M/S. OCL INDIA LTD versus STATE OF ORRISA AND ORS. on 4 November 2022

[2022] 18 S.C.R. 669

M/S. OCL INDIA LTD.

v.

STATE OF ORRISA AND ORS.

(Civil Appeal No. 2348 of 2004)

NOVEMBER 04, 2022

[UDAY UMESH LALIT, CJI, S. RAVINDRA BHAT ANDJ. B. PARDIWALA, JJ.]

Orissa Entry Tax Act, 1999 – Orissa Municipal Act, 1950 -The Constitution of India – Article 243Q, Schedule 7[th] Entry 52 ofList II – Whether the exclusion of an industrial area or areas fromthe limits of municipal councils or municipalities under the statelaws in exercise of statutory power or by virtue of a declarationunder proviso to Article 243Q, would result in that area ceasing tobe a “local area” within Entry 52 of List II and consequentlyprecluding State from levying and collecting entry tax from thoseareas – Held: The nature of services provided in industrial areasare relevant factors taken into account by the State or Governorwhile issuing exemptions under municipal laws or proviso to Article243Q (1) – These, however, do not in any manner impact orundermine the fact that such industrial areas or estates are equally“local areas” – Diamond Sugar Mills itself acknowledged that theword “local” means relating to or “pertaining to a place” – SupremeCourt also very pertinently held that a local area is one which isadministered by municipal law, district board or a local board, unionboard, a panchayat or some body constituted by the Governmentfor the governance of local affairs of any part of the State – Theapplication of state laws regarding industrial areas, therefore,squarely falls within the expression “description of a bodyconstituted for the purposes of local affairs of the State” since noone denies that industrial areas are also part of the State - Theobject of the levy, i.e., entry tax, is the regulation of entry of goodsin a regular area for consumption, i.e., manufacture, use or sale –There is no dispute that entry of goods into an industrial area orestate is for their use for manufacturing or for processing or forthe purposes of their delivery as their ultimate point of destination,i.e. for the purpose of their “consumption, use or sale” within thatarea – It could even be that the goods enter within the industrial

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Aarea or estate, as the ultimate point of destination for their use – Inany case, the levy would be attracted because the incidence is theentry into the local area.

Dismissing the special leave petition and appeals, the Court HELD:B

1.1 The provisions in Part IX-A of the Constitution providefor constitution of municipalities, their duration, powers andresponsibilities of authorities of the municipalities. Municipalitieswere conceived as vibrant democratic units of self-governance.Their term or duration was provided to be for five years; regularCelections, to elect representatives of municipalities wascontemplated. The special features of the municipalitiescontemplated by the provisions contained in Part IX-A, howeverneed not be present in other bodies created by law, such asBoards, etc. Such statutory bodies, like industrial estates mayDperform some municipal functions. However, that some municipalfunctions are performed by such bodies ipso facto does not resultin their acquiring the features of municipalities which arecontemplated by Part IX-A of the Constitution. [Para 43][691-F-H; 692-A]

E1.2 The introduction of Part IX-A by the 74th Amendmentto the Constitution was with the intention of strengthening unitsof local self-government, and ensuring that they were subjectedto minimum democratic standards. The proviso to Article 243-Q(1), therefore, has to be read in context, that industrial areas andestates, administered in terms of some legal regime, where someFmunicipal services were provided, could be exempt from therequirements spelt out in Part IX-A of the Constitution. Theseprovisions spell out the elements of democratic governance, suchas representation of different Sections of society, regularity ofelections, a three-tier structure of local government, reservation,Gmechanism for deciding election disputes, and elected bodieswhich were tasked with decision making in regard to variousheads or subject matter, that concerned people at village, talukand District levels. [Para 44][692-B-E]

1.3 The focus of provisions of Part IX-A of the Constitutioninserted through the 74th Amendment was on local self-H

governance and all provisions concerning it. It had no relevanceto the issue of State taxation. Furthermore, the exercise of powerby the Governor to exclude from the limits of a municipal area,industrial estates or large areas that were predominantlyindustrialised areas is upon the condition that such areas provideda minimum modicum of municipal services. The pattern of Stateenactments - which emerges from a reading of various decisionsof this Court is that every State has a set of municipal or localself-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, theUPIAD Act, Gujarat Industrial Development Act, 1962 etc. onthe other. The latter enactments prescribe the kind of services(analogous to the municipal services provided by themunicipalities) that every industrial area has to provide. Giventhese circumstances, the exemption from application ofmunicipality laws or such enactments in relation to industrial areas- as also the exemption from the application of Part-IX A by virtueof proviso to Article 243-Q (1) is to exclude the application ofcertain requirements, such as election etc. As far as the natureof services provided in industrial areas are concerned, those arerelevant factors taken into account by the State or Governor whileissuing exemptions under municipal laws or proviso to Article243Q (1). These, however, do not in any manner impact orundermine the fact that such industrial areas or estates are equally“local areas”. Diamond Sugar Mills Ltd. and Ors. v. The State ofUttar Pradesh and Ors [1961] 3 SCR 242. itself acknowledgedthat the word “local” means relating to or “pertaining to a place”.This Court also very pertinently held that a local area is one whichis administered by municipal law, district board or a local board,union board, a panchayat or somebody constituted by theGovernment for the governance of local affairs of any part of theState. The application of state laws regarding industrial areas,therefore, squarely falls within the expression “description of abody 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 excludedfrom the municipality in OCL’s case comprise of several villages.The material on record placed by SAIL also acknowledges that AB

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Anot less than 24,000 houses exist in its industrial area. Likewisein the case of HINDALCO as also SAIL indicate that the industrialestates or area cover large areas. If one keeps these facts inmind, there can be no doubt that such areas would fall within thedescription “local areas” [Para 45][692-E-H; 693-A-E]

B1.4 The object of the levy, i.e., entry tax, is the Regulationof entry of goods in a regular area for consumption, i.e.,manufacture, use or sale. There is no dispute that entry of goodsinto an industrial area or estate is for their use for manufacturingor for processing or for the purposes of their delivery as theirultimate point of destination, i.e., for the purpose of theirC“consumption, use or sale” within that area. It could even bethat the goods enter within the industrial area or estate, as theultimate point of destination for their use. In any case, the levywould be attracted because the incidence is the entry into thelocal area. [Para 48][694-D-E]

