Industrial Townships Are "Local Areas" For Entry Tax Levy By States Though They Are Excluded From Municipalities : Supreme Court

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• The bench of CJI UU Lalit, Justices S. Ravindra Bhat and J B Pardiwala held that industrial townships are 'local area' for the purposes of entry tax.

• Local Area' Entry 52 of List II of of the Seventh Schedule to the Constitution authorises State Legislatures to levy entry tax: "taxes on the entry of goods into a local area for consumption, use or sale therein".

• ndustrial areas or estates are equally "local areas" "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"

• 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 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.

• levy would be attracted because the incidence is the entry into the local area. 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.

• OCL India Limited vs State of Orissa | 2022 LiveLaw (SC) 911 | CA 2348 OF 2004 | 4 November 2022 | CJI UU Lalit, Justices S. Ravindra Bhat and J B Pardiwala

• Constitution of India, 1950 ; Article 243-Q(1) Proviso ; Entry 52 of List II of of the Seventh Schedule - 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 243-Q, would result in that area ceasing to be a "local area" within Entry 52 of List II ? - Industrial areas or estates are equally "local areas" - The application of state laws regarding industrial areas squarely falls within the expression "description of a body constituted for the purposes of local affairs of the State" - Distinguished Diamond Sugar Mills Ltd was & Anr. v. State of Uttar Pradesh & Anr (Para 45)

• Constitution of India, 1950 ; Part IX A , Article 243-Q(1) Proviso - The proviso to Article 243-Q(1) 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 - 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. (Para 44)