Dismissed

M/S Sanwarmal Ratanal v. State of Raj and Ors.

Rajasthan HC1 Dec 2014CW/516/2009

Case brief

AI extract

What is this about?

Batch of writ petitions challenging the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 as violating Article 301. The court held that the Division Bench which struck down the levy had exceeded the Supreme Court's limited remand, declined to decide the constitutional issue pending before the Supreme Court, and dismissed the petitions, discharging the interim orders.

What the court decided

AI extract

M/S Sanwarmal Ratanal Vs State of Raj and Ors. — GST and Indirect Tax | Rajasthan HC (2014)

¶1

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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR

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:: ORDER ::

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D.B. CIVIL WRIT PETITION NO.8745/2014

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M/S. HARIT POLYTECH PVT. LTD. Vs. State of Rajasthan & Ors.

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D.B. WRIT REVIEW PETITION NO.100/2008 D.B. WRIT REVIEW PETITION NO.101/2008 D.B. WRIT REVIEW PETITION NO.102/2008 D.B. CIVIL WRIT PETITION NO.1/2013 D.B. CIVIL WRIT PETITION NO.20226/2013

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Reportable Alongwith

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*other connected D.B.C.W.P. Nos*.10082/2014, 10280/2008,
10282/2009, 10283/2009, 10428/2008, 10429/2008, 10430/2008,
10432/2008, 10433/2008, 10503/2008, 10504/2008, 10505/2008,
10632/2009, 10633/2009, 10651/2008, 10654/2008, 1067/2008,
10671/2008, 10672/2008, 10673/2008, 10674/2008, 10675/2008,
1068/2008, 10689/2009, 10709/2009, 10710/2009, 10736/2013,
10854/2008, 10880/2010, 1095/2009, 1096/2009, 1097/2009,
1103/2014, 11032/2010, 11032/2011, 11037/2010, 11038/2010,
11082/2011, 11107/2008, 11194/2009, 11195/2009, 11196/2009,
11197/2009, 11198/2009, 11199/2009, 11200/2009, 11201/2009,
11290/2011, 11320/2009, 11340/2009, 11605/2011, 11664/2009,
11689/2011, 11788/2008, 11789/2008, 11805/2009, 11918/2009,
11966/2008, 1198/2010, 12178/2010, 12179/2010, 12181/2010,
12338/2009, 12342/2012, 1254/2011, 12559/2011, 12735/2013,
12736/2013, 12737/2013, 12738/2013, 12761/2008, 12768/2010,
12793/2012, 12798/2009, 12836/2011, 12880/2008, 12909/2009,
12910/2009, 12931/2013, 12933/2013, 13038/2009, 13174/2008,
13177/2009, 13185/2008, 1322/2010, 13265/2010, 13267/2010,
13268/2010, 13301/2012, 13525/2009, 13674/2009, 13677/2009,
13765/2010, 13766/2010, 13784/2008, 13883/2010, 13887/2008,
1403/2009, 14125/2011, 14133/2009, 14135/2009, 14136/2009,
14179/2009, 14201/2010, 14246/2009, 14247/2009, 14248/2008,
14248/2009, 14249/2009, 14250/2008, 14250/2009, 14251/2008,
14252/2008, 14253/2008, 14324/2013, 14325/2013, 14328/2013,
14335/2010, 14402/2009, 14403/2009, 14404/2009, 14405/2009,
14475/2009, 14559/2011, 1461/2009, 14854/2010, 15016/2009,
15060/2012, 1507/2011, 15360/2011, 15362/2011, 15428/2013,
15467/2013, 15533/2009, 15547/2010, 15599/2009, 1568/2010,
1569/2010, 15738/2010, 15793/2010, 159/2010, 16098/2009,
16099/2009, 16100/2010, 16170/2009, 1630/2009, 16309/2010,
16326/2010, 16327,2010, 167/2009, 168/2009, 1685/2009,
169/2009, 1698/2011, 170/2009, 172/2009, 1723/2013,
1724/2013, 1725/2013, 1729/2009, 1731/2014, 17444/2013,