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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 SCR242; State of Karnataka v. Hansa Corporation [1981]1 SCR 823; Shaktikumar M. Sancheti & Anr. V. StateEof Maharashtra & Ors. (1995) 1 SCC 351 : [1994] 6Suppl. 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 SCC494 : [2017] 1 SCR 604; Kishansing Tomar v. MunicipalCorporation of the City of Ahmedabad & Ors. (2006) 8FSCC 352 : [2006] 7 Suppl. SCR 454; NavinchandraMafatlal v. Commissioner of Income Tax [1955] 1 SCR829; New Okhla Industrial Development Authority vCommissioner of Income Tax (2018) 9 SCC 351; JindalStainless Ltd. & Anr. V. State of Haryana & Ors. (2006)G7 SCC 241 : [2006] 3 SCR 1095; Union of India v. RCJain (1981) 2 SCC 308 : [1981] 2 SCR 854; ITC Ltd. v.Agriculture Produce Market Committee (2002) 9 SCC232 : [2002] 1 SCR 441; Housing Board of Haryana v Haryana Housing Board Employees’ Union (1996) 1ASCC 95 : [1995] 4 Suppl. SCR 53 – referred to.

Case Law Refrence

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2348of 2004.

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From the Judgment and Order dated 28.02.2003 of the High Courtof Orissa at Cuttack in O.J.C. 14424 of 1999.

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S.L.P (Civil) No. 15179 of 2008, C.A. Nos. 4649-4650 of 2012,Civil Appeal No. 289 of 2012.

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S.K. Bagaria, Rakesh Dwivedi, Sr. Advs., Sunil Kumar Jain,Pawanshree Agrawal, Kumar Ajit Singh, Ms. Rashika Swarup,Ms. Kanika Kalayasaran, Ajit Singh, Zeeshan Rizvi, Anas Zaidi, SyedShahid Hussain Rizvi, Ms. Kirti Renu Mishra, Ms. Monika Dwivedi,Arya Tripathy, Ms. Apurva Upmanyu, Braj Kishore Mishra, AbhishekGYadav, Kanhaiya Priyadarshi, Bhakti Vardhan Singh, Advs. for theappearing parties.

AThe Judgment of the Court was delivered byS. RAVINDRA BHAT, J.

1. Since common questions of law relating to the interpretation of“local area” occurring under Entry 52 of List II of the Seventh Scheduleto the Constitution are involved, this Court by its order dated 26.03.2015Breferred the issue for the decision of a larger bench. The referenceorder took note of a previous Constitution Bench ruling in DiamondSugar Mills Ltd. & Anr. v. State of Uttar Pradesh & Anr.[1] where thecourt held that a “local area” would be an area which is administered bya local body such as a municipality, a district Board, a local board, aCPanchayat or the like and that factory premises are not covered by theaforesaid expression. The court also took note of the Constitution(Seventy-fourth) Amendment Act, 1992 which introduced Article 243-Q relating to the constitution and administration of municipal bodies andheld that having regard to these developments, the issues which needadjudication in the present appeals have to be considered by a largerDbench. Hence, the appeals are listed before this Bench.

2. For a proper determination of the issues involved, it would benecessary first to notice Entry 52 of List II which authorises StateLegislatures to levy entry tax:

E“taxes on the entry of goods into a local area for consumption,use or sale therein”.[2]

3. The term “local area” has not been defined in the Constitution;however, by Article 367, provisions of the General Clauses Act, 1897,subject to adaptations or modifications made under Article 372 shall applyFfor interpretation of the Constitution. The General Clauses Act, 1897does not per se define a local area, however, it does define a “localauthority”, by Section 2(31) in the following terms:

“(31) “local authority” shall mean a municipal committee,district board, body of port Commissioners or other authoritylegally entitled to, or entrusted by the Government with, theGcontrol or management of a municipal or local fund.”

1 (1961) 3 SCR 242

2 This entry was omitted by the Constitution (One Hundred and First) AmendmentHAct, 2016.

4. The State of Orissa enacted the Orissa Entry Tax Act, 1999(hereafter, “the Orissa Act”) which defined the local area so as to includeindustrial townships among other areas[3] including areas within theindustrial township constituted under Section 4 of the Orissa MunicipalAct, 1950 (hereafter “the 1950 Act”), thereby subjecting goods enteringinto such areas, to entry tax.[4] . The 1950 Act, by Section 4 provides thatthe State Government can constitute (a) a notified area council for every“transitional” area; (b) a municipal council for every smaller urban area;and (c) a municipal corporation for every larger urban area. The provisoto Section 4(1), however, indicates that no such council or corporation:

“shall be constituted in any urban area or part thereof whichthe Governor may, having regard to the size of the area underMunicipal services being provided or proposed to be providedby an industrial establishment in that area and such otherfactors as he may deem fit, by notification, specified to be anindustrial township.”

5. Two of the appellants before this Court i.e., M/s. OCL IndiaLtd. and Steel Authority of India Ltd. (hereafter, “SAIL”) impugned theOrissa Act especially the levy of entry tax. SAIL contended that impositionof entry tax violates Article 301 of the Constitution. It relied upon thefive judge Bench decision in Jindal Stainless Ltd. & Anr. V. State ofHaryana & Ors.[5] This Court had held that whenever a law is impugnedas violative of Article 301, the court has to consider whether theenactment facially or patently indicates quantifiable data based on whichcompensatory taxes sought to be levied. The basis of SAIL’s writ petitionbefore the High Court was that the levy of entry tax on capital goodsand raw-materials imported into India and raw-materials used in thefactories or in work was unconstitutional. The High Court by its impugnedjudgment dismissed SAIL’s writ petition holding that the Orissa entry 3 (f) “Local area” means the areas within the limits of any –

(i) Municipality constituted under the Orissa Municipal Act,1950 (Orissa Act 23 of1950);

(ii) Grama Panchayat constituted under the Orissa Grama Panchayats Act, 1964 (OrissaAct 1 of 1965);

(iii) Other local authority by whatever name called, constituted or continued in any lawfor the time being in force, and includes the area within an industrial township constitutedunder Section 4 of the Orissa Municipal Act, 1950 (Orissa Act 23 of 1950).

4 By Section 3, a levy and collection of tax on the entry of scheduled goods into localarea for consumption, use or sale was imposed.

