Karnataka HC upholds Levying Entry Tax on Unmanufactured Tobacco in ‘Sealed Container’ [Read Judgment]

The High Court of Karnataka upheld the Notification issued by the Government of Karnataka specifying unmanufactured tobacco in “sealed container” for levy of Entry Tax at 5%.

The court upheld the Notification in the case of M/S Giriraj Enterprises and Another v. State of Karnataka and Another. The pronouncement was made by Justice S.Sujatha.

In the relevant case, the petitioners were engaged in the business of unmanufactured tobacco. This unmanufactured tobacco was obtained by beating, crushing and sieving the raw tobacco. The unmanufactured tobacco was packed in sachets and sold.

The petitioners questioned the validity of the Notification-III dated 1.10.2013 issued by the Government of Karnataka specifying “unmanufactured tobacco in the sealed container” for levy of entry tax at 5%. The petitioners argued 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. It was further argued by the petitioners that unmanufactured tobacco would not come within the ambit of Entry 96 of the First Schedule.

The counsel for the Revenue contended that Sl.No.96 of the First schedule is exhaustive and includes tobacco products of all descriptions both manufactured and unmanufactured.

The court held that, “Sl.No.96 of the First schedule prescribes tobacco products of all descriptions and enlarges the scope of the entry by employing the phrase ‘including’ and ‘etc.,’ The said entry is ex-facie exhaustive.”

The court further stated that, the “Entry 96 of the First Schedule – “tobacco products of all description” encompasses both manufactured and unmanufactured tobacco. Hence, the amendment to the Notification impugned is clarificatory in nature.”