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TMI Blog1997 (7) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... Zafar Marg, New Delhi. The petitioner No. 2 is a shareholder of the petitioner No. 1. It is alleged that the State of Madhya Pradesh in exercise of power conferred under section 8(5) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act of 1956") issued notification whereby the Central sales tax on sale of cement in Madhya Pradesh State was reduced from 12 per cent to 8 per cent. It is alleged that as a result, there is a large scale dumping of cement by Madhya Pradesh manufacturers in the State of Gujarat to the detriment of the Gujarat manufacturers. It is submitted that in an identical situation, such kind of notification has been quashed by the honourable Supreme Court in the case of Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305; AIR 1988 SC 567. 5.. In order to appreciate the controversy involved in the matter, it will be proper to refer to the relevant provisions of law. Section 8 of the Act lays down the rates of tax on sales in the course of inter-State trade or commerce. It also says that so far as the normal rate for the goods of description referred in sub-section (3) shall be liable to pay tax under this Act, which shall be 4 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in sub-section (1) or sub-section (2) as may be mentioned in the notification." In exercise of powers under this sub-section, the State Government issued notification dated 3rd July, 1993 (annexure P-2), which reads as under: "Madhya Pradesh Rajpatra, Bhopal, dated 3rd July, 1993. F.No. A-3-11-93-ST-V (57).-Whereas, the State Government is satisfied that it is necessary so to do in the public interest; Now therefore, in exercise of the powers conferred by sub-section (5) of section 8 of the Central Sales Tax Act, 1956 (No, 74 of 1956), the State Government hereby directs that during the period from the date of publication of this notification in the Madhya Pradesh Gazette' to 31st March, 1994, the tax payable under the said section of the said Act, by any dealer in respect of the sales of cement from his place of business in Madhya Pradesh in the course of inter-State trade or commerce shall be calculated at the lower rate of 8 per cent on his turnover of such sales. By Order and in the name of Governor of Madhya Pradesh S.N. Sharma, Dy. Secy." By this notification, the dealers who deals in the inter-State sale or commerce of the cement from his place of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een given that as compared to Gujarat, the normal rate of sales tax in the State of M.P. is low and that will be apparent from the following chart given in the additional return, which reads as under: S.No. Type of sale Rate of tax Remarks Gujarat M.P. 1 Local sale with the State. 16 per cent 12 per cent (as on date10 per cent) Not challenged 2 Inter-State sale to registered dealers or Government department [section 8(1), CST Act] 4 per cent 4 per cent Not challenged 3 Rate of tax under section 8(5) of CST Act. ... 8 per cent (as on date 6 per cent as per the notification under theCommercial Tax Act, 1994, dated June 20, 1995). Now challenged It is also pointed out by the respondents that only 5 per cent of the interState sale is made to unregistered dealers whereas remaining 95 per cent of sales is made to registered dealers and the Government organisation/departments and for which the rate of tax for sale to registered dealers and the Government departments is less and uniform throughout the count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent against free-flow. As a result of favourable or unfavourable treatment by way of taxation, the course of flow of trade gets regulated either adversely or favourable. If the scheme which Part XIII guarantees has to be preserved in national interest, it is necessary that the provisions in the article must be strictly complied with. ......The reasonable restrictions contemplated in Part XIII have to be backed by law and not by executive action provided the same are within the limitations prescribed under the scheme of Part XIII. ......Variation of the rate of inter-State sales tax does affect free trade and commerce and creates a local preference which is contrary to the scheme of Part XIII of the Constitution. The notification extends the benefit even to unregistered dealers. Both the notifications of the Andhra Pradesh Government are, therefore, not sustainable." It seems that despite this decisions, the State of Rajasthan still issued a notification by which certain benefits were sought to be given to the industrialists of Rajasthan State by giving certain benefits to the traders in the inter-State sale. This again came to be challenged before the honourable Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Firm A.T.B. Mehtab Majid Co. v. State of Madras [1963] 14 STC 355; [1963] Supp 2 SCR 435 has also held that sales tax, which has the effect of discriminating between goods of the State and goods of another, may affect the free-flow of trade and would be violative of article 301." Therefore, all the arguments which the learned counsel for the State have raised to justify the State action were considered by their Lordships of the honourable Supreme Court in the above decision and negatived. However, our attention was invited to the decision of the honourable Supreme Court in the case of Video Electronics Pvt. Ltd. v. State of Punjab [1990] 77 STC 82 (SC); [1990] 3 SCC 87. The said decision was also considered by the Lordships of the honourable Supreme Court in Digvijay Cement Co. [1997] 106 STC 11; [1990] 3 Scale 150 in para 19 and their Lordships after examining that case also reiterated the law laid down in the case in Indian Cement Ltd. [1988] 69 STC 305 (SC); AIR 1988 SC 567. In view of the recent decision of the honourable Supreme Court in Digvijay Cement Co. [1997] 106 STC 11; [1997] 3 Scale 150, there leaves hardly any room for us except to quash the notifications. 9.. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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