TMI Blog2000 (5) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... ership licence and also not required to pay any entry tax on the import of cigarettes, within the local area of the State of Rajasthan. 2.. We consider it expedient to narrate in brief the material facts, which have given rise to filing of the present petition, before itemising the contentious posers springing from the competing submissions advanced by the learned counsel for the parties. 3.. It is averred in the writ petition that the petitioner No. 1 is a company registered under the provisions of the Companies Act, 1956, having its registered office at Chakla, Andheri East, Mumbai, carrying on business, See [2000] 120 STC Statutes 1. inter alia, of manufacture, distribution and sale of cigarettes. The said petitioner has several branches, offices all over India, stocking points in the State of Rajasthan, including Jaipur and wholesale dealers in the State of Rajasthan to whom the said petitioner, from time to time, sends consignments of cigarettes for delivery, distribution in the State of Rajasthan and also to other adjoining States. The said consignments are despatched by way of stock transfer from the company's stocking points/clearing and forwarding agents and sometime a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the meeting of the National Development Council, held in December, 1956, it was agreed unanimously that sales tax levied in States, on mill-made textiles, tobacco, including manufactured tobacco and sugar, should be replaced by a surcharge on the Central excise duties on these articles with the income derived therefrom being distributed among the States on the basis of consumption. In implementation of the aforesaid agreement between the States and the Centre and the recommendations of the Second Finance Commission, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was enacted on December 24, 1957. 7.. It is further averred in the writ petition by the petitioners that the tax imposed pursuant to entry No. 52 of List II of the Seventh Schedule to the Constitution, is popularly known as octroi. According to the averments made in the writ petition, an essential feature of octroi is that it is a tax on the entry of goods into a definite local area and the goods must enter for the purpose of consumption, use or sale therein. The entry tax referred to under the said entry No. 52 of State List of the Seventh Schedule is levied by a local authority, and the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be levied only by local authorities. 10.. It is averred in the return filed by the respondents that in State of Rajasthan, levy of octroi has already been abolished which occasioned financial crunch, and compelled the State Legislature, to pass Act No. 13 of 1999, to compensate the loss suffered by State Government, authorising it under section 3 of the said Act, to collect tax on entry of any goods brought into a local area, for consumption, use or sale therein. 11.. It is averred in the reply filed by the respondents that the State Government has to provide substantial funds to the local authorities, to discharge their statutory obligations, therefore, levy of entry tax is clearly compensatory in nature. The flow of funds from the State Government to local bodies, in lieu of octroi, during 1998-99 (August, 1998 to March, 1999), was Rs. 194 crores and during 1999-2000 (April, 1999 to December, 1999) was Rs. 240 crores. 12.. It is averred by the respondents that the rates, which have been fixed by State Government under the notification dated October 15, 1999, annexure 2 to the writ petition, are reasonable and these rates are well within the outer-limit of ten per cent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Orissa reported in AIR 1966 SC 1686, G.K. Krishnan v. State of Tamil Nadu reported in AIR 1975 SC 583 and Western Electronics v. State of Gujarat reported in [1988] 70 STC 52; AIR 1988 SC 2038. 16.. The aforesaid contention, raised by the learned counsel for the petitioners, was opposed by the learned Advocate-General, with equal vehemence. It is urged before us by the learned Advocate-General that if the aforesaid argument of the learned counsel for the appellants, is accepted, then, entry No. 52 of the State List of the Seventh Schedule to the Constitution, would be rendered otiose, which is impermissible under the constitutional philosophy. It is submitted by the learned Advocate-General that Act No. 13 of 1999 is within the legislative competence of State Legislature. The tax levied on the entry of goods into local area, for consumption, use or sale therein, is compensatory and regulatory in nature. The apex Court, in the case of State of Bihar v. Bihar Chamber of Commerce reported in [1996] 103 STC 1; (1996) 9 SCC 136 after placing reliance on the decision, rendered by a Constitutional Bench of the apex Court, constituted by the then honourable seven Judges of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial gazette. Section 3 further provides that different dates and different rates may be specified in respect of different goods or different classes of goods or different local areas. Section 4 of the Act envisages incidence of tax, whereas, section 5 creates bar against collection of tax, when not payable; section 7 deals with payment and disbursement of amounts wrongly collected by dealer as tax, whereas, section 8 provides grant of set off; section 9 provides exemption from tax; section 10 provides bar to certain proceedings; section 11 mandates registration of dealers; and section 12 provides detailed procedure for filing returns by every registered dealer and procedure for assessment by the assessing authority. Sections 23, 24, 25, 26 and 27 of Act No. 13 of 1999 provide for statutory appeals and revisions by any person, objecting to an order affecting him under the said Act. Thus, Act No. 13 of 1999 is a self-contained Act, empowering the State Government, under section 43 of the said Act, to make rules by notification in Official Gazette, to carry out different purposes of the Act, whereas, section 44 empowers the State Government, to remove difficulties, if any, arises in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Legislatures only after satisfying the requirements of article 304(b). 