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TMI Blog2015 (3) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... nesh Pouches Ltd.(1) Vs. State of Rajasthan & Ors. (D.B. Civil Writ Petition No.21/2002), the vires of the Act, challenged on the grounds that it violates freedom of trade, commerce and intercourse under Article 301, not saved by Article 304(b) of the Constitution of India, the Act was upheld, following the earlier judgment in M/s.Godfrey Philips India Ltd.(1) & Anr. Vs. State of Rajasthan & Anr. 3. A Special Leave to Appeal was filed by the assessee's against the judgments in M/s.Godfrey Philips India Ltd.(1) Vs. State of Rajasthan & Anr. (supra) and M/s.Dinesh Pouches Ltd.(1) Vs. The State of Rajasthan & Ors. (supra). The State of Rajasthan also filed Special Leave to Appeal, as the Court had upheld two notifications and had quashed the circular dated 23.10.1999, with direction to the respondents, making entry tax on cigarettes qua petitioners recoverable with effect from 7.1.2000. 4. In Jindal Strips Ltd.(1) Vs. State Haryana, (2003) 8 SCC 60, a two-Judges Bench of the Apex Court doubted the correctness of the views expressed in Bhagatram Rajeevkumar Vs. CST, 1995 Supp.(1) SCC 673, and referred the matter to a larger Bench. In Jindal Stainless Ltd.(2) & Anr. Vs. State of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of receipt of the order. The judgment in the respective cases were directed to be placed on record by the parties concerned within a month from the date of the decision in each case, pursuant to the direction. The relevant paragraphs of the judgment, by which the matters were remitted to the High Courts for recording the findings in the respective cases, to be forwarded to Hon'ble Supreme court, are quoted as below:- "4. At this juncture, it is necessary to take note of what has been stated in paras 42 to 45 of Scale (paras 45 to 48 of SCC) of the judgment rendered by the Constitution Bench, which read as follows:(Jindal Stainless Ltd.(2) case, SCC pp.268-69) "45[42]. To sum up, the basis of every levy is the controlling factor. In the case of "a tax", the levy is a part of common burden based on the principle of ability or capacity to pay. In the case of "a fee", the basis is the special to the payer (individual as such) based on the principle of equivalence. When the tax is imposed as a part of regulation or as a part of regulatory measure, its basis shifts from the concept of "burden" to the concept of measurable/quantifiable benefit and then it becomes "a compensatory tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he operation of the impugned law on inter-State trade and commerce as well as intra-State trade and commerce. 48[45]. When any legislation, whether it would be a taxation law or a non-taxation law, is challenged before the Court as violating Article 301, the first question to be asked is: what is the scope of the operation of the law? Whether it has chosen an activity like movement of trade, commerce and intercourse throughout India, as the criterion of its operation? If yes, the next question is: what is the effect of operation of the law on the freedom guaranteed under Article 301? If the effect is to facilitate free flow of trade and commerce then it is regulation and if it is to impede or burden the activity, then the law is a restraint. After finding the law to be a restraint/restriction one has to see whether the impugned law is enacted by Parliament or the State Legislature. Clause (b) of Article 304 confers a power upon the State Legislature similar to that conferred upon Parliament by Article 302 subject to the following differences: (a) While the power of Parliament under Article 302 is subject to the prohibition of preference and discrimination decreed by Article 303(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount shall be recoverable from him. Likewise, any amount already paid by the petitioner as Entry Tax shall be refunded to him on proof of the fact that burden thereof has not been passed on to the users, consumers or buyers of such goods, as the case may be, as aforesaid. The petitioner may lay his claim for refund with required proof before the concerned Assessing Authority under Commercial Taxes Department. No order as to costs. (Manak Mohta),J. (Rajesh Balia),J." 8. In S.B.S.T.R.No.162/2005 (M/s.Prerna Syntex Vs. Additional Commissioner), a Division Bench of this Court by an order dated 10.9.2007 followed the judgment in M/s.Dinesh Pouches Ltd. (2) Vs. State of Rajasthan & Ors.(supra). In the Special Leave to Appeal (Civil)....../2008 CC 9615/2008, arising from the judgment, Hon'ble Supreme Court, while issuing notice and tagging the matter with Civil Appeal No.3453 of 2002, passed an order :- "There shall be an interim stay of the direction of the High Court so far as it relates to refund." 9. In Lakshmi Cement Vs. The State of Rajasthan & Ors.(D.B.Civil Writ Petition No.739/2004), a Division Bench of this Court noticed the conflict between M/s.Dinesh Pouches Ltd.