5 (2006) 7 SCC 241

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Atax did not violate any constitutional prohibition and was in conformitywith Article 304(a) of the Constitution. SAIL relied on notification dated15.04.1995 as modified on 07.03.1996 and 17.11.2014. It contended thatthe effect of these was to exclude the areas in its industrial area, whichwere part of the Rourkela Municipality; consequently, they ceased to bea “local area” under the Orissa Act.B

6. OCL challenged the levy imposed upon it contending that byvirtue of certain notifications dated 23.12.1998, the industrial townshipsset up by it were excluded from the local limits of the RajgangpurMunicipality It, therefore, argued that the inclusion of its industrialtownship as a local area by virtue of the definition of that term in theCOrissa Act was unconstitutional. OCL contended that having regard tothe agreement (hereafter “Agreement”)[6] which it had entered into withthe Municipal Council, in regard to the provision of services and thenature of services provided, its industrial township could not becharacterised as a local area. It also relied upon Article 243-Q of theDConstitution and contended that any enactment by the Parliament or the State Government had to conform to the amended Constitution, especiallyprovisions of Article 243-Q, the object of which was to exclude fromwithin the purview of municipalities and municipal bodies, industrialestablishments. Therefore, the imposed or levy of entry tax was void.The Writ Petitions of both OCL and SAIL were rejected by the OrissaEHigh Court.[7]

7. This batch also comprises of two appeals[8] preferred byHindustan Aluminium Company Ltd. (hereafter, “HINDALCO”). Bothappeals are directed against the common judgment rendered by theAllahabad High Court dated 23.12.2011, which had negatived theFcontentions urged by it [along lines similar to those advanced by OCLand SAIL, before the Orissa High Court]. The Allahabad High Court byits elaborate reasoning in the impugned judgment noticed not only theprovisions of the U.P. enactments but also took note of the definition oflocal area and referred to the other cognate statutes such as Uttar PradeshGMunicipalities Act, 1916; The Uttar Pradesh Kshetrra Panchayats And 6 Agreement for transfer of assets and liabilities etc. entered into between RajgangpurMunicipality and OCL India Ltd, Rajgangpur dated 26-03-1999.

7 By two separate Judgments dated 28.03.2003 in OJC No. 14424/1999 (which is thesubject matter of C.A. No. 2348/2004) and dated 18.02.2008 in W.P. 3019/2007 (whichis the subject matter of SLP No. 15179 /2008).

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8 Civil Appeal No 4649-50 of 2012 and Civil Appeal No 289 /2012

Zila Panchayats Adhiniyam, 1961; United Provinces Panchayat Raj Act,1947 and U.P. Industrial Area Development Act, 1976 (hereafter, “theUPIAD Act”).

HINDALCO, in its petitions had relied on notifications dated07.04.2000 which declared its industrial area, in Renukoot Sonebhadra,as an “industrial township” under the UPIAD Act.

8. It was held by the Allahabad High Court that the inclusion ofindustrial townships within the definition of the local area for the purposesof entry tax did not exceed any constitutional limit and also did not violateArticle 243-Q of Constitution.

A Submission of Parties

(i) Appellants’ contentions

9. It was argued by Mr Braj K Mishra, learned counsel for OCL,that no octroi was being levied or leviable in its notified industrial townshipand therefore, it is not covered by the definition of “local area” underEntry 52 of List II of the Seventh Schedule to the Constitution.Consequently, the levy of entry tax on entry of goods into such industrialtownship for use, sale or consumption therein must be declaredunconstitutional on the ground of incompetency of the State Legislatureto levy the same.

10. It was also submitted by the counsel that interpretation ofEntry 52 in List II (of the Seventh Schedule to the Constitution) declaredin Diamond Sugar Mills (supra) is applicable, even after introductionof Article 243-Q, under Part IX-A of the Constitution. The purpose ofintroducing that provision was to strengthen functioning of local bodiesbecause they were unable to perform effectively as vibrant units of self-government. The proviso to the article allows the Governor to excludean area industrial establishment in which an industrial township may beset up and in which certain municipal services may be provided by suchestablishment. Counsel submitted that such industrial establishmentcannot be equated with an area administered by local authority i.e., localself-government such as a municipal or town area. Therefore, its exclusion,by the proviso to Article 243-Q meant that it could not be considered asa local area, under any law, made by any state. The levy of entry tax,into such areas covered by industrial establishments, lawfully declaredas such, therefore, had to fail.

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A11. OCL’s counsel also relied on the ruling of this Court in Unionof India v RC Jain[9] and Housing Board of Haryana v HaryanaHousing Board Employees’ Union[10]and urged that OCL does notpossess attributes and features or any power or functions of a ‘localauthority’ like Municipal Committees, District Boards, Gram Panchayats,and Panchayat Samitis. Thus, its ‘Industrial Township’ cannot beBconstrued to fall within the expression “Local Area” used in the SeventhSchedule to the Constitution. Reliance was also placed on DiamondSugar Mills Limited (supra) to argue that though the interpretation ofthe term ‘local area’ was given in respect of factory premises, theinterpretation must not be limited only to a case of factory premises. ThisCCourt in Diamond Sugar Mills (supra) held that:

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“15. The etymological meaning of the word “local” is“relating to” or “pertaining to”a place. It may be first observedthat whether or not the whole of the State can be a “localarea”, for the purpose of Entry 52, it is clear that to be aD“local area” for this purpose must be an area within the State.

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28. The premises of a factory is therefore not a “local area”.

12. OCL relied on the Agreement between OCL and theEMunicipality to state that OCL’s premises are excluded from theRajgangpur Municipal area after its declaration as an Industrial Township.Further, Clause 5 of the minutes of discussions[11] dated 01-02-1999between the State Government, Rajgangpur Municipality, and OCLdeclares that goods procured by OCL will not be liable for octroi. Learnedcounsel submitted that once the OCL is exempted from payment ofFoctroi, the State Government cannot impose entry tax on goods procuredby it since octroi duty is basically the predecessor of entry tax.

13. Counsel for SAIL, Mr. S.K. Bagaria, relied on the dicta inDiamond Sugar Mills (supra) and also placed reliance on New OkhlaIndustrial Development Authority v Commissioner of Income Tax[12]G(hereafter, “NOIDA”) to contend that Article 243-Q of the Constitutionof India does not contemplate constitution of an industrial establishment 9 (1981) 2 SCC 308

10 (1996) 1 SCC 95

11 No 249/Res Re: formation of committee for settlement of assets and liabilities etc.between OCL India Ltd. and Rajgangpur MunicipalityH12 (2018] 9 SCC 351

as a municipality and thus merely because OCL was providing municipalservices in its area, it cannot be said that OCL is a municipality. Thecourt noted in NOIDA (supra) that:

“31. …exemption from constituting Municipality does not leadto mean that the industrial establishment which is providingmunicipal services to an industrial township is same asMunicipality as defined in Article 243P€…..