21.. The intricate constitutional question canvassed at the Bar in the present case, before us, was raised before the Supreme Court, in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, wherein, the majority view of 4 to 3, after taking into account ratio of majority view rendered by the then honourable five Judges of Supreme Court in Constitutional Bench case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, substantially agreed with the proposition of law propounded in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232, with the following clarification in paragraph 17 of the majority view judgment, which reads thus: "We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are acceptable. The interpretation which was accepted by the majority in the Atiabari Tea Co. case [1961] 1 SCR 809; AIR 1961 SC 232, is correct but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufactured or produced in the State, power to legislate given by article 304, was not available. The notification of March, 1961 was held not to affect the validity of earlier notification of 1937, which was held to remain operative in view of article 305 to the Constitution of India. It is pertinent to observe that the decisions rendered in the cases of Atiabari Tea Co. Ltd. AIR 1961 SC 232 and Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 on the subject, were not brought to the notice of their Lordships, in the case of Kalyani Stores AIR 1966 SC 1686. 24.. The aforesaid question for consideration before us, again came up for consideration in the case of State of Kerala v. A.B. Abdul Kadir reported in AIR 1970 SC 1912, wherein, the High Court of Kerala, placing reliance on the case of Kalyani Stores AIR 1966 SC 1686, struck down the Kerala Luxury Tax on Tobacco (Validation) Act (Act No. 9 of 1964), and in special appeal, their Lordships of the Supreme Court set aside the judgment of the Kerala High Court, dated October 3, 1966 and allowed the appeal, remanding the case to the Kerala High Court, to consider it afresh, whether the provisions of the Kerala Luxury Tax on T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led writ petitions before the Madras High Court, filed special appeals before the apex Court. After detailed discussion about the ratio dicidendi laid down in the case of Atiabari Tea Co. Ltd. AIR 1961 SC 232 and the ratio dicidendi in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, the validity of the aforesaid enactment and the G.O. Ms. No. 2044 dated January 20, 1971, was upheld. The writ petitions and the special appeals filed by the aggrieved persons, were dismissed. We consider it appropriate to quote herein the decision rendered in the case of G.K. Krishnan AIR 1975 SC 583, which reads thus: "In view of the grave impact of this judgment, when appeals from Rajasthan High Court came up for consideration in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan [1963] 1 SCR 491; AIR 1962 SC 1406 (hereinafter referred to as the "Automobile case"), a larger Bench was constituted and that Bench considered the question once again. The appellants in that case impugned the Rajasthan Motor Vehicles Taxation Act, 1951, inter alia, as violating article 301. The High Court dismissed the petitions and this Court, by a majority of 4 to 3 held that the Act was val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in, the constitutional validity of Gujarat Sales Tax Act (1 of 1970), was challenged on the ground of infringement of article 301 of the Constitution and non-compliance of the provisions envisaged under Part XIII of the Constitution. It was held that it is apparent from article 304(a) of the Constitution that while a State Legislature may enact a law imposing a tax on goods imported from other States as is levied on similar goods manufactured in that State, the imposition must not be such as to discriminate between goods so imported and goods so manufactured in the State. It is observed in the case of Western Electronics [1988] 70 STC 52 (SC); AIR 1988 SC 2038 that the discrimination effected by applying different rates of sales tax between electronic goods imported into the State of Gujarat and goods manufactured within the State is liable to be struck down. It is observed that imposition of tax leading to discrimination, State cannot be permitted to draw support from the object of granting incentive to local manufacturers or from article 39(b) or 39(e) of the Constitution. With the aforesaid discussion, the writ petition was allowed and the notifications dated July 23, 1981 and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was challenged. The enactment was held to be compensatory and not open to challenge on ground of violation of article 301. It is observed in the aforesaid case that since tax is payable by every dealer liable to tax under the Sales Tax Act and under Sales Tax Act registration is provided, whose turnover is Rs. 1,000 per year, the apprehension that it may exclude some dealers, is only hypothetical and not well-founded. In the aforesaid case, it is further held that since entry tax is compensatory in nature, therefore, even if some link is there between the tax and the facility extended directly or indirectly, such levy of tax is not open to challenge under article 301 of the Constitution. 