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17445/2013, 18910/2012, 1897/2011, 1905/2009, 19405/2013,
19406/2013, 2/2009, 20226/2013, 20233/2013, 21067/2012,
21068/2012, 21069/2012, 21077/2013, 21083/2013, 21362/2013,
21655/2013, 21656/2013, 21657/2013, 21658/2013, 21659/2013,
21689/2013, 223/2010, 2235/2009, 2495/2010, 2496/2014,
2505/2011, 2506/2011, 2582/2011, 2583/2011, 2584/2011,
2584/2014, 2585/2011, 2585/2014, 2602/2010, 2713/2009,
2780/2009, 2781/2009, 2782/2009, 2783/2009, 2784/2009,
2786/2009, 2787/2009, 28/2009, 2832/2011, 2833/2011,
2834/2011, 2835/2011, 2836/2011, 2837/2011, 2838/2011,
2839/2011, 2840/2011, 2842/2011, 2843/2011, 2848/2009,
2849/2009, 2996/2010, 2997/2010, 3029/2009, 3062/2010,
3063/2010, 3132/2010, 3141/2010, 3142/2010, 3143/2010,
3144/2010, 3206/2012, 3213/2009, 3215/2009, 3215/2010,
3216/2010, 3231/2010, 3236/2012, 3263/2011, 3264/2011,
3265/2011, 3266/2011, 3361/2009, 3413/2010, 3436/2009,
3505/2013, 3507/2011, 3514/2012, 3516/2010, 355/2013,
3557/2012, 358/2010, 359/2010, 360/2010, 361/2010, 362/2010,
3625/2013, 3626/2009, 3627/2009, 3628/2009, 3629/2009,
363/2010, 3650/2011, 3691/2011, 3692/2011, 3693/2011,
373/2010, 3782/2010, 3783/2010, 3784/2010, 3808/2009,
3809/2009, 3810/2009, 3811/2009, 3812/2009, 3815/2009,
3853/2010, 3855/2010, 3885/2010, 3886/2010, 3924/2012,
3996/2014, 4030/2009, 4031/2009, 4032/2009, 405/2011,
4077/2010, 4080/2009, 4083/2009, 4084/2010, 4085/2010,
4086/2010, 4132/2010, 4133/2011, 4134/2010, 414/2014,
4148/2013, 4163/2010, 4164/2010, 4175/2010, 4196/2009,
4199/2009, 4200/2009, 4201/2009, 4202/2009, 4203/2009,
4231/2010, 4232/2010, 4233/2010, 4234/2010, 4251/2011,
4278/2014, 4279/2014, 4280/2014, 4281/2014, 4328/2009,
4352/2010, 4368/2010, 444/2010, 449/2010, 4491/2011,
4508/2009, 4547/2009, 4548/2009, 4548/2012, 4549/2009,
4550/2009, 457/2009, 4593/2010, 4601/2009, 4602/2009,
4603/2009, 4604/2009, 4605/2009, 4618/2011, 4619/2011,
4632/2009, 4633/2009, 4661,2008, 4673/2011, 4748/2011,
4749/2011, 476/2009, 477/2009, 478/2009, 479/2009, 480/2009,
481/2009, 4840/2010, 4841/2010, 4842/2010, 4843/2010,
4844/2010, 5057/2012, 5067/2011, 5125/2009, 514/2009,
515/2009, 516/2009, 517/2009, 5252/2010, 5278/2009,
5289/2012, 5371/2008, 5371/2011, 5416/2014, 5489/2011,
5490/2011, 5516/2009, 5597/2012, 5611/2011, 5612/2011,
5614/2009, 5628/2013, 5629/2013, 5630/2013, 5631/2013,
5632/2013, 5660/2014, 567/2010, 568/2010, 5707/2011,
5727/2008, 5793,2009, 5794/2009, 5794/2011, 5830/2014,
5831/2014, 5844/2009, 5845/2009, 5846/2009, 5926/2012,
5927/2012, 5999/2009, 6099/2010, 6118/2011, 6206/2011,
6209/2011, 6271/2009, 6272/2009, 6274/2011, 6275/2011,
6276/2011, 628/2010, 629/2010, 63/2008, 6300/2012, 6301/2012,
6303/2012, 6305/2012, 6306/2012, 6365/2011, 6366/2011,
6367/2011, 6368/2011, 6451/2007, 6566/2013, 6685/2008,
6800/2011, 6801/2011, 6874/2008, 6930/2010, 6939/2009,
6978/2009, 7004/2011, 7034/2010, 7078/2008, 7167/2010,

