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2015 (3) TMI 828 - HC - VAT and Sales TaxConstitutional validity of Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 - violation of freedom of trade, commerce and intercourse under Article 301, not saved by Article 304(b) of the Constitution of India, the Act - Held that - In the State of Rajasthan, the Act of 1999 is still in force, in which the entry tax is levied on 55 items on varying rates from 0.25% to 65% on Sugar, Batasha, Mishri, Makhana and Sugar Toys (Entry No.1) @ 0.25% to Pan Masala (not zarda mixed) (Entry No.46) @ 65%, and Tobacco, cigarettes, cheroots, cigars and cigarillos, zarda mixed pan masala including gutkha and churi @ 65% (Entry No.54) respectively. By a notification of the same date i.e.14.7.2014, it was provided that the State Government had exempted from the tax payable under the Act of 1999, with immediate effect, in respect of the goods specified in the List of 53 items, on the condition that the tax leviable under the Rajasthan Value Added Tax Act, 2003 (Act No.4 of 2003), in respect of such goods has been paid in the State. Despite availability of the judgment in M/s.Dinesh Pouches Limited(2) Vs. State of Rajasthan & Ors.(2007 (8) TMI 667 - RAJASTHAN HIGH COURT) to both the parties, it was not brought to the notice of the Division Bench, hearing M/s.Godfrey Philips India Limited(2) Vs. State of Rajasthan & Ors.(2000 (5) TMI 1055 - RAJASTHAN HIGH COURT), five months after the judgment was rendered in M/s.Dinesh Pouches Limited (2) Vs. State of Rajasthan & Ors.(supra). On the same material, the Division Bench in M/s. Godfrey Philips India Limited(2) Vs. State of Rajasthan & Ors., and in pursuance to the same order of the Apex Court remitting the issue, recorded contradictory findings. It however did not choose, in view of the order of remittance of the Supreme Court dated 14.07.2006, to decide the writ petition. In our view, both the parties represented by same counsels should have drawn the attention of the Division Bench to the earlier decision of the High Court. The review petitions have however been filed by the petitioners to review the opinion in M/s.Godfrey Philips India Limited(2) Vs. State of Rajasthan & Ors.(supra). 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 passed in pursuance to the directions issued by the Hon'ble Supreme Court, which had remitted the issues for findings to be recorded by the High Court, be forwarded by the Registry of the High Court to Hon'ble Supreme Court, to be placed on the record of 2010 (4) TMI 849 - SUPREME COURT OF INDIA . Since we have refrained ourselves from deciding the issues, which are pending in the Hon'ble Supreme Court, we do not propose to extend the interim orders, and leave the parties to seek appropriate remedies, for protecting their interests. - Decided against appellant.
Issues Involved:
1. Constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999. 2. Whether the entry tax imposed under the Act is compensatory in nature. 3. Conflict between previous judgments regarding the validity of the Act. 4. Interim orders and their implications on the revenue. Issue-wise Detailed Analysis: 1. Constitutional Validity of the Act: The Rajasthan High Court previously upheld the constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 in the cases of M/s. Godfrey Philips India Ltd. and M/s. Dinesh Pouches Ltd. The Act was challenged on the grounds that it violated the freedom of trade, commerce, and intercourse under Article 301 and was not saved by Article 304(b) of the Constitution of India. The court upheld the Act, following the earlier judgment in the Godfrey Philips case. 2. Compensatory Nature of the Entry Tax: The Supreme Court in Jindal Stainless Ltd. (2) held that the doctrine of "direct and immediate effect" of the impugned law on trade and commerce under Article 301 and the working test enunciated in Automobile Transport (Rajasthan) Ltd. vs. State of Rajasthan for deciding whether a tax is compensatory or not will continue to apply. The High Courts were directed to deal with the basic issue as to whether the impugned levy was compensatory in nature. The Rajasthan High Court, in M/s. Dinesh Pouches Ltd. (2), found the entry tax to be ultra vires Article 301, concluding that the Act does not provide quantifiable benefit or recompense to the payers of the entry tax. 3. Conflict Between Previous Judgments: There was a conflict between the judgments in M/s. Dinesh Pouches Ltd. (1) which upheld the Act, and M/s. Dinesh Pouches Ltd. (2), which declared the Act ultra vires. The Division Bench in Lakshmi Cement vs. The State of Rajasthan & Ors. observed that the earlier order in Dinesh Pouches Ltd. (1) was not set aside by the Supreme Court, and the subsequent Division Bench could not have allowed the writ petition by striking down the provisions of law. The matter was referred to a larger Bench for examination due to contradictory judgments. 4. Interim Orders and Revenue Implications: Interim orders were passed by the Rajasthan High Court staying the recovery of entry tax, which affected the revenue collection. The court directed petitioners to deposit 50% of the assessed tax and furnish solvent security for the balance. The Supreme Court, in a transfer petition, directed the High Court to take up the matter after the disposal of the special leave petition. The Division Bench in the present case noted that the revenue from entry tax to the extent of Rs. 1163.41 crores had been stayed by the court. Conclusion: The Division Bench in the present case concluded that the Division Bench in M/s. Dinesh Pouches Ltd. (2) exceeded the mandate of the Supreme Court's order by declaring the Act ultra vires and directing a refund of the entry tax. The court held that the issues regarding the compensatory nature of the tax and the validity of the Act are still pending before the Supreme Court. Therefore, the High Court refrained from passing any final orders and dismissed all the writ petitions, discharging the interim orders. The judgments dated 21.8.2007 and 18.1.2008 were directed to be forwarded to the Supreme Court for consideration in the pending Civil Appeal No. 3453/2002.
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