31.. In the case of State of Bihar v. Bihar Chamber of Commerce reported in [1996] 103 STC 1 (SC); (1996) 9 SCC 136, challenging Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1993 (16 of 1993), wherein, Act 16 of 1993 was declared to be compensatory in nature, as entire State was found to be divided into local areas and State Government as well as local authorities were found providing several trading facilities to promote trade and commerce within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensatory and regulatory taxation enactments to show service and facilities to promote trade and commerce as a condition precedent is undergoing evolutionary process. 33.. The aforesaid discussions further bring us to the consideration as to whether Act No. 13 of 1999, enacted by State Legislature, relating to entry No. 52 of the State List of the Seventh Schedule, is compensatory and regulatory in nature, therefore, it does not constitute such restriction or impediment as directly and immediately hamper free-flow of trade, commerce and intercourse and, therefore, it does not fall within the prohibition imposed under article 301 and it is saved from the applicability of article 304(b) of the Constitution. In the present case, it is to be examined by this Court whether State Legislature has exclusive legislative power to enact Act No. 13 of 1999 lest entry No. 52 of State List of Seventh Schedule would be rendered otiose. 34.. Thus, now we are called upon to record findings on the aforesaid issues, on the basis of materials available on record. In this case, we are to decide at the outset whether or not Act No. 13 of 1999 infringes article 301 of the Constitution; secondly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of article 246 of the Constitution relating to entry No. 52 of the State List of the Seventh Schedule neither required Presidential sanction, before introducing the Bill under article 304(b) nor it required assent of the President. We have no hesitation to hold that Act No. 13 of 1999 does not infringe freedom of trade enshrined under article 301 of the Constitution. In our opinion if the argument of learned counsel for the petitioners is accepted to the effect that Act No. 13 of 1999 is violative of articles 301 and 304(b) of the Constitution, then, it would render otiose clause (3) of article 246 of the Constitution and entry 52 in State List of the Seventh Schedule to the Constitution which is not acceptable to us being contrary to federal structure of our Constitution. 36.. It is true that in the past, there was some controversy to the effect, whether taxation enactments fall within the inhibition of Part XIII of the Constitution, but this controversy is no more res integra and it has been resolved by a majority of 4 to 3, in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406. In the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 the taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o augment its source of revenue. It is borne out from perusal of counter-affidavit filed by respondents that after abolition of octroi in State of Rajasthan, the State Government has to provide substantial funds to the local areas authorities to discharge their statutory obligations and, therefore, the levy of entry tax is clearly compensatory and regulatory in nature. It is revealed from the averments made in the counter-affidavit filed by respondents that the flow of funds from the State Government, to local bodies, in lieu of octroi during 1998-1999 (August, 1998 to March, 1999) was Rs. 194 crores, whereas during 1999-2000 (April, 1999 to December, 1999) was increased to Rs. 240 crores. 38.. Indisputably, Act No. 13 of 1999, levying tax on the entry of goods into local areas, defined under section 2(j) of the said Act, has all the characteristics of octroi, but for the manner of levy and the method of its collection from a dealer liable to pay tax, the State Legislature has enacted a fair procedure of assessment, and thereafter, making provisions for appeals and revisions against assessment, under sections 23, 24, 25, 26 and 27, and provisions for rectification of mistakes und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to provide municipal services more efficiently, which would help and ease free-flow of trade and commerce, because of which, the impost has to be regarded as compensatory in nature. We are fortified in taking the aforesaid view from the decisions rendered by the Supreme Court, in the cases of Bhagatram Rajeev Kumar [1995] 96 STC 654; (1995) Supp. 1 SCC 673, Hansa Corporation AIR 1981 SC 463 and Bihar Chamber of Commerce [1996] 103 STC 1 (SC); (1996) 9 SCC 136. 40.. It is held that the local area defined under section 2(j) of Act No. 13 of 1999 covers the entire State of Rajasthan and distinction between the State and the local areas practically disappears. Interests of the State of Rajasthan and the interests of the local authorities are, in essence, not different but the same to promote facilities to the trade including laying and maintaining roads, water ways, cleanliness of roads, lights and markets, etc. In our humble opinion for upholding the Constitutional validity of Act No. 13 of 1999 and for the purposes of establishing the compensatory character of tax impost by State Government by notification dated October 15, 1999, annexure 2 to the writ petition and clarificatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Official Gazette on January 6, 2000. It is held that once it is found that the tax levied is compensatory and regulatory, then, it is to be left to State Government to determine the rate at which within upper limit fixed under section 3 of Act No. 13 of 1999 the demand of entry tax is to be made. 42.. Here, in the present petition, controversy is confined to the rate of tax 1.5 per cent