¶11

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7209/2008, 7210/2008, 7277/2009, 7294/2011, 7348/2010, 737/2010, 7373/2008, 7421/2013, 7437/2014, 7443/2013, 7444/2013, 7663/2008, 7664/2008, 7665/2008, 767/2009, 7679/2013, 768/2009, 7680/2013, 7681/2013, 7683/2014, 7684/2014, 7686/2008, 7724/2008, 7725/2008, 7726/2008, 7727/2008, 7729/2008, 7730/2008, 7731/2008, 7814/2012, 7816/2012, 7849/2010, 7895/2008, 7914/2008, 7960/2011, 7979/2011, 7992/2008, 7993/2008, 7994/2008, 7998/2011, 8259/2012, 8456/2008, 8524/2010, 8554/2013, 8670/2011, 8671/2011, 8686/2010, 8689/2010, 8690/2010, 8691/2010, 8805/2013, 8875/2013, 8933/2011, 8934/2011, 8984/2007, 9011/2013, 9019/2008, 903/2013, 9129/2008, 9130/2008, 9131/2008, 9146/2014, 9253/2010, 9254/2010, 9276/2012, 9295/2012, 9434/2009, 9435/2009, 9436/2009, 9498/2009, 9499/2013, 9602/2012, 9644/2013, 9645/2013, 9651/2014, 9665/2008, 9683/2011, 9770/2010, 9771/2010, 9772/2010, 9773/2010, 9774/2010, 9784/2009, 9788/2009, 9789/2009, 983/2014, 9848/2009, 9866/2008, 9867/2008, 9868/2008, 9869/2008, 9929/2008, 9930/2008, 9953/2010, 9983/2009.

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01/12/2014

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HON'BLE THE ACTING CHIEF JUSTICE MR. SUNIL AMBWANI HON'BLE MR. JUSTICE J.K. RANKA

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Mr.A.K.Bhandari Senior Advocate assisted by Mr.Ajeet Bhandari, Mr.A.K.Sharma, Senior Advocate Assisted by Mr.Rachit Sharma, Mr.Sudhir Gupta, Senior Advocate assisted by Ms.Shweta Chauhan & Mr.Sachin Mehta

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Mr.R.P.Garg, Mr.Amol Vyas, Mr.Anil Mehta, Mr.Devendra Kumar, Mr.O.P.Pareek on behalf of Mr.Anuroop Singhi, Mr.Mahesh Sharma, Mr.Manish Sharma with Mr.Veerender Singh, Mr.Nitin Jain, Mr.Pankaj Ghiya, Mr.Gaurav Jain, Mr.Sandeep Taneja, Mr. Sanjay Jhanwar with Mr.Atul Saxena, Mr.Saransh Saini, Mr.Sunil Nath, Mr.T.C.Jain, Mr.V.K.Gogra, Mr.S.D.Khaspuria, Mr.Jaideep Singh and Mr.Tanveer Ahmed, Mr. R.P. Singh, Mr. Rajendra Soni, Mr. Rakesh Kumar Sharma, Mr. S. K. Jindal, Mr. S. Kasliwal, Mr. Sameer Jain with Mr.M.P.Devnath, Mr. Sandeep Khyaliya, Mr. Sandeep Pathak, Mr. Sandeep Saxena, Ms. Shalini Sheoran, Ms. Sukariti Kasliwal, Mr. Vinay, Mr. Vinay Kumar Goyal, Mr. Vinod Singhal, Mr. Vivek Singhal, Mr. Vishal Sharma, Ms. Alankrita Sharma, Mr. Bharat Vyas, Mr. Aatish Jain, Mr. Ajay Goyal, Mr. Akhil Simlot, Mr. Anant Kasliwal, Mr. Anil Bhansali, Mr.Arvind Kumar Pareek, Mr. Ashish Sharma, Mr. Ashok Verma, Mr. Brij Sharma with Mr.Arvind Kumar Arora, Mr. D.S. Poonia, Mr. Dilip Sharma, Mr. Dinesh Kumar, Mr. G.D. Parwal, Mr. Gajendra Singh Rathore, Mr. Gaurav Gupta, Mr. Gunjan Pathak, Mr. J.N. Sharma, Mr. L.L. Gupta, Mr. Lokesh Atrey, Mr. Mahendra Goyal, Mr. Manoj Kumar Sharma, Mr. Manoj Pareek, Mr. Mohit Gupta, Mr. Mohit

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Soni, Mr. Najeeb A. Khan, Ms. Neelu Mathur, Mr. Neeraj Batra, Mr. Pawan Sharma, Mr. Prateek Kasliwal, Mr. Praveen Balwada, Mr.Manish Priyadarshi on behalf of Mr.Mahendra Singh, Mr. R. B. Mathur, Mr. R.K. Jain,

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Mr.N.M.Lodha, Senior Advocate & Advocate General assisted by Mr.Vishal Sharma & Mr.Sheetanshu Sharma, for respondents.

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We have heard learned counsels for the petitioners. Learned Advocate General has appeared for the State of Rajasthan.

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The constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 (for short, 'the Act') was upheld by Division Bench of the Rajasthan High Court in the case of M/s.Godfrey Philips India Ltd. (1) & Anr. Vs. State of Rajasthan & Anr., (2001) 121 STC 54 (Raj.) . In M/s.Dinesh Pouches Ltd. (1) Vs. State of Rajasthan & Ors. (D.B. Civil Writ Petition No.21/2002) , the vires of the Act, challenged on the grounds that it violates freedom of trade, commerce and intercourse under Article 301, not saved by Article 304(b) of the Constitution of India, the Act was upheld, following the earlier judgment in M/s.Godfrey Philips India Ltd.(1) & Anr. Vs. State of Rajasthan & Anr.

