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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 ..... /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. St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Haryana Ors.(2006) 7 SCC 241, a Constitution Bench of five Judges, on such reference, held as follows:- 52. In our opinion, the doubt expressed by the referring Bench about the correctness of the decision in Bhagatram case followed by the judgment in Bihar Chamber of Commerce was well founded. 53. We reiterate that the doctrine of direct and immediate effect of the impugned law on trade and commerce under Article 301 as propounded in Atiabari Tea Co. Ltd. v. State of Assam and the working test enunciated in Automobile Transport (Rajasthan) Ltd. vs. State of Rajasthan for deciding whether a tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 and its payment is then not for revenue but as reimbursement/recompense to the service/facility provider. It is then a tax on recompense. Compensatory tax is by nature hybrid but it is more closer to fees than to tax as both fees and compensatory taxes are based on the principle of equivalence and on the basis of reimbursement/recompense. If the impugned law chooses an activity like trade and commerce as the criterion of its operation and if the effect of the operation of the enactment is to impede trade and commerce then Article 301 is violated. Burden on the State 46 [43]. Applying the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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) unless Parliament makes the declaration under Article 303(2), the State power contained in Article 304(b) is made expressly free from the prohibition contained in Article 303(1) because the opening words of Article 304 contain a non obstante clause both to Article 301 and Article 303. (b) While Parliament's power to impose restrictions under Article 302 is not subject to the requirement of reasonableness, the power of the State to impose restrictions under Article 304 is subject to the condition that they are reasonable. (c) An additional requisite for the exercise of the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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) Vs. State of Rajasthan Ors.(supra) decided on 12.2.2002, and M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan Ors.(supra) decided on 21.8.2007, after the issue was remitted by Hon'ble Supreme Court. The Division Bench found that the earlier order in Dinesh Pouches Ltd.(1)(supra) was not set aside by the Hon'ble Supreme Court, and that, when the earlier Division Bench had dismissed the same writ petition by upholding the vires of the provisions of the Act of 1999, subsequently, another Division Bench in the case of the very petitioner, and the same writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and immediate effect is satisfied and the taxes are compensatory taxes which instead of hindering trade, commerce and intercourse facilitate them by providing facilities in terms of infrastructure and its maintenance which does not hinder but assist the free flow of trade. The issue of compensatory benefit availed by the tax payers in the State of Rajasthan in lieu of the entry tax indicate in the light of the relevant data furnished by the State of Rajasthan that the tax payers have been availing the services or convenience provided by the State through the Munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for reconsideration of the judgments in Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd. Paragraphs 10 to 14 of the judgment, referring the matter to a suitable larger Bench, are quoted as below:- 10. Applying the tests laid down in the aforestated two cases i.e.Keshav Mills Co. Ltd. and Central Board of Dawoodi Bohra Community, we find that on a number of aspects a larger Bench of this Court needs to revisit the interpretation of Part XIII of the Constitution including the various tests propounded in the judgments of the Constitution Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory 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 Union and States are separate and mutually exclusive. It is rather strange that power to tax given to States, say, for instance, under Entry 54 of List II to pass a law imposing tax on sale of goods should depend upon the goodwill of the Union Executive (emphasis supplied) 14. For the aforestated reasons, let this batch of cases be put before the Hon'ble the Chief Justice of India for constituting a suitable larger Bench for reconsideration of the judgments of this Court in Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd. 12. In the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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/demand notices being issued, the petitioners' case shall be covered by the order, as aforesaid. The interim order in a batch of writ petitions led by D.B.Civil Writ Petition No.13765/2010 (M/s.Ramgopal Satyanarayan Vs. The State of Rajasthan Ors.) and other connected petitions dated 1.12.2010, is being followed, and similar orders have been passed in all the writ petitions, pending in the High Court of Rajasthan, both at Jodphur and the Jaipur Bench of the High Court. 15. We are informed that a transfer petition was filed by one Binani Cement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notice the judgment in M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan Ors.(supra), and thereby, rendered a contradictory opinion, without finally deciding the matter. It is contended that the judgment in Godfrey Philips India Ltd.(2) dated 18.1.2008 is per incuriam the law laid down by this Court in M/s.Dinesh Pouches Ltd.(2)(supra). The opinion was rendered on the same principles of law, which were laid down by the Hon'ble Supreme Court in Jindal Stainless Ltd.(2) Vs. State of Haryana Ors.(supra) on the same data in the affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken 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 Act of 2000, was found to be violative of Article 301 of the Constitution of India, was held to be constitutionally valid. 24. It is submitted by learned Advocate General that the argument as to whether the Act, is ultra vires Article 301 of the Constitution of India, in the absence of the material regarding expenditure of the amount collected by way of entry tax in quantifiable measure in the same area as recompense to the tax payers, is not an issue, which was pending in this Court. The Civil Appeals arising out of the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Rajasthan Ors., travelled beyond the authority given by the Hon'ble Supreme Court in the appeals arising out of the original orders, which are still pending. The Supreme Court had only remitted an issue to record the findings, within five months and remit it within next one month, to enable the Apex Court to decide the matter. The High Court pre-empted the final decision on its findings, which have not been considered so far by the Supreme Court. 27. We are distressed to observe that despite availability of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.(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 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 Civil Appeal No.3453/2002. 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. 31. All the Writ Petitions are accordingly dismissed, and the interim orders are discharged. The Review Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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