on the value of goods levied on tobacco and on its product. The aforesaid levy of tax is assailed before us by the learned counsel for the petitioners that legislative history of tobacco taxation establishes that tobacco is being overtaxed by the State. Therefore, a scheme was arrived at between the Centre and the States whereby the States surrendered their right to levy various taxes on tobacco. The learned counsel for the petitioners invited our attention to the report of the Taxation Enquiry Commission which was approved by Ministry of Finance. On the recommendation of the Second Finance Commission the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was enacted by Parliament, wherein, it is provided that in the event of a State levying a tax on sale or the purchase of tob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular dated October 23, 1999, annexure 3 to the writ petition. 46.. The learned Advocate-General, appearing on behalf of the respondents, refuting the aforesaid argument submitted before us that under sub-section (2) of section 2 of Act No. 13 of 1999, it is provided that the words and expressions used but not defined in this Act, shall have the meanings assigned to them under the Rajasthan Sales Tax Act, 1994 (Act No. 22 of 1995). It is urged by the learned Advocate-General that in the notification dated August 12, 1980, issued under section 4(2) of the Rajasthan Sales Tax Act, 1954 (Rajasthan Act No. 29 of 1954), which is valid under the Rajasthan Sales Tax Act, 1994, tobacco has been defined as per the definition contained in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Central Act 58 of 1957). He invited our attention towards annexure R/2, annexed to the reply to the writ petition, a copy of Notification dated August 12, 1980. In Act No. 58 of 1957, tobacco has been defined under section 2(c) which reads thus: "(c) The words and expressions 'sugar', 'tobacco', 'cotton fabrics' 'silk fabrics', 'wollen fabrics' and 'man-made fabrics' shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 2 clarifying tobacco to include its all kinds of products against the notification dated October 15, 1999 wherein tobacco has been specified one of the goods by State Government in exercise of its power under sub-section (1) of section 3 of the Act No. 13 of 1999 is ultra vires to the statutory provisions of sub-section (1) of section 3 and section 44 of the said Act mentioned hereinabove. We have reason to believe that the State Government realised its mistake and subsequently issued clarificatory notification on December 30, 1999 clarifying its earlier notification dated October 15, 1999, defining tobacco to include any form of tobacco, whether cured or uncured and whether manufactured or not and includes the leaf, stalks and stems of tobacco plant but does not include any part of a tobacco plant while still attached to the earth, published on January 6, 2000 in Rajasthan Raj Patra, part 4(ga). 48.. Coming to the next intricate question of law involved in the present case whether entry tax on cigarettes leviable on the petitioners is recoverable from them from the date of notification dated October 15, 1999, or from the date of clarificatory notification dated December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in this Act, shall have the meanings assigned to them under the Rajasthan Sales Tax Act, 1994. In view of the clear provision under sub-section (2) of the definition clause, this Court cannot travel beyond the scope of sub-section (2) of section 2, which mandates that if the words and expressions are used but not defined in the said Act, shall have the meanings as assigned to them under the Rajasthan Sales Tax Act, 1994. It goes without saying that the expression "tobacco" has not been defined under the Rajasthan Sales Tax Act, 1994, therefore, it is far-fetched to approve the argument advanced by the learned AdvocateGeneral, to adopt the definition of "tobacco", given in the notification dated August 12, 1980, issued under sub-section (2) of section 4 of the Rajasthan Sales Tax Act, 1954, which is alleged to have been followed in the Rajasthan Sales Tax Act, 1994. 53.. For proper interpretation of sub-section (2) of section 2 of Act No. 13 of 1999, we have to look into the provisions made under sub-section (1) of section 3, together with the provisions made under section 44 of the said Act. In our humble opinion, if Act No. 13 of 1999 has provided specific procedure to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is yet another reason to arrive at the aforesaid conclusion. The expression "notification in Official Gazette", used under Act No. 13 of 1999, means its publication within the meaning of the Rajasthan Gazette (Rajpatra) Act, 1956. It is to be noticed that to facilitate the interpretation of laws enacted by State Legislature, Rajasthan General Clauses Act, 1955 has been enacted, wherein, under section 25, publication of orders, notification, etc., in Rajasthan Gazette, is to be deemed to be due publication. In a democratic country like ours, mere publication is not sufficient, unless, it is made available to the public at large. Looking to the decision rendered in the case of New Tobacco Co. [1998] 109 STC 376 (SC); (1998) 8 SCC 250, it is held that after publication of the notification dated December 30, 1999, which is found to be published on January 6, 2000, shall be deemed to be available to public at large including the petitioners at least on January 7, 2000. It is to be imbibed that in legal terminology, day includes night, therefore, the publication of notification in Official Gazette, on January 6, 2000, can be extended up to 12 midnight. In such a situation, by neces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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