Learned counsel also asserted that exemption given to OCL frompayment of octroi was made after taking into account that the amount of` 2 crores deposited by it would be enough to set off the loss of octroiand that the municipality was compensated for even the potential futureloss of revenue.

14. Mr Bagaria, learned senior, relied on Diamond Sugar Mills(supra) to urge that meaning of the term ‘local area’ as expounded inthat decision must be applied in the present case to declare SAIL’sindustrial area as not a ‘local area’ within the meaning of Entry 52 ofList II. It was further argued that merely because SAIL providedmunicipal services within its industrial township area, does not make itsarea a ‘municipality’ or ‘local authority’. Furthermore, no powers,authority and responsibilities of municipalities under Article 243-W[13] wereendowed upon SAIL by the State Government to enable it to function asan institution of self-government and neither has SAIL been authorizedto levy, collect and appropriate any taxes or duties or tolls or fee. Theexclusion of industrial establishments, was also in the light of proviso toArticle 243-Q. It was submitted that by Article 243-Q in every State, aNagar Panchayat for transitional areas (areas in transition from a rural 13 Article 243W - Powers, authority and responsibilities of Municipalities, etc.

Subject to the provisions of this Constitution, the Legislature of a State may, by law,endow—

(a) the Municipalities with such powers and authority as may be necessary to enablethem to function as institutions of self-government and such law may contain provisionsfor the devolution of powers and responsibilities upon Municipalities, subject to suchconditions as may be specified therein, with respect to—

(i) the preparation of plans for economic development and social justice;

(ii) the performance of functions and the implementation of schemes as may be entrustedto them including those in relation to the matters listed in the Twelfth Schedule;(b) the Committees with such powers and authority as may be necessary to enable themto carry out the responsibilities conferred upon them including those in relation to thematters listed in the Twelfth Schedule.

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Aarea to an urban area); a Municipal Council for a smaller urban area;and a Municipal Corporation for a larger urban area, has to be constituted.However, proviso to Article 243-Q exempts this requirement, in relationto declared industrial areas:

“Provided that a Municipality under this clause may not beBconstituted in such urban area or part thereof as the Governormay, having regard to the size of the area and the municipalservices being provided or proposed to be provided by anindustrial establishment in that area and such other factorsas he may deem fit, by public notification, specify to be anindustrial township.”C15. It was submitted that in the present cases, notifications underthe above provisions were issued, which meant that areas falling withinindustrial townships, were neither local areas, nor were they part ofmunicipalities. Relying extensively on Diamond Sugar Mills (supra), itwas argued that the definition of “local area” was conclusively declaredDby the Constitution Bench, in that decision, to be an area “administeredby a local body like a Municipal District Board, a local Board, aUnion Board a Panchayat or the like. The premises of a factory istherefore, not a ‘local area’”. It was urged that since the state law, byproviso to Section 4 (1) [i.e., Orissa Municipal Act, 1950] excludedEfrom its operation, industrial establishments, the declaration of law inDiamond Sugar Mills (supra) bound the state, which could not then,include industrial establishments as local areas.

16. It was argued by Mr Bagaria that by including the area ofindustrial township in the definition of local area in Section 2(f) of theFOrissa Act, the State Legislature went beyond its legislative competenceunder Article 246[14] read with Entry 52 of List II as there is no entry in 14 Article 246 - Subject-matter of laws made by Parliament and by the Legislatures ofStates

(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power tomake laws with respect to any of the matters enumerated in List 1 in the SeventhGSchedule (in this Constitution referred to as the “Union List”).

(2) Notwithstanding anything in clause (3), Parliament and subject to clause (1), theLegislature of any State 1[**] also, have power to make laws with respect to any of thematters enumerated in List III in the Seventh Schedule (in this Constitution referred toas the “Concurrent List”).

(3) Subject to clauses (1) and (2), the Legislature of any State 1[***] has exclusivepower to make laws for such State or any part thereof with respect to any of the mattersH

Seventh Schedule under which impugned legislation could have beenmade. Counsel also placed reliance on ITC Ltd v Agriculture ProduceMarket Committee[15] and argued that the scope of a constitutional taxationpower cannot be determined with reference to a Parliamentaryenactment. Otherwise, it would result in Parliament enacting and/oramending an enactment, thereby controlling the ambit and scope of theconstitutional provision which should not be sustained.

17. Learned senior counsel submitted, furthermore, that levy ofretrospective tax upon entry of goods, into industrial areas, was arbitrary,given that the original definition did not impose any tax, on goods whichentered into those areas or local limits.

18. Learned counsel appearing on behalf of HINDALCO adoptedthe submissions made on behalf of OCL and SAIL. Learned counseladditionally argued that the UP Entry Tax Act of 2007, to the extent itwas retrospective, has to be struck down, as it is unfair and arbitrary.

(ii) Respondents’ contentions

19. Mr. Rakesh Dwivedi, learned senior Advocate appearing onbehalf of the State of Orissa had submitted that the notifications covernot only the factory premises but also the other areas consisting of factorypremises, residential colonies, other areas including roads, sewage, severalcommon amenities, play fields, open spaces, and other associated facilitiesand thus claiming that only the factory premise of OCL constituteindustrial township should not be accepted.

20. Reliance was placed on the contents of the impugnednotification to submit that the industrial township was open to public useand the concerned Rajanagar Municipality has right of using severalamenities available including the drainage and sewage facilities to establishthat the Industrial Township was open to public use just like any otherIndustrial Township in the country.

21. Further, it was submitted that it was mutually agreed betweenthe parties that OCL shall pay ` 2 crores in four instalments by 31[st]

enumerated in List II in the Seventh Schedule (in this Constitution referred to as the‘State List’).

(4) Parliament has power to make laws with respect to any matter for any part of theterritory of India not included 2[in a State] notwithstanding that such matter is a matterenumerated in the State List.

15 (2002) 9 SCC 232

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AMarch 1999 as a compensation for loss of revenue that would haveotherwise accrued to the Municipality owing to OCL being declared anindustrial township. It cannot be said that octroi was not payable byOCL ipso facto on declaration of Industrial Township, but the mentionedamount was merely a compensation for loss on account of revenue fromoctroi. Further, octroi was not payable only by the OCL and otherBindustrial townships were still liable to pay octroi.