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A Special Leave to Appeal was filed by the assessee's against the judgments in M/s.Godfrey Philips India Ltd.(1) Vs. State of Rajasthan & Anr. (supra) and M/s.Dinesh Pouches Ltd.(1) Vs. The State of Rajasthan & 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

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recoverable with effect from 7.1.2000.

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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.

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(2006) 7 SCC 241 , a Constitution Bench of five Judges, on such reference, held as follows:-

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“ 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.

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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 compensatory or not vide para 19 of the Report (AIR), will continue to apply and the test of “some connection” indicated in para 8 (of SCC) of the judgment in Bhagatram Rajeevkumar v. CST and followed in State of Bihar v. Bihar Chamber of Commerce is, in our opinion, is not good law. Accordingly, the constitutional validity of various local enactments which are the subject-matters of pending appeals, special leave petitions and writ petitions will now be listed for being disposed of in the light of this judgment.”

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The Special Leave Petitions filed by the assessee and the State of Rajasthan against the judgment in M/s.Godfrey Philips India Ltd. & Anr.(1) Vs. State of Rajasthan & Anr. (supra) dated 31.5.2000, and the judgment in M/s.Dinesh Pouches Ltd.(1) Vs. State of Rajasthan & Ors. (supra) dated 12.2.2002, dismissing the writ petitions,

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challenging the validity of the Act of 1999, were connected with Civil Appeal No.3453/2002, arising from the judgments on the validity of Entry Tax from various States in the country.

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By an order dated 14.7.2006, in Jindal Stainless Ltd. (3) & Anr. Vs. State of Haryana & Ors., (2006) 7 SCC 271 , the Apex Court summarized the legal position on the scope of Articles 301, 302 & 304 vis-a-vis compensatory tax, as decided in Jindal Stainless Ltd. (2) & Anr. Vs. State of Haryana & Ors.(supra), and found that since the relevant data does not appear to have been placed before the High Court (including Rajasthan High Court), the parties were permitted to place it in the writ petitions concerned within two months. The High Courts concerned were directed to deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts were requested to decide the issue within five months from the date of receipt of the order. The judgment in the respective cases were directed to be placed on record by the parties concerned within a month from the date of the decision in each case, pursuant to the direction. The relevant paragraphs of the judgment, by which the matters were remitted to the High Courts for recording the findings in the respective cases, to be forwarded to Hon'ble Supreme court, are quoted as below:-

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“ 4. At this juncture, it is necessary to take note of what has been stated in paras 42 to 45 of Scale (paras 45 to 48 of SCC) of the judgment rendered by the Constitution Bench, which read as follows:(Jindal Stainless Ltd.(2) case, SCC pp.268-69)

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“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

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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.

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Burden on the State

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46[43]. Applying the above tests/parameters, whenever a law is impugned as violative of Article 301 of the Constitution, the Court has to see whether the impugned enactment facially or patently indicate quantifiable data on the basis of which the compensatory tax is sought to be levied. The Act must facially indicate the benefit which is quantifiable or measurable. It must broadly indicate proportionality to the quantifiable benefit. If the provisions are ambiguous or even if the Act does not indicate facially the quantifiable benefit, the burden will be on the State as a service/facility provider to show by placing the material before the Court, that the payment of compensatory tax is a reimbursement/recompense for the quantifiable/measurable benefit provided or to be provided to its payer(s). As soon as it is shown that the Act invades freedom of trade it is necessary to enquire whether the State has proved that the restrictions imposed by it by way of taxation are reasonable and in public interest within the meaning of Article 304(b) [see para 35 (of AIR) of the decision in Khyerbari Tea Co. Ltd. v. State of Assam].

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Scope of Articles 301, 302 and 304vis-a-vis Compensatory Tax 47[44]. As stated above, taxing laws are not excluded from the

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operation of Article 301, which means that tax laws can and do amount to restrictions on the freedom guaranteed to trade under Part XIII of the Constitution. This principle is well settled in Atiabari Tea Co. It is equally important to note that in Atiabari Tea Co., the Supreme Court propounded the doctrine of “direct and immediate effect”. Therefore, whenever a law is challenged on the ground of violation of Article 301, the Court has not only to examine the pith and substance of the levy but in addition thereto, the Court has to see the effect and the operation of the impugned law on inter-State trade and commerce as well as intra-State trade and commerce.

