TMI Blog1994 (9) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... his place of business in the State, in respect of the sale by him, from any such place of business in the course of inter-State trade or commerce, of cement, to any Central or State Government undertaking or corporation or an autonomous body under the Government, shall be calculated at the rate of 7 per cent. [Published in Rajasthan Gazette, Extraordinary, Part 4(C)(II) dated January 9, 1990.]" Notification dated June 27, 1990, reads as follows: "Notification No. F. 4(72)FD/Gr. IV/82-34 Jaipur dated June 27, 1990. S.O. 113.-In exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (Central Act No. 74 of 1956), and in supersession of this Department Notification No. F. 4(72)FD/Gr. IV/82-77, dated January 8, 1990, the State Government being satisfied that it is necessary so to do, in the public interest, hereby, with immediate effect, directs that the tax payable under sub-sections (1) and (2) of the said section, by any dealer having his place of business in the State in respect of the sale by him from any such place of business in the course of inter-State trade or commerce, of cement shall be calculated at 7 per cent on the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove that the transaction was in the nature of inter- State sale, shall be on the dealer; and (iii) that the dealer making inter-State sales under this notification shall not be eligible to claim benefit provided for by the Notification No. F. 4(72) FD/Gr. IV/81-8, dated May 16, 1986, as amended from time to time. This notification shall come into force from April 1, 1994 and shall remain in force up to March 31, 1995. [No. F. 4(8)FD/Gr. IV/94.701 By order of the Governor, Sd./-N.C. Goel, Deputy Secreatry to Government. [Published in Rajasthan Gazette, Extraordinary, Part 4(C), dated March 7, 1994.]" 4. Writ Petitions Nos. 656 of 1994, 788 of 1994 and 803 of 1994 were filed in February, 1994, i.e., prior to issue of Notification dated March 7, 1994. By these writ petitions, they challenged the legality and validity of the first two notifications. Consequent to the issuance of the third Notification dated March 7, 1994, they were appropriately amended to include a challenge to Notification dated March 7, 1994. 5.. It appears that some of the writ petitioners initially filed a writ petition under article 32 of the Constitution of India before the apex Court. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtance, viz., taxation is not to be resorted so as to give preference to goods manufactured in one State over goods manufactured or produced in other States. 8.. Their case further is that section 8 of the Central Sales Tax Act deals with rates of tax on sales in the course of inter-State trade or commerce. The object of the law as contained in this section is that the rate of Central sales tax shall in no event be less than the rate of local sales tax for goods in question though it may exceed the local rate in case that rate be less than 10 per cent. It is pleaded that variation in the rate of inter-State sales tax affects free-flow of trade and commerce and creates a local preference which is contrary to the scheme of Part XIII of the Constitution of India. It is pleaded that the impugned notifications, purport to have been issued in exercise of powers conferred by sub- section (5) of section 8 of the Central Sales Tax Act, 1956. By Notification dated January 8, 1990, it was directed that the tax payable under sub-sections (1) and (2) of section 8 of the aforesaid Act by any dealer having his place of business in the State in respect of the sale made by him from any such pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and is hit under relevant articles 301, 302, 303 and 304 of Part XIII of the Constitution of India. 11. How this trade has been affected adversely to the prejudice of cement manufacturers in Gujarat has been stated in the latest writ petition, viz., D.B. Civil Writ Petition No. 2645 of 1994 (Saurashtra Cement) in para 13(a), (b), (c), (d), (e) and (f), which pleas are illustrative of the pleas in all the writ petitions. We may reproduce the averments made in aforesaid para 13 and its sub-paras (a) to (f) for facility of reference: "13(a). The average monthly despatches from outside the State of Gujarat has increased tremendously on account of the impugned notification under section 8(5) of the Central Sales Tax Act, 1956, as could be seen hereunder: Year Average Mfg. Despatches from outside Gujarat Percentage increase 1991-92 47,000 M.T. ... 