22. It was further submitted that the judgment of this Court inDiamond Sugar Mills (supra) is not applicable, as the court, in thatcase, confined the meaning of the expression “local area” to areas whereoctroi was being levied and which were administered by a local body. ItCwas also argued that this Court in Diamond Sugar Mills (supra) didnot consider the question of whether entire state can be declared a “localarea” which is contemplated under the present 1950 Act. Furthermore,the mere exclusion of an industrial estate or area does not render itimmune from entry tax, and there can be no dispute that it is a localDarea.

23. Counsel for the State of UP also submitted that the entireState is conglomerate of local areas and thus the distinction between‘local area’ and ‘state’ has disappeared for all practical purposes. It wasfurther contended that entry tax is levied by State and not by the ‘localEauthority’ and the levy was not restricted only to urban local area buteach local area inside the state.

24. It was further argued that levy imposed is compensatory incharacter and cannot be considered to offend Article 301[16] of theConstitution. Local areas cannot be treated as insulated pockets withinFa State and the facilities provided by the State are availed by local areasand they form essential part of intra-state trade. The interest of a localarea is the interest of the state and the State cannot neglect the interestsof local areas. Also, it need not be established that every amount collectedfrom the levy must be spent on trading facilities and only some connectionbetween trading facilities provided and taxes levied needs to beGestablished. The fact that OCL provides compensation for making themunicipal services available inside the limits of industrial township cannot 16 Article 301 - Freedom of trade, commerce and intercourse:Subject to the other provisions of this Part, trade, commerce and intercourse throughoutHthe territory of India shall be free.

be considered to be relevant as they are already receiving other benefitsin the form of other taxation reliefs.

25. It was further submitted that the Article 243-Q of theConstitution was inserted much after the judgment in Diamond SugarMills (supra). The idea behind that provision is a recent phenomenonand does not find any correspondence history of India before the adventof the Constitution. The concept had evolved on account of theemergence of large industries where employees also occupied spaceswhich are similar to virtual townships with municipal services beingprovided by industrial establishments.

26. The counsel sought to distinguish the present case fromNOIDA (supra) by arguing that while in latter, the court held that anindustrial township cannot be equated with a municipality defined underArticle 243-(P)(e)[17] as industrial township is specified on account ofnon-constitution of municipality, nevertheless the court did not decide animportant question that whether an industrial township constituted underproviso to Article 243-Q read with provisions of the UPIAD Act is anadministrative unit obligated to provide all municipal services envisagedby the municipal enactments in the area of the industrial township andtherefore its area would be a local area.

27. The learned senior advocate appearing for the respondentsalso sought to distinguish this case from Diamond Sugar Mills (supra)to argue that the latter involved a single factory premise while the formerinvolved an industrial township which is constitutionally enacted as provisoto Article 243-Q(1) of the Constitution. Here, the industrial township ischarged with rendering municipal services under a public notificationand thus, the Industrial Township is administering the rendering of serviceslike municipal services and the fact that industrial township is providingthe services free of cost would not change the constitutional status.

28. It was lastly submitted by the senior counsel that Entry 52must be interpreted in light of Part IX-A and Article 243 to theConstitution. Rendering municipal services is a precondition forspecification of industrial area, and OCL is likely to retain substantialnexus with the erstwhile or adjacent municipalities for certain definedpurposes, namely, registration of birth and death, planning, policing 17 Article 243P - Definitions… (e) ‘Municipality’ means an institution of self-governmentconstituted under Article 243Q ; A

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Apurposes, etc. It was further argued that industrial area is not excludedfrom the states’ territories and remain subject to state’s authority andlegislative powers. Their inclusion as “local area” for the levy andcollection of entry tax, is therefore not violative of any provision of theConstitution of India.

B. Analysis and Conclusions

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29. From the facts narrated and the arguments of parties, it isquite evident that the narrow issue requiring determination in these appealsis whether the exclusion of an industrial area or areas from the limits ofmunicipal councils or municipalities under the state laws in exercise ofCstatutory power or by virtue of a declaration under proviso to Article243-Q, would result in that area ceasing to be a “local area” withinEntry 52 of List II and consequently precluding State from levying andcollecting entry tax from those areas.

30. The Constitution Bench ruling in Diamond Sugar Mills Ltd.D(supra), which was heavily relied upon by the appellants, was renderedin the context of pointed authorization by the state enactment - U.P.Sugarcane (Regulations of State and Purchase) Act, 1953 in Section 20and the U.P. Sugarcane Cess Act, 1956 in Section 3 to State to collectentry tax “into the premises of a factory”. The challenge in that judgmentwas on the ground that the levy was invalid as it was beyond the legislativeEcompetence of the State – the argument being that the factory premisescould not be characterised as a “local area”. This Court analysed Entry52, by first considering the historical context in which it was enacted(for which it traced the previous legislation i.e., Entry 49 of List II of theSeventh Schedule to the Government of India Act, 1935). The courtFpreviously held that etymologically “local” is “relating to” or “pertainingto” a place.

31. Keeping these in mind, and also after considering the entry inEncyclopaedia Britannica relating “local area” for the purpose ofcollection of octroi as an indirect or consumption tax levied by politicalGunits, this Court concluded that under the Government of India Act, 1919imposed a levy on import of goods into an area administered by localbody i.e., a local government authority could be levied. This Court thenconcluded in Diamond Sugar Mills (supra) that:

22. “It was with the knowledge of the previous history of thelegislation that the Constitution-makers set about their taskH

in preparing the lists in the seventh schedule. There can bringtitle doubt therefore that in using the words “tax on the entryof goods into a local area for consumption, use or saletherein”, they wanted to express by the words “local area”primarily area in respect of which an octroi was leviable underitem 7 of the schedule tax rules, 1920- that is, the areaadministered by a local authority such as a municipality, adistrict Board, a local Board or a Union Board, “aPanchayat” or somebody constituted under the law for thegovernance of the local affairs of any part of the State.Whether the entire area of the State, as an area administeredby the State Government, was also intended to be included inthe phrase “local area”, we need not consider in the presentcase.”