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48[45]. When any legislation, whether it would be a taxation law or a non-taxation law, is challenged before the Court as violating Article 301, the first question to be asked is: what is the scope of the operation of the law? Whether it has chosen an activity like movement of trade, commerce and intercourse throughout India, as the criterion of its operation? If yes, the next question is: what is the effect of operation of the law on the freedom guaranteed under Article 301? If the 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:

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(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.

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(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

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is subject to the condition that they are reasonable.

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(c) An additional requisite for the exercise of the power under Article 304(b) by the State Legislature is that previous Presidential sanction is required for such legislation.”

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5. Since relevant data do not appear to have been placed before the High Courts, we permit the parties to place them in the writ petitions concerned within two months. The High Courts concerned shall deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts are requested to decide the aforesaid issue within five months from the date of receipt of our order. The judgment in the respective cases shall be placed on record by the parties concerned within a month from the date of the decision in each case pursuant to our direction.

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6. Place these matters for further hearing in the third week of January, 2007.”

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(emphasis supplied)

¶52

In pursuance to the order dated 14.7.2006, quoted as above, a Division Bench of this Court, decided the matter in M/s.Dinesh Pouches Ltd.(2) Vs. State of Haryana & Ors. (D.B.Civil Writ Petition No.21/2002), on 21.8.2007. It found the entry tax to be ultra vires the Article 301. The conclusion arrived at in the judgment in M/s.Dinesh Pouches Ltd. (2)(supra) is quoted as below:-

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“ Accordingly, this petition is allowed. The Rajasthan Tax on Entry of Goods into Local Area Act, 1999 is held to be ultra vires Article 301. The demand raised against petitioner shall not be enforceable in case not already paid by the petitioner. However, if any amount is collected by the petitioner from its customer as Entry Tax, the same shall be allowed to be retained by him on proof that the burden of its has not been passed on to buyers, consumers or users. If the burden has been so pass on to such other persons, the same shall be paid by the petitioner to the State Treasury within a month failing which such amount shall be recoverable from him. Likewise,

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any amount already paid by the petitioner as Entry Tax shall be refunded to him on proof of the fact that burden thereof has not been passed on to the users, consumers or buyers of such goods, as the case may be, as aforesaid. The petitioner may lay his claim for refund with required proof before the concerned Assessing Authority under Commercial Taxes Department.

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No order as to costs. (Manak Mohta),J. (Rajesh Balia),J.”

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In S.B.S.T.R.No.162/2005 (M/s.Prerna Syntex Vs. Additional Commissioner ), a Division Bench of this 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.”

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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

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provisions of the Act of 1999, subsequently, another Division Bench in the case of the very petitioner, and the same writ petition, which was dismissed by earlier Division Bench, could not have allowed the writ petition by striking down the provisions of law, as decision of earlier Division Bench is also binding on the subsequent Division Bench. It further observed that when one Division Bench has already taken the decision of upholding the vires in the case of very petitioner, prima facie, no further relief could have been granted by another Division Bench, as it is ultimately for the Hon'ble Supreme Court to allow the appeal, or to pass any other consequential order. So far as this Court (High Court of Rajasthan) is concerned, the decision of earlier Division Bench in the case of Dinesh Pouches Ltd. had become final, subject to the order of the Hon'ble Supreme Court, and that, the only issue, which was referred to the High Court was regarding the nature of tax, whether it is compensatory or not. The Division Bench in Lakshmi Cement Vs. The State of Rajasthan & Ors.(supra) , in view of the validity of the Entry Tax being upheld by Division Bench of this Court, felt that it would be just and proper that the Larger Bench should examine the question about the imposition of Entry Tax, as there are two contradictory judgments of two different Division Benches of this Court, one taking the view that the Entry Tax is valid, and another, taking the view that the same is ultra vires. The matter, despite the objections of learned Advocate General, was referred to the then Hon'ble the Chief Justice for considering the question about constituting the Larger Bench, so that the issue in question may be thrashed out at the earliest.

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In the matter of D.B.Civil Writ Petition No.6489/1999 (M/s.Godfrey Philips India Ltd. & Anr.(2) Vs. State of

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Rajasthan & Anr.) , and other connected petitions, which was also remitted by the Hon'ble Supreme Court vide the same order dated 14.7.2006, a Division Bench of this Court, on the same issue regarding the validity of the Act, considering the same data, which was placed before it by the State of Rajasthan, and considering the same judgment of Jindal Stainless Ltd. (3) & Anr. Vs. State of Haryana & Ors. (supra), by which the issue was remitted to be decided by the Court, held on 18.01.2008, that the Act cannot be held to be a legislation which does not offer quantifiable benefit or any recompense/equivalence to the payers of entry tax. The operative portion of the judgment, in paragraphs 28 and 29, is quoted as below:-