1992-93 59,000 M.T. 125% over 1991-92 1993-94 70,732(till July) 119% over 1992-93 Overall 150% over 1991-92 (only in 4 months) (b) The implication to the detriment of Gujarat manufacturers could be seen inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of India Ltd. 5. Sardar Sarovar Project. (f) Industries, builders as unregistered dealers are not eligible for concessional rate of tax at 4 per cent against "C" form under section 8(1) of the Central Sales Tax Act, 1956. Taking advantage of the impugned notification, such unregistered dealers have opted to purchase from Rajasthan manufacturers at 4 per cent as against 16 per cent prior to impugned notification. A list of such unregistered dealers/consumers is given hereunder: 1. Videocone Narmada Electronics. 2. Zaveri Polymers (P) Ltd., Palej. 3. Gujarat Inject Hospital Ltd., Baroda. 4. Steel Co. Gujarat Ltd., Palej. 5. Gujarat Spinners Ltd., Amletha. 6. Saraf Foods Ltd., Waghodia. 7. Rishabh Inds. Ltd., Waghodia. 8. Jayshree Insulators Ltd., Halol. 9. Rubamin Inds., Halol. 10. Khatau Junkar Ltd., Ankleshwar 11. Ashok Organics Ltd. 12. Lactose India Ltd., Poicha. 13. Appolo Tyres. 14. Deepak Nitrite Ltd., Nandesari. 15. Gujarat Godrej, Valia. 16. Gokak Vadodara Spinning Mill, Baroda. 17. Indu Nisan, Bajuwa. 18. Inox India Ltd., Halol. 19. Kanoria Chemical Inds., Ankleshwar. 20. Varun Seacon Ltd., Nadiad.. 21. Transpek Inds. Ltd., K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the last two writ petitions and has substantially supported the writ petitioners and has specifically pleaded that the impugned notifications create a preference in favour of manufacturers of cement in Rajasthan. 16.. Respondents Nos. 1 and 2 have filed their replies in D.B. Civil Writ Petitions Nos. 656 of 1994 and 803 of 1994 and have adopted these replies in all the cases. They have substantially traversed the pleas of the writ petitioners and it is denied that impugned notifications) create any preference in favour of the cement manufacturers in Rajasthan or are violative in any manner of the provisions of the Constitution or adversely affect inter-State trade of cement in any way. 17.. Since all the writ petitions involve substantially same questions of facts and law, they have been heard together by consent of all concerned and are being disposed of by a common order. 18.. At the outset we may state that Notifications dated January 8, 1990 and June 27, 1990, have admittedly been superseded by the Notification dated March 7, 1994 and since the aforesaid two notifications are no longer operative, the writ petitions have become infructuous to that extent and the chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrectness or otherwise of the figures given by the petitioners. Annexure P5 submitted by the petitioners shows that price quoted by J.K. Cement Company, which is admittedly a manufacturer in Rajasthan, is substantially the same, as the price quoted by the manufacturers in Gujarat and this belies the contention that cement manufactured in Rajasthan is being sold at cheaper rate. 21.. Thirdly, it has been pleaded that the pleas raised by the petitioners have no basis in law. Petitioners have mainly placed reliance upon the decision in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 (SC); AIR 1988 SC 567. It has been submitted that the said judgment is not in consonance with the earlier and later judgments of the apex Court and the notification was lawfully issued and did not violate any of the constitutional provisions or provisions of the Central Sales Tax Act. Hence, the writ petitions were devoid of merit and deserved to be dismissed. 22. We have heard the learned counsel for the parties at great length and we are of the view that these writ petitions, being devoid of merit, deserve to be dismissed. Firstly, on facts, we do not find that reduction of inter-Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable for supply at destination as shown in tender Schedules and valid for one year, i.e., for the period of contract, no price escalation as per the tender formula will be paid but any increase in excise duty and sales tax shall have to be paid as per the keen conditions of the tender. 3. Original tenders and Nos. are returned herewith. The same may please be acknowledged. 4. This issues with the concurrence of honourable chairman and managing director, Sardar Sarovar Narmada Nigam Limited dated May 28, 1992 on Nigam's file of even number. Sd/-B.S. Rami Deputy Manager (N) S.S.N.N.L. Encl: Six tender in original." A bare look at the document would go to show that the rate at which cement from J.K. Cement had been accepted by Sardar Sarovar Nigam Ltd. was substantially the same as negotiated with the manufacturers from Gujarat. Not only this, the document shows that the order placed with J.K. Cement is of much lesser quantity than the orders placed with other manufacturers in Gujarat. Hence, the allegation that the lowered rates of inter-State sales tax prejudicially affected the sale of cement by manufacturers in Gujarat, is not well-founded and has not been satisfactori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces at which Gujarat manufactured cement was being purchased by them. Thus, they have not been able to show in any manner that Gujarat cement was being purchased at substantially higher rates as compared to Rajasthan cement. 