32. The next decision of note is Shaktikumar M. Sancheti &Anr. V. State of Maharashtra & Ors.[18], where the challenge was tolevy under the Maharashtra Tax on Entry of Motor Vehicles into LocalAreas Act, 1987. It was contended that the incidence of tax was onpurchase value of motor vehicles and therefore the tax was really apurchase tax and further that a local area has a connotation of its ownas being understood or administered by local authority and tax on entryof vehicle into a state as whole was invalid. This court, after noticing theprevious decision in Diamond Sugar Mills (supra), held that the questionas to whether the entire area of a state was a local area had been leftundecided in that decision. The court then noticed that “local area” hadbeen used in several provisions of the Constitution, namely Articles 3(b),12, 245(1), 246, 277, 321, 323-A, and 371-D. The court upheld the decisionof the High Court that the taxable event is not the entry of a vehicle inany area of the state in a local area. The court also cited the previousholding in State of Karnataka v. Hansa Corporation.[19]

33. In Saij Gram Panchayat v. State of Gujarat & Ors.[20], thepanchayat sought for quashing of certain notifications and a StateGovernment resolution under which, in exercise of its power under Section16 of the Gujarat Industrial Development Act, 1962, the Kalol industrialarea was notified as a municipal area under Section 264A of the Gujarat 18 (1995) 1 SCC 35119 (1981) 1 SCR 82320 (1999) 2 SCC 366

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AMunicipalities Act, 1963. Another notification excluded that area fromthe Saij Gram Panchayat under Section 9(2) of the Gujarat PanchayatsAct, 1961. The contentions urged was that the notification and theresolution were contrary to Parts IX and IX-A of the Constitution ofIndia. This Court repelled the argument stating that the Gujarat IndustrialDevelopment Act, 1962 operates in a different sphere from Parts IXBand IX-A of the Constitution as well as the Gujarat Panchayats Act,1961 under the Gujarat Municipalities Act, 1962. The later enactmentsdealt with local self-government whereas the Gujarat IndustrialDevelopment Act, 1962 operates for orderly establishment andorganization of industries in the State. It was further noticed that theCindustrial areas had been notified long back in 1972.

34. This Court repelled the argument with respect to the violationof Article 243-Q. It was noticed that Article 243-Q constitutes threetypes of municipalities i.e. nagar panchayat, a municipal council and amunicipal corporation. It noted that by virtue of the proviso, and havingDregard to the size of the area, the nature of the municipal services providedor proposed to be provided by an industrial establishment, and otherrelevant factors – the Governor could by prior notifications specifiedthat area to be an industrial township.

35. It was therefore concluded that if an area under provisions ofEthe Gujarat Industrial Development Act, 1962, is equated with the industrialtownship under Article 243-Q, then there would be no breach of thatprovision. The Court then concluded as follows:

20. “Explaining the purpose behind Section 16 the HighCourt has rightly held that having regard to the powerFconferred upon the Gujarat Industrial DevelopmentCorporation in the matter of provision of amenities andcommon facilities in industrial estates and industrial areas,on levy of certain charges upon those who set up industriestherein, an industrial area would ordinarily be a self-sufficienttownship in itself which provides its own amenities andGrecovers charges therefor. A local authority having jurisdictionover such area will have to perform very few of its statutoryor discretionary duties in respect of such area. Yet it may levyand collect taxes from those who set up industries in the area.It is to avoid this virtual dual control and administration whichHmight impede the growth and development of industries that

provision has, presumably, been made in Section 16 forconstituting an industrial area into a notified area and therebyconverting it into a separate administrative unit. As we havestated earlier, creation of such a separate administrative unitis not contrary to the scheme of Parts IX and IXA of theConstitution when Article 243Q provides for the creation ofsuch a separate administrative unit in the form of an industrialtownship. It has also been pointed out by the respondentsthat neither Article 243N nor 243ZF invalidates any IndustrialDevelopment Act.”

36. In two judgments i.e., MGR Industries Association & Anr.V. State of Uttar Pradesh & Ors[21]and NOIDA (supra), this Court hadoccasion to consider the question of applicability of Article 243-Q. InMGR Industries (supra), specifically the provisions of the U.P. IndustrialArea Development Act, 1976 particularly, Section 12A was alsoconsidered. In MGR Industries (supra) the argument urged was thatthe appellant was an association of industrial areas which were declaredas industrial areas under the U.P. enactment but in respect of which nonotification had been issued under Article 243-Q, the levy of taxes byPanchayats was questioned. The court noticed Section 12A of the U.P.Industrial Areas Development Act, 1976, which reads as follows:

“12-A. No panchayat for industrial township —-Notwithstanding anything contained to the contrary in anyUttar Pradesh Act, where an industrial development area orany part thereof is specified to be an industrial township underthe proviso to clause (1) of Article 243-Q of the Constitution,such industrial development area or part thereof, if includedin a Panchayat area, shall, with effect from the date ofnotification made under the said proviso, stand excluded fromsuch Panchayat area and no Panchayat shall be constitutedfor such industrial development area or part thereof underthe United Provinces Panchayat Raj Act, 1947 or the UttarPradesh Kshettra Panchayats and Zila PanchayatsAdhiniyam, 1961, as the case may be, and any Panchayatconstituted for such industrial development area or partthereof before the date of such notification, shall cease toexist.”

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A37. The court also noted that a joint reading of Section 12A withArticle 243-Q clarified that unless a notification under proviso to Article243-Q(1) was issued, industrial development areas were not per seexcluded from the ambit of panchayats. The court noted crucially that“the exclusion of industrial development area from panchayats hasserious consequences since the person residing within the industrialBdevelopment are immediately deprived of facilities and benefitsextended to them by from their respective panchayats. Thedeprivation of said benefits has to be a conscious decision inaccordance with condition as contained in Article 243Q.”