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“ 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

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the tax payers have been availing the services or convenience provided by the State through the Municipalities and if that is so, the freedom of trade and commerce will have to be considered as unimpaired. It is further difficult to hold that the imposition of entry tax which is only 1.5% on tobacco and its allied products under the Rajasthan Entry Tax impedes flow of trade and commerce so as to hold that it does not hold compensatory or quantifiable benefit to the tax payers in any manner ignoring the fact that the tax payers would be availing the entire advantage of infrastructure facilities involving huge expenditure indicated in the data furnished by the State of Rajasthan vide Annexure-R/2. Therefore, in our view, the Rajasthan Entry Tax Act cannot be held to be a legislation which does not offer quantifiable benefit or any recompense/equivalence to the payers of entry tax to the extent of 1.5% on the sale of tobacco in the form of cigarettes and other allied products. We, however, find no reason in this writ petition to deal with the effect of the Entry Tax Act on other products as the challenge to the entry tax in the writ petitions which are before us are only at the instance of M/s Godfrey Philips which deals in the sale of tobacco in the form of cigarettes and other allied products and M/s Modern Woolens Ltd. which is engaged in the business of manufacturing of worsted yarn and wool including dyes and chemicals, oil and lubricants.

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29. But before parting with this order, we consider it essential in the interest of justice to record that the entry tax in so far as M/s Godfrey Philips India Ltd. is concerned, 1.5% of entry tax has bee levied on tobacco and its allied products whereas 4% entry tax has been levied on Dyes and dye stuffs which is under challenge in the case of Modern Wollens Ltd. Vs. State of Rajasthan vide DBCWP No.1484 of 2007. No argument has been advanced by the respondent – State as to why 4% entry tax has been imposed on modern wool of dyes and dye stuffs and only 1.5% on tobacco and allied products. The State of Rajasthan has not explained as to why

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a particular product, in absence of any additional benefit, should be made to pay entry tax @ 4% and some other product like tobacco @ 1.5% only when the infrastructure facility availed by all the parties indulge in trade and commercial activity uniformly. In our view, therefore, even though the entry tax may be held leviable for the reasons assigned, the question as to why there 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.”

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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:-

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“ 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 this Court in the aforestated two cases, namely, Atiabari Tea Co. and Automobile Transport (Rajasthan) Ltd.

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11. Some of these aspects which need consideration by a larger Bench of this Court may be briefly enumerated. Interplay/interrelationship between Article 304(a) and 304(b). The significance of the word “and” between Articles 304(a) and

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304(b). The significance of the non obstante clause in Article 304. The balancing of freedom of trade and commerce in Article 301 vis-a-vis the States' authority to levy taxes under Article 245 and Article 246 of the Constitution read with the appropriate legislative entries in the Seventh Schedule, particularly in the context of movement of trade and commerce.

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12. Whether Article 304(a) and Article 304(b) deal with different subjects? Whether the impugned taxation law to be valid under Article 304(a) must also fulfil the conditions mentioned in Article 304(b), including Presidential assent? Whether the word “restrictions” in Article 302 and in Article 304(b) includes tax laws? Whether validity of a law impugned as violative of Article 301 should be judged only in the light of the test of non-discrimination? Does Article 303 circumscribe Article 301? Whether “internal goods” would come under Article 304(b) and “external goods” under Article 304(a)? Whether “per se test” propounded in Atiabari case should or should not be rejected? Whether tax simpliciter constitutes a restriction under Part XIII of the Constitution? Whether the word “restriction” in Article 304(b) includes tax laws? Is tax justiciable? Whether the “working test” laid down in Atiabari makes a tax law per se violative of Article 301? Interrelationship between Article 19(1)(g) and Article 301 of the Constitution? These are some of the questions which warrant reconsideration of the judgments in Atiabari Tea Co. Ltd. and Automobile Transport (Rajasthan) Ltd. by a larger Bench of this Court.

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13. In conclusion, we may also mention that though the judgments in Atiabari Tea Co. Ltd. and Automobile Transport (Rajasthan) Ltd. came to be delivered 49 years ago, a doubt was expressed about the tests laid down in those two judgments even in the yeare 1975 in G.K.Krishnan v. State of T.N. by Mathew, J., vide para 27, which reads as under: (SCC p.385)

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“27. Whether the restrictions visualised by Article 304(b) would include the levy of a non-discriminatory 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”

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(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.”

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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

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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.

