1994 (9) TMI 335 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutionality of Notification No. F.4(3)FD/Gr. IV/89-12 dated March 23, 1989, and Notification No. F.4(3)FD/Gr. IV/79-2 dated March 5, 1979, as amended by Notification No. F.4(3)FD/Gr. IV/79-34 dated February 26, 1980.
2. Validity of notices issued under section 12 of the Rajasthan Sales Tax Act (RST Act).
3. Alleged discrimination against Rajasthan dealers under Article 14 of the Constitution.
4. Impediment to free trade under Article 301 of the Constitution.
5. Applicability of concessional tax rate to wooden boxes.

Issue-wise Detailed Analysis:

1. Constitutionality of Notifications:
The petitioners challenged the constitutionality of the notifications issued under sections 4(2) and 5 of the RST Act, arguing they were ultra vires of the Constitution. The court dismissed this challenge, noting that the Rajasthan Sales Tax Act was enacted under entry No. 54 of List II (State List) and the Central Sales Tax Act under entry No. 92A of List I (Union List) of the Seventh Schedule to the Constitution. The court observed that the notifications were in line with the legislative powers granted to the State and did not violate any constitutional provisions.

2. Validity of Notices under Section 12 of the RST Act:
The petitioners received notices under section 12 of the RST Act for reassessment, as the initial assessments had applied a lower tax rate of 4% instead of the prescribed 10% or 12%. The court upheld the validity of these notices, stating that the assessing authority was justified in issuing them due to the incorrect application of the concessional tax rate. The court emphasized that the reassessment was necessary to correct the tax rate discrepancy.

3. Alleged Discrimination under Article 14:
The petitioners argued that the different tax rates for Rajasthan and non-Rajasthan dealers constituted hostile discrimination. The court rejected this argument, citing that the classification between traders inside and outside Rajasthan was reasonable and permissible under Article 14. The court referenced precedents, including Sita Ram Bishambhar Dayal v. State of U.P. and East India Tobacco Company v. State of Andhra Pradesh, to affirm that taxation laws can have different classifications if they are based on reasonable distinctions.

4. Impediment to Free Trade under Article 301:
The petitioners contended that the different tax structures impeded free trade, violating Article 301. The court clarified that Articles 302, 303, and 304 allow the Parliament and State Legislatures to impose restrictions on trade in the public interest. The court noted that the different tax rates did not impede trade as long as they applied equally to all persons. Additionally, the court highlighted circulars issued by the Rajasthan Government ensuring that the component of Central Sales Tax (CST) was included and Rajasthan Sales Tax (RST) excluded when comparing tenders, thereby eliminating any discrimination.

5. Applicability of Concessional Tax Rate to Wooden Boxes:
The petitioners claimed that wooden boxes were subject to the concessional tax rate of 4% under the exemption notification. The court noted that the notification excluded "furniture and office equipment including metal furniture and cabinetwares" from the concessional rate. The assessing authority contended that the petitioners sold furniture but declared them as wooden boxes to avail the lower tax rate. The court left it to the assessing authority to determine whether the items sold were indeed wooden boxes or furniture falling under the excluded category.

Conclusion:
The writ petitions were dismissed with costs. The petitioners were directed to appear before the assessing authority, who was instructed to decide the cases within six months. The stay orders were vacated. The court upheld the validity of the notifications and the reassessment notices, rejected claims of discrimination and impediment to free trade, and left the determination of the correct tax rate to the assessing authority.

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