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38. In NOIDA (supra), the issue was with respect of whether,Cthe appellant authority, also constituted under the UPIAD Act couldclaim the benefit of exemption under Section 10 (20) of the Income TaxAct, 1961 as a “local authority”. The appellant had relied upon on anotification (dated 24.12.2011) issued by Governor under proviso to Article243-Q(1). The argument made was since the industrial area i.e. NOIDADwas excluded from the requirement of provisions of Part IX of theConstitution, it ceased to be a municipal area and therefore was itself alocal authority. This Court rejected the argument and observed, – afternoticing the Statement of Object and Reasons to the Constitution(Seventy-fourth) Amendment Act, 1992 and the memorandum, movedby the Minister on the floor of Parliament by piloting the AmendmentEBill, that:

“28. The constitutional provisions as contained in Part IXAdelineate that the Constitution itself provided for constitutionof Municipalities, duration of Municipalities, powers ofAuthorities and responsibilities of the Municipalities. TheFMunicipalities are created as vibrant democratic units of self-government. The duration of Municipality was provided forfive years contemplating regular election for electingrepresentatives to represent the Municipality. The specialfeatures of the Municipality as was contemplated by theGconstitutional provisions contained in Part IXA cannot be saidto be present in Authority as delineated by statutory schemeof Act, 1976. It is true that various municipal functions arealso being performed by the Authority as per Act, 1976 butthe mere facts that certain municipal functions were alsoperformed by the authority it cannot acquire the essential H

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features of the Municipality which are contemplated by PartIXA of the Constitution. The main thrust of the argument ofthe learned counsel for the appellant that the High Courthaving not adverted to the notification dated 24.12.2001issued under proviso to Article 243Q (1) the judgments reliedon by the High Court for dismissing the writ petition is notsustainable. We thus have to focus on proviso to Article 243Q(1). For the purpose and object of the industrial townshipreferred to therein whether industrial township mentionedtherein can be equated with Municipality as definedunder Article 243P€. Article 243P (e) provides that the“Municipality means an institution of self-governmentconstituted under Article 243Q. Whether the appellant is aninstitution of self-government constituted under Article 243Qis the main question to be answered? Sub-clause (1) of Article243Q provides that there shall be constituted in every State-a Nagar Panchayat, a Municipal Council and a MunicipalCorporation, in accordance with the provisions of this Part.The proviso to sub-clause (1) provides that:

“Provided that a municipality under this clause may not beconstituted in such urban area or part thereof as the Governormay, having regard to the size of the area and the municipalservices being provided or proposed to be provided for anindustrial establishment in that area and such other factorsas may he may deem fit, by public notification, specify to bean industrial township.”.

29. Thus, proviso does not contemplate constitution of anindustrial establishment as a Municipality rather clarifies anexception where Municipality under clause (1) of Article243Q may not be constituted in an urban area. The proviso isan exception to the constitution of Municipality ascontemplated by sub-clause (1) of Article 243Q. No otherinterpretation of the proviso conforms to the constitutionscheme.”

39. It is immediately clear that in all the decisions, which theappellants relied upon, (save Diamond Sugar Mills (supra) andShaktikumar M. Sancheti (supra)) the question which had arisen forconsideration was whether after the exclusion of an industrial area, either AB

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Aunder the provisions of some state law, or in terms of Article 243-Q,such an industrial area was part of a municipality, or a panchayat. InSaij Gram Panchayat (supra), the court rejected the argument thatexclusion of an area, which was previously declared as an industrialarea, from a panchayat, by virtue of a notification, was contrary to theGujarat Panchayats Act, 1961 or Article 243-Q of the Constitution ofBIndia. Likewise, in MGR Industries (supra), the court held that withouta notification under proviso to Article 243-Q, mere declaration of anarea as an industrial area or township, did not result in the exclusion ofthat area, from the coverage of a panchayat. In NOIDA (supra), thequestion which arose for decision was whether the NOIDA was a localCauthority for claiming income tax exemption status, under Section 10(20) of the Income Tax Act, 1961. This Court held that the exclusion ofan area from the limits of a municipality ipso facto did not result in itseligibility to seek tax exempt status, under that act. This Court’sobservations about the effect of Article 243-Q are significant.

D40. The view expressed in Diamond Sugar Mills (supra), wasthat a local area, is an area, falling within a “local authority such as amunicipality, a district Board, a local Board or a Union Board, aPanchayat or somebody constituted under the law for thegovernance of the local affairs of any part of the State.” Thatarticulation was relevant because the levy of tax involved in that decisionEimposed a duty on the entry of goods into factory premises. The court,in that context, held as it did, that entry tax can be imposed in relation toa local area, and the incidence is the point of entry.

41. In the present case, two or more sets of law, operate withinthe two states. The first set of statutes are the enactments, that imposeFthe levy, which is entry tax. The incidence is entry into a local area. A“local area” is defined as including industrial establishments, or estates.The second set of laws that are involved, are the concerned municipalitieslaws, such as the Orissa Act of 1950- which by proviso to Section 4 (1)excludes industrial areas, from the rigours and requirements of theGmunicipalities’ enactments. In the U.P. Entry Tax law, “local area” hasbeen defined expansively, to cover all areas, including industrialestablishment areas. By the UP Municipalities Act, 1916, a municipalityand a municipal area have been defined as follows:

‘(9) “Municipality” means an institution of self GovernmentHreferred to in clause (e) of Article 243P of the Constitution.

(9A) “Municipal area” means the territorial area of amunicipality.”

42. The decision of this Court, in Kishansing Tomar v. MunicipalCorporation of the City of Ahmedabad & Ors[22] , noticed the objectand purpose of Constitution (seventy-fourth) Amendment Act, 1992. Thecourt stated that:

“12. It may be noted that Part IX-A was inserted in theConstitution by virtue of the Constitution (Seventy-fourth)Amendment Act, 1992. The object of introducing theseprovisions was that in many States the local bodies were notworking properly and the timely elections were not being heldand the nominated bodies were continuing for long periods.Elections had been irregular and many times unnecessarilydelayed or postponed and the elected bodies had beensuperseded or suspended without adequate justification atthe whims and fancies of the State authorities. These viewswere expressed by the then Minister of State for UrbanDevelopment while introducing the Constitution AmendmentBill before Parliament and thus the new provisions were addedin the Constitution with a view to restore the rightful place inpolitical governance for local bodies. It was considerednecessary to provide a constitutional status to such bodiesand to ensure regular and fair conduct of elections. In theStatement of Objects and Reasons in the ConstitutionAmendment Bill relating to urban local bodies, it wasstated:[…]”

43. The provisions in Part IX-A of the Constitution provide forconstitution of municipalities, their duration, powers and responsibilitiesof authorities of the municipalities. Municipalities were conceived asvibrant democratic units of self-governance. Their term or duration wasprovided to be for five years; regular elections, to elect representativesof municipalities was contemplated. The special features of themunicipalities contemplated by the provisions contained in Part IX-A,however need not be present in other bodies created by law, such asBoards, etc. Such statutory bodies, like industrial estates may performsome municipal functions. However, that some municipal functions areperformed by such bodies ipso facto does not result in their acquiring22 2006 (8) SCC 352

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Athe features of municipalities which are contemplated by Part IX-A ofthe Constitution.