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Even prior to the notification dated 14.7.2014, from the year 2007, with the enforcement of the Rajasthan Value Added Tax Act, 2003, the entry tax is not payable where the VAT has been paid, and which means that where the goods are not intended to be brought within local areas of the State of Rajasthan for sale, the entry tax is payable on the scheduled items at the specified rates. 14. A large number of writ petitions have been filed in this Court, both at Jodhpur and the Jaipur Bench of this Court, once again, challenging the validity of the Act and imposition of Entry Tax on the specified items. Relying upon the judgment in M/s.Dinesh Pouches Ltd. (2) Vs. State of Rajasthan & Ors.(supra), interim orders were made by the High Court. The stay orders passed by this Court had varied in terms, on which a Division Bench of this Court in D.B.Civil Writ Petition No.13765 of 2010 (M/s.Ramgopal Satyanarayan & Ors. Vs. State of Rajasthan & Ors.) , in a batch of 265 writ petitions, was of the opinion that considering that the matter is pending in the Supreme Court against the judgment dated 21.8.2007 in M/s.Dinesh Pouches case (2), to be heard by a Bench of seven Judges, in which an interim order has been passed on 21.8.2007 staying the directions of refund, it would be equitable and in the interest of the State, that the petitioners deposit 50% of the assessed tax, excluding any amount of penalty and/or interest imposed by the assessing authority, within six weeks, and for the balance amount of 50% of tax and the amount of

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penalty or interest imposed by the assessing authority, the assessee 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.

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We are informed that a transfer petition was filed by one Binani Cement in D.B.Civil Writ Petition No.3630/2006 pending at Jodhpur, challenging the validity of the Act, before the Hon'ble Supreme Court. On 25.2.2008, the Hon'ble Supreme Court passed an order disposing of the transfer petition, with the following observations:-

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“Heard.

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This is an application for transfer of W.P.(C) No.3630/2006. The said writ petition has been referred to a larger Bench. This Court is examining the correctness of the judgment of the High Court, which is assailed in SLP(C)

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No.16351/2007. The High Court shall take up W.P.(C) No.3630/2006 after the disposal of the aforesaid special leave petition by this Court.

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The transfer petition is disposed of accordingly.”

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In the aforesaid backdrop, the entire batch of writ petitions are listed before us for final hearing.

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Learned counsel for the petitioners submit that the Act had been declared ultra vires Article 301 of the Constitution of India in M/s.Dinesh Pouches Ltd.(2)(supra), in view of the principles laid down in the judgment of Jindal Stainless Ltd.(2) Vs. State of Haryana & Ors. (supra). The State Government had failed to establish that the entry tax is a compensatory tax. The Act does not provide either facially or otherwise by way of data produced before the Court, that any special benefits, are derived by the payers to defray the cost of regulation or to meet the duty of outlay incurred, for some special advantage to trade and commerce. In M/s.Dinesh Pouches Ltd.(2)(supra), it was clearly held that the Act does not provide for any provision, to either separate the amount of entry tax collected or the interest on any services or otherwise for spending for the purposes of some special advantage to the trade and commerce, in quantifiable or measurable way on the payers of the tax. It is submitted that in view of the legal position, as explained in Jindal Stainless Ltd.(2) Vs. State of Haryana & Ors.(supra), disagreeing with the judgment in Bhagatram Rajeevkumar v. CST (supra), the Act cannot stand the test of tax being compensatory in any manner. The Court may therefore, following the judgment in M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan & Ors. (supra), declare the Act to be ultra vires Article 301 and not saved by

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Article 304(a), and direct refund of the tax collected, and to release the bank guarantees.

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In the alternative, learned counsel appearing for 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.

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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 filed by the State, in which it was sought to be established that the amount collected by way of entry tax is being spent in the quantifiable measure in the same area by the local bodies to compensate the payers of the entry tax. The opinion in M/s.Godfrey Philips India Ltd.(2)(supra) dated 18.1.2008, should therefore be ignored by the Court.

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We were informed that review petitions have been filed in

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M/s.Godfrey Philips India Ltd. (supra) for recalling the opinion dated 18.1.2008, in which view taken is that this Court had, despite the judgment in M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan & Ors. (supra), failed to take notice of it, perhaps for the reason that the judgment was delivered five months after it was reserved. The judgment was also sought to be reviewed on the principles laid down in Jindal Stainless Ltd.(2) Vs. State of Haryana & Ors.(supra), which was not considered, in proper perspective.

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We have noticed that in M/s.Godfrey Philips India Ltd. Vs. State of Rajasthan & Ors.(2)(supra), the Division Bench in its opinion dated 18.1.2008, taking into consideration the order passed by Hon'ble Supreme Court on 16.4.2006, has in compliance with the order, directed in paragraph 30 :-”The question referred by the order of remand thus stands decided.”

