ltd. & Anr. V. State of Haryana & Ors. (2006)
7 SCC 241 : [2006] 3 SCR 1095; Union of India v. RC Jain (1981) 2 SCC 308 : [1981] 2 SCR 854; ITC Ltd. v. Agriculture Produce Market Committee (2002) 9 SCC
232 : [2002] 1 SCR 441; Housing Board of Haryana v Haryana Housing Board Employees’ Union (1996) 1 SCC 95 : [1995] 4 Suppl. SCR 53 – referred to.
Case Law Refrence
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Para 49
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Para 1
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Para 32
[1994] 6 Suppl. SCR 98
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Para 32
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Para 36
[2006] 7 Suppl. SCR 454
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Para 42
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Para 47
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Para 5
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Para 11
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Para 16
[1995] 4 Suppl. SCR 53
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Para 11
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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