26.. This takes us to the consideration of the principal legal contention raised by the petitioners earlier before the apex Court, and now before us that the present petitions are entirely covered by the judgment rendered by the apex Court in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305; AIR 1988 SC 567. On a careful reading of the said judgment, we find that on facts that case was altogether different. Two notifications issued under section 8(5) of the Central Sales Tax Act, one issued by the Government of Andhra Pradesh and the other issued by the Government of Karnataka were challenged in that case. By both the notifications, which were in identical terms, the Central sales tax was reduced to 2 per cent. 27.. In none of the two notifications impugned in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 (SC); AIR 1988 SC 567, a condition had been incorporated as we find in the impugned notifications. The averments of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horising the giving of any preference to one State over another, or making, or authorising the making of any discrimination between one State and another. This is notwithstanding the entries in any of the Lists in the Seventh Schedule. This is, however, subject to the restrictions contained in clause (2) of article 303 of the Constitution of India. (v) The Legislature of a State, notwithstanding anything in article 301 or 303 of the Constitution, may by law- (a) impose on goods imported from other States (or the Union territories) any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President. 30.. The clear import of this article is that it does not deprive a State of power to levy taxes on imported goods if such taxes are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her name), shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation.-For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods. (3) The goods referred to in clause (b) of sub-section (1)- (a) (omitted); (b) are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power; (c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) as may be mentioned in the notification." 32.. A bare look at sub-section (5) of this section goes to show that the State Government, if it is satisfied that it is necessary to do so in public interest, by notification in official Gazette and subject to such conditions as may be specified therein direct any of the two things to be done as specified in clause (a) or (b) of this sub-section. The exercise of this power in the present case, has been specifically stated to be in "public interest' based on satisfaction of the State Government. We have to presume this statement to be true unless rebutted satisfactorily. 33.. In the writ petitions specific reliance has been placed on paras (11), (12), (14) and (15) of Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305 (SC); AIR 1988 SC 567, which were of general nature and as dem- onstrated by us, have no application to the facts of the present cases. These paras/ their gists have been quoted in the writ petition and we need not encumber this judgment by reproducing them, for the reason that on facts they have no applicability. 34.. Learned Advocate-General cited certain rulings of the apex Court in support of his con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumers. The imposition of rates of sales tax is normally influenced by factors political and economic. If the rate is so high as to drive away prospective traders from purchasing a commodity and to resort to other sources of supply, in its own interest the State will adjust the rate to attract purchasers. Again, in a democratic constitution political forces would operate against the levy of an unduly high rate of tax. The rate of tax on sales of a commodity may not ordinarily be based on arbitrary considerations, but in the light of the facility of trade in a particular commodity, the market conditions-internal and external-and the likelihood of consumers not being scared away by the price which includes a high rate of tax. Attention must also be directed to sub-section (5) of section 8 which authorises the State Government, notwithstanding anything contained in section 8, in the public interest to waive tax or impose tax on sales at a lower rate on inter-State trade or commerce. It is clear that the Legislature has contemplated that elasticity of rates consistent with economic forces is clearly intended to be maintained." (at pages 389-390 of STC; from para 16 of AIR) To our min ..... X X X X Extracts X X X X X X X X Extracts X X X X
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