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Learned Advocate General has pointed out that in view of the interim orders passed by this Court, the revenue from Entry Tax to the extent of Rs.1163.41 crores, spread out from 2009-10 to 2013-14, has been stayed by this Court. He submits that once the validity of the Act has been upheld in M/s.Godfrey Philips India Ltd.(1) Vs. State of Rajasthan & Ors.(supra), and thereafter, in M/s.Godfrey Philips India Ltd.(2) Vs. State of Rajasthan & Ors.(supra), there was no justification to entertain the writ petitions afresh and pass interim orders to the extent of 50% of the demand, on furnishing solvent security. He submits that the Division Bench in deciding M/s.Dinesh Pouches Ltd.(2) Vs. State of Rajasthan & Ors.(supra) has committed gross error of law in going beyond the terms of the order of Hon'ble Supreme Court dated 16.4.2006, and to decide the same writ petition, against which

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the Special Leave to Appeal was pending in the Supreme Court, declaring the Act to be ultra vires Article 301 of the Constitution of India. Learned Advocate General further submits that having taken 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.

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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.

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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

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pending in this Court. The Civil Appeals arising out of the judgment in M/s.Godfrey Philips India Limited (1) Vs. State of Rajasthan & Ors. (supra) and in M/s.Dinesh Pouches Limited (1) Vs. State of Rajasthan & Ors.(supra), are still pending in the Supreme Court, connected with other matters arising from different High Courts. In the order passed in Jindal Stainless Ltd.(3) Vs. State of Haryana & Ors.(supra), the Supreme Court did not give such liberty to the High Courts, which had

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decided the questions of the Constitutional validity of the Entry Tax Act. The Civil Appeals were not allowed remanding the matter to the High Courts. In paragraph 5 of the judgment, directions were specifically given by the Hon'ble Supreme Court to the High Courts concerned, to deal with the basic issue as to whether the impugned levy was compensatory in nature. The High Courts concerned were given time frame of five months to decide the issue, and to place on record the judgment within a month from the date of decision. The order was not modified, nor any of the subsequent orders passed in the matters, authorized the High Courts from which the Civil Appeal had arisen, to decide the matters finally, and to direct refund of Entry Tax realised by the State.

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Learned Advocate General submits that though some of the High Courts have decided the validity of the entry tax, and that, subsequently, all the matters have been tagged with Civil Appeal No.3453/2002 pending in the Supreme Court, insofar as the State of Rajasthan is concerned, the validity of the Act was upheld 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), and that, the questions of law arising from these judgments are still pending consideration by the Supreme Court, which is still required to decide on the validity of the Act, in view of the findings recorded in M/s.Dinesh Pouches Limited (2) Vs. State of Rajasthan & Ors.(supra) and M/s.Godfrey Philips India Limited (2) Vs. State of Rajasthan & Ors.(supra).

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After hearing learned counsels for the parties, we are of the considered opinion that the Division Bench in M/s.Dinesh Pouches

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Limited(2) Vs. State of Rajasthan & Ors.(supra), having noticed the directions of Hon'ble Supreme Court issued in the order dated 14.7.2006, exceeded the mandate of the order issued by the Hon'ble Supreme Court, in declaring the Act to 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.

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We are distressed to observe that despite availability of the judgment in M/s.Dinesh Pouches Limited(2) Vs. State of Rajasthan & Ors.(supra) decided on 21.8.2007 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.(supra), five months after the judgment was rendered in M/s.Dinesh Pouches Limited (2) Vs. State of Rajasthan & Ors.(supra). On the same

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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).

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In view of the aforesaid discussion, we hold, without any hesitation, that the Division Bench, deciding D.B.Civil Writ Petition No.21/2002 (M/s.Dinesh Pouches Limited (2) Vs. State of Rajasthan & Ors.) in its judgment dated 21.8.2007, had after quoting the order of the Supreme Court on 14.7.2006, by which the issue was remitted to it, could not have finally decided the writ petition. We do not propose to pass any final orders in the matter, as in doing so, we will be committing the same error, which was made by the Division Bench in the judgment dated 21.8.2007 in M/s.Dinesh Pouches Limited(2) Vs. State of Rajasthan & Ors.(supra).

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We enquired from the learned counsels appearing for the petitioners and learned Advocate General, State of Rajasthan, as to whether this Court's order dated 21.8.2007 and the order dated 18.1.2008 have been forwarded to the Hon'ble Supreme Court to be placed on the record of Civil Appeal No.3453/2002. We are informed that since Special Leave to Petitions have been filed, and have been tagged with Civil Appeal No.3453/2002, both the orders are available

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on the records of Supreme Court. Learned counsels appearing for the petitioners submit that since they have filed review petitions to review the judgment dated 18.1.2008 in M/s.Godfrey Philips India Limited (2) Vs. State of Rajasthan & Ors.(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.

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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.

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