(1) V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court vide the same order dated 14.7.2006, a Division Bench of this Court, on the same issue regarding the validity of the Act, considering the same data, which was placed before it by the State of Rajasthan, and considering the same judgment of Jindal Stainless Ltd. (3) & Anr. Vs. State of Haryana & Ors. (supra), by which the issue was remitted to be decided by the Court, held on 18.01.2008, that the Act cannot be held to be a legislation which does not offer quantifiable benefit or any recompense/equivalence to the payers of entry tax. The operative portion of the judgment, in paragraphs 28 and 29, is quoted as below:- "28. Thus the ratio of the decisions delivered by the Constitution Bench of five Judges in Atiabari Tea Co. Vs. State of Assam, another Constitution Bench decision of seven Judges in Automobile Transport (Rajasthan) Ltd. Vs. State of Rajasthan and the Constitution Bench decision of five Judges delivered in the case of Jindal Stainless Ltd. and another Vs. State of Haryana and others (supra) clearly indicate that he authoritative pronouncements have been consistent in holding that the taxes are compensatory taxes, if the doctrine of direct an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - State as to why 4% entry tax has been imposed on modern wool of dyes and dye stuffs and only 1.5% on tobacco and allied products. The State of Rajasthan has not explained as to why a particular product, in absence of any additional benefit, should be made to pay entry tax @ 4% and some other product like tobacco @ 1.5% only when the infrastructure facility availed by all the parties indulge in trade and commercial activity uniformly. In our view, therefore, even though the entry tax may be held leviable for the reasons assigned, the question as to why there should not be a uniform tax on entry of goods is not clear. However, the petitioners themselves have not addressed this court on this aspect of the matter and, therefore, this court has to leave this question open to be raised before the Supreme Court where the matter is subjudice to test the constitutional validity of the Rajasthan Entry Tax Act along with other local Act passed by several State in India." 11. In Civil Appeal No.3453/2002 (M/s. Jindal Stainless Ltd.(3) & Ors. Vs. State of Haryana & Ors. (supra), which is still pending in the Apex Court, a five-Judges Bench, on 16.4.2010, referred the matter to a larger Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Atiabari Tea Co. Ltd. and Automobile Transport (Rajasthan) Ltd. by a larger Bench of this Court. 13. In conclusion, we may also mention that though the judgments in Atiabari Tea Co. Ltd. and Automobile Transport (Rajasthan) Ltd. came to be delivered 49 years ago, a doubt was expressed about the tests laid down in those two judgments even in the yeare 1975 in G.K.Krishnan v. State of T.N. by Mathew, J., vide para 27, which reads as under: (SCC p.385) "27. Whether the restrictions visualised by Article 304(b) would include the levy of a non-discriminatory tax is a matter on which there is scope for difference of opinion. Article 304(a) prohibits only imposition of a discriminatory tax. It is not clear from the article that a tax simpliciter can be treated as a restriction on the freedom of internal trade. Article 304(a) is intended to prevent discrimination against imported goods by imposing on them tax at a higher rate than that borne by goods produced in the State. A discriminatory tax against outside goods is not a tax simpliciter but is a barrier to trade and commerce. Article 304 itself makes a distinction between tax and restriction. That apart, taxing powers of the Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Supreme Court against the judgment dated 21.8.2007 in M/s.Dinesh Pouches case (2), to be heard by a Bench of seven Judges, in which an interim order has been passed on 21.8.2007 staying the directions of refund, it would be equitable and in the interest of the State, that the petitioners deposit 50% of the assessed tax, excluding any amount of penalty and/or interest imposed by the assessing authority, within six weeks, and for the balance amount of 50% of tax and the amount of penalty or interest imposed by the assessing authority, the assessee shall furnish a solvent security or the security as provided under the Act, within six weeks. The Division Bench further issued directions that in the event, the writ petition succeeds, the petitioner shall be entitled to refund of the amount of the tax deposited by the assessees or where the entire amount has been deposited, the entire amount with interest @ 12% per annum, and in the event, if the petition fails, the assessees shall be liable to pay the balance amount of tax plus penalty with interest @ 12% and where assessments have not been made so far, the respondents may proceed to finalize the same and on assessment orders/dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained in Jindal Stainless Ltd.