44. The burden of the appellants’ song, so to say, is that when anotification is issued, excluding industrial areas or estates from municipalareas, they cease to be local areas, and cannot be treated as such forBthe purpose of levy of entry tax. As noticed earlier, all the judgments,dealing with provisions of Part IX-A of the Constitution were not renderedin the context of applicability or imposition of entry tax, or whether suchareas excluded by virtue of notifications under proviso to Article 243-Q(1) ceased to be local areas. To this Court, it is plain that the introductionof Part IX-A by the 74[th] Amendment to the Constitution was with theCintention of strengthening units of local self-government, and ensuringthat they were subjected to minimum democratic standards. The provisoto Article 243-Q(1), therefore, has to be read in context, that industrialareas and estates, administered in terms of some legal regime, wheresome municipal services were provided, could be exempt from theDrequirements spelt out in Part IX-A of the Constitution. These provisionsspell out the elements of democratic governance, such as representationof different sections of society, regularity of elections, a three-tierstructure of local government, reservation, mechanism for decidingelection disputes, and elected bodies which were tasked with decisionmaking in regard to various heads or subject matter, that concernedEpeople at village, taluk and District levels.

45. The focus of provisions of Part IX-A of the Constitution insertedthrough the 74[th] Amendment was on local self-governance and allprovisions concerning it. It had no relevance to the issue of State taxation.Furthermore, the exercise of power by the Governor to exclude fromFthe limits of a municipal area, industrial estates or large areas that werepredominantly industrialised areas is upon the condition that such areasprovided a minimum modicum of municipal services. The pattern of Stateenactments – which emerges from a reading of various decisions of thisCourt is that every State has a set of municipal or local self-governanceGlaws, such as those dealing with municipalities, cantonments, panchayats,gram panchayats, etc., on the one hand, and those that deal with industrialareas – as for instance, the UPIAD Act, Gujarat Industrial DevelopmentAct, 1962 etc. on the other. The latter enactments prescribe the kind ofservices (analogous to the municipal services provided by themunicipalities) that every industrial area has to provide. Given these H

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circumstances, the exemption from application of municipality laws orsuch enactments in relation to industrial areas – as also the exemptionfrom 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 electionetc. As far as the nature of services provided in industrial areas areconcerned, those are relevant factors taken into account by the State orGovernor while issuing exemptions under municipal laws or proviso toArticle 243Q (1). These, however, do not in any manner impact orundermine the fact that such industrial areas or estates are equally “localareas”. Diamond Sugar Mills (supra) itself acknowledged that theword “local” means relating to or “pertaining to a place”. This Courtalso very pertinently held that a local area is one which is administeredby municipal law, district board or a local board, union board, a panchayator some body constituted by the Government for the governance oflocal affairs of any part of the State. The application of state lawsregarding industrial areas, therefore, squarely falls within the expression“description of a body constituted for the purposes of local affairs of theState” since no one denies that industrial areas are also part of the State.The record in the present case indicates that the areas excluded fromthe municipality in OCL’s case comprise of several villages. The materialon record placed by SAIL also acknowledge that not less than 24,000houses exist in its industrial area. Likewise in the case of HINDALCOas 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 areaswould fall within the description “local areas”.

46. Reliance placed upon Diamond Sugar Mills (supra) by theappellants in this case is misplaced because in that decision, the Courthad to deal with a different set of facts. The levy on sugarcane imposedby the State of U.P. was on the incidence of entry into factory premises.The Court, therefore, correctly concluded that factory premises per secould not constitute a local area. The subsequent decision in ShaktiKumar Sancheti (supra) explained that entry into the State with theultimate destination within the State, constituted a taxable event themoment the goods, i.e. the vehicles reached within the limits ofmunicipality of its ultimate destination. In Sahaj Gram Panchayat(supra), the argument that the industrial areas could not be excluded inexercise of the powers under Article 243-(Q)(1) was repelled. MGRIndustries (supra) is an important judgment because the Court heldthat the mere exclusion of an industrial area under a local enactment AB

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Awas insufficient for it to be removed from the coverage of Panchayat’sjurisdiction in the absence of a notification under Article 243-Q (1). Thejudgment in NOIDA (supra) explained the intent and purport of theprovision of Part IX-A of the Constitution. None of these, in the opinionof the Court, can be of any assistance to the appellants, who contendthat industrial areas or industrial estates can be treated as local areasBthe moment they are excluded from the limits of municipality or wheneverthey are excluded by virtue of exercise of power under proviso to Article243-Q (1) of the Constitution.

47. It is also a cardinal rule of interpretation that words of a taxingCstatute should be read in their ordinary, natural, and grammatical meaning.Further, in construing the words in a constitutional enactment that conferslegislative power, a liberal construction should be placed upon the wordsso that they may have effect in their widest amplitude.[23]

48. The object of the levy, i.e., entry tax, is the regulation of entryDof goods in a regular area for consumption, i.e., manufacture, use orsale. There is no dispute that entry of goods into an industrial area orestate is for their use for manufacturing or for processing or for thepurposes of their delivery as their ultimate point of destination, i.e. forthe purpose of their “consumption, use or sale” within that area. It couldeven be that the goods enter within the industrial area or estate, as theEultimate point of destination for their use. In any case, the levy would beattracted because the incidence is the entryinto the local area.

49. The Court is of the opinion that the argument – made bycounsel that the levy could not be retrospective, in the facts of this case,is insubstantial. The earlier effort to tax the assessee by demand led toFpetitions which quashed them – where the legal regime was that somecompensatory element had to be disclosed. With the object of curing thisdefect, the fresh law was enacted by the State of U.P., with retrospectiveeffect which on the application of principles enunciated by this Court, inSri Prithvi Cotton Mills v. Baroda Borough Municipality & Ors.[24],Gis valid.

50. In view of the foregoing discussions, this Court finds no reasonto interfere with the decision of the Orissa and Allahabad High Courts.

23 Navinchandra Mafatlal v Commissioner of Income Tax, 1955 (1) SCR 829H24 1970 (1) SCR 388

The special leave petition and appeals are consequently dismissed asunmerited without any order on costs.

Ankit Gyan and Anurag Bhaskar

SLP and appeals dismissed.

(Assisted by : Bodhi Ramteke, LCRA)

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