2000 (1) TMI 817 - SC - VAT and Sales Tax

Notifications dated January 8 1990 June 27 1990 and March 7 1994 to reduce the rate of sales tax payable by dealers having their place of business in that State in respect of inter-State sales challenged - Held that - Appeal allowed. In the interest of justice and equity that the respondent-State should be directed not to collect the amount of sales tax that became payable only by reason of the order in the case of Shri Digvijay Cement 1997 (3) TMI 516 - SUPREME COURT OF INDIA quashing the notifications dated January 8 1990 June 27 1990 and March 7 1994.

Summary

Issues:
Challenge to state notifications reducing sales tax rates on inter-State sales; Validity of notifications; Recovery of differential tax rates; Interpretation of previous judgments; Equitable relief for manufacturers.

Analysis:
1. The judgment addressed the challenge to state notifications issued by the State of Rajasthan, reducing sales tax rates on inter-State sales. The notifications were challenged by cement manufacturers in Gujarat, leading to a legal battle that culminated in the Supreme Court.

2. A previous decision by a Bench of three Judges of the Supreme Court had declared the notifications as "void and, therefore, they are hereby quashed." However, a subsequent notification issued by the State of Rajasthan was challenged, leading to a Constitution Bench decision that overruled the earlier judgment, stating it did not lay down the correct law.

3. The petitioners, cement manufacturers in Rajasthan, were assessed to sales tax based on the reduced rates under the notifications. Show cause notices were issued for recovery of differential tax rates following the earlier quashed notifications, citing the previous Supreme Court decision.

4. The petitioners argued that the State cannot recover the differential tax rates demanded by the show cause notices, emphasizing that the State's stand on the validity of the notifications was vindicated by the Constitution Bench judgment that overruled the previous decision.

5. The State contended that the show cause notices were issued to implement the earlier Supreme Court judgment declaring the notifications void. However, the petitioners argued for equitable relief, citing precedents where recovery of differential tax rates was not permitted after a notification was struck down.

6. Referring to previous judgments, including the case of British Physical Lab India Ltd., the Court found it just and equitable not to allow the State to collect the differential amounts, especially considering that local manufacturers were disentitled to recover differences in tax amounts from customers.

7. The Court concluded that, in the interest of justice and equity, the State should not collect the additional sales tax amounts that became payable due to the quashing of the notifications. The judgment allowed the writ petitions, directing the State not to collect the disputed tax amounts.

8. Similar relief was granted in other writ petitions with similar facts, emphasizing the equitable approach taken by the Court in preventing the recovery of differential tax rates. No costs were awarded in any of the cases.

This detailed analysis of the judgment highlights the legal intricacies involved in challenging state notifications, interpreting previous judgments, and providing equitable relief to affected parties.