(2) Vs. State of Haryana & Ors.(supra), disagreeing with the judgment in Bhagatram Rajeevkumar v. CST(supra), the Act cannot stand the test of tax being compensatory in any manner. The Court may therefore, following the judgment in M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan & Ors.(supra), declare the Act to be ultra vires Article 301 and not saved by Article 304(a), and direct refund of the tax collected, and to release the bank guarantees. 18. In the alternative, learned counsel appearing for the petitioners submit that since there was no restriction or prohibition for the Division Bench of this Court in hearing the same writ petition, after the matter was remitted by the Hon'ble Supreme Court, in view of the provisions given, where the validity of the Act was still subject matter of consideration, the Court may decide these matters, as the principles for the Entry Tax to be valid have been clearly laid down in Jindal Stainless Ltd.(2) Vs. State of Haryana decided on 13.4.2006. 19. It is further submitted that the Division Bench of this Court in M/s.Godfrey Philips India Ltd.(2) Vs. State of Rajasthan & Ors.(supra) failed to notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 50% of the demand, on furnishing solvent security. He submits that the Division Bench in deciding M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan & Ors.(supra) has committed gross error of law in going beyond the terms of the order of Hon'ble Supreme Court dated 16.4.2006, and to decide the same writ petition, against which the Special Leave to Appeal was pending in the Supreme Court, declaring the Act to be ultra vires Article 301 of the Constitution of India. Learned Advocate General further submits that having taken note of the order of Hon'ble Supreme Court, by which issues were remitted to this Court, the Division Bench travelled beyond the scope of order of remittance of the issue to decide the writ petition finally as well as direct the entry tax collected to be refunded, which was stayed by Hon'ble Supreme Court. 23. Our attention has also been drawn to the judgment of the Allahabad High Court, to which one of us (Hon'ble the Acting Chief Justice Mr.Sunil Ambwani) was a member, in ITC Limited Vs. State of U.P. & Ors., (2012) 48 VST 281 (All), in which the Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007, enacted after the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in M/s.Dinesh Pouches Limited (2) Vs. State of Rajasthan & Ors.(supra) and M/s.Godfrey Philips India Limited (2) Vs. State of Rajasthan & Ors.(supra). 26. After hearing learned counsels for the parties, we are of the considered opinion that the Division Bench in M/s.Dinesh Pouches Limited(2) Vs. State of Rajasthan & Ors.(supra), having noticed the directions of Hon'ble Supreme Court issued in the order dated 14.7.2006, exceeded the mandate of the order issued by the Hon'ble Supreme Court, in declaring the Act to be ultra vires Article 301 of the Constitution of India, and to refund the entire amount of Entry Tax levied and collected by the State of Rajasthan. The Division Bench was not required to decide the issue as the Civil Appeals against the earlier judgment in the same writ petition upholding the Act were pending in the Supreme Court, alongwith other connected matters. The directions in the order of Supreme Court dated 14.7.2006, which had not set aside the Judgments of the High Court and had remitted an issue for recording the findings, were clear and did not admit any ambiguity or doubt. The Division Bench of this Court in M/s.Dinesh Pouches Ltd.(2) Vs. State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 18.1.2008 have been forwarded to the Hon'ble Supreme Court to be placed on the record of Civil Appeal No.3453/2002. We are informed that since Special Leave to Petitions have been filed, and have been tagged with Civil Appeal No.3453/2002, both the orders are available on the records of Supreme Court. Learned counsels appearing for the petitioners submit that since they have filed review petitions to review the judgment dated 18.1.2008 in M/s.Godfrey Philips India Limited (2) Vs. State of Rajasthan & Ors.(supra), they have not considered it appropriate to place the orders on record of Civil Appeal No.3453/2002, until the review petitions are decided. 30. In the special facts and circumstances of the case, we are of the view that since Civil Appeals arising out of the judgments passed by this Court in M/s.Godfrey Philips India Limited(1) Vs. State of Rajasthan & Ors.(supra) and M/s.Dinesh Pouches Limited(1) Vs. State of Rajasthan & Ors.(supra) are still pending in the Hon'ble Supreme Court, both the judgments dated 21.8.2007 and 18.1.2008, passed in pursuance to the directions issued by the Hon'ble Supreme Court, which had remitted the issues for findings to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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