(1.)THIS is a writ petition under Article 226 of the Constitution of India for setting aside the assessment orders passed against the petitioner on 18th February, 1965 in respect of assessment years 1963-64 and 1964-65 on the ground that the sales-tax assessed on the sale of imported 'bardana' is invalid.
(2.)THE petitioner is a registered partnership firm carrying on the business of commission agent for the sale of gunny bags which come under the category of 'bardana'. Under sec. 4 (2) of the Rajasthan Sales Tax Act, 1954, the Government of Rajasthan issued a notification which runs as follows: " Excise & Taxation Department Notification Jaipur, August 11, 1959 No. F. 5 (139) E&t/57in exercise of the powers conferred by sub-sec. (2) of sec. 4 of the Rajasthan Sales Tax Act, 1954 (Act No. XXIX of 1954) and in supersession of this department notification No. F. 5 (39) E&to 57 dated the 19th December, 1958, the State Government being of the opinion that it is expedient in the public interest to do so, hereby exempts from tax the sale of Bardana (old, new or being received as container) except on the first point at the hands of an importer in the series of sales in the State. By order of the Governor, Sd/- G. S. Purohit Secretary to Government. " THE petitioner's case is that it was granted a certificate of exemption on the basis of its being a commission agent in the financial year 1961-62. It is also stated in the petition that the petitioner's firm paid the necessary renewal fees for the financial years 1962-63, 1963-64, 1964-65 and 1965-66 and the exemption certificate thus continued to be in force till the end of the financial year 1965-66. THE petitioner has further submitted that the commercial Taxes Officer, Jaipur City, respondent No. 2, assessed it to tax for the year 1961-62 and 1962-63 by assessment orders dated 6 8 63. THE petitioner claimed exemption on the sale of gunny bags, but it was not granted. It then filed an appeal to the Deputy Commissioner, Excise & Taxation (Appeals), Jaipur, who by his order dated 6-5-64 allowed it and remanded the cases for both the assessment years to respondent No. 2 with a direction to the taxing authority to make further inquiry as to who would be the first point dealer liable to be assessed in the circumstances of the case. Thus, the petitioner's cases for the year 1961-62 and 1962-63 are pending before the taxing authority. THE petitioner goes on to state that the quarterly returns of turn-over for the succeeding years 1963-64 and 1964-65 were submitted to the taxing authority and in the said returns, it claimed exemption from payment of sales-tax on the sale of 'bardana' imported by it from outside the State of Rajasthan. THE petitioner's grievance is that the taxing authority did not call upon the petitioner to produce any evidence and by its order dated 18-2-65 held that the petitioner was liable to pay tax on the sale of the gunny bags imported by it from outside Rajasthan. THE taxing authority also levied a penalty of Rs. 25,000 on the petitioner for the year 1963-64 and a similar penalty of Rs. 17,000 for the year 1964-65 for not filing returns in time. THEse assessment orders passed by the respondent No. 2 for the years 1963-64 and 1964-65 are being assailed before us. It appears that the petitioner instead of going in appeal against the said orders has chosen to file this writ application in this Court on the ground that levy of sales-tax on the imported 'bardana' is bad and unconstitutional. It is prayed that the assessment orders dated 18 2-65 be quashed and the amount of tax realised from the petitioner in pursuance thereof be ordered to be refunded.
The petition has been opposed on behalf of the State of Rajasthan and it has been urged on its behalf that the impugned tax is perfectly valid and constitutional and does not violate any provisions of the Constitution.
The main contention advanced on behalf of the petitioner is that the impugned tax is violative of Art. 301 of the Constitution. It is urged that the levy of sales-tax on the sale of the imported 'bardana' creates an impediment in the inter-state trade and commerce and, therefore. , it is liable to be struck down. In support of his contention, the learned counsel for the petitioner has placed reliance on The State of M. P. vs. Bhailal Bhai (l ). In that case, while dealing with the validity of the notification issued by the Madhya Bharat Government regarding levy of sales-tax on tobacco leaves, manufactured tobacco used for bidi manufacturing, their lordships of the Supreme Court held that even though it was the sale in Madhya Bharat of the imported tobacco that created the liability to tax and not the import by itself, the trade and commerce as between Madhya Bharat and other parts of India was directly impeded by the tax and it therefore contravened the provisions of Art. 301 of the Constitution. It was further held that tobacco manufactured or produced in Madhya Bharat had not been subjected to the tax which the importers of tobacco from other States had to pay on its sale by them, and therefore the tax was not within the saving provisions of Art. 304 (a) of the Constitution. It was also observed that even though it was the sale in Madhya Bharat of the imported goods that created the liability to tax and not the import by itself yet the trade and commerce as between Madhya Bharat and other parts of India whs directly impeded by this tax.
On the basis of the above cited judgment of their lordships of the Supreme Court, learned counsel for the petitioner has contended that the trade and commerce as between Rajasthan and other parts of India is directly impeded by levy of sales tax on 'bardana' on the first point at the hands of an importer in the serais of sales in the State, inasmuch as the 'bardana' manufactured or produced in Rajasthan would not be subjected to a similar tax. It is urged that the ratio decidendi of that case applies with full force to the facts and circumstances of the present case, and, therefore, the levy of sales-tax on the sale of imported 'bardana' at the hands of the petitioner is clearly illegal.
The learned Deputy Government Advocate, on the other hand, has urged that the levy of sales-tax on the imported 'bardana' would be saved by the saving provisions of Art. 304 (a) of the Constitution. That Article runs as follows "art. 304. Notwithstanding anything in Art. 301 or Art. 303, the Legis-ture of a State may by law (a) impose on goods imported from other State or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced ; and (b) x x x x x x x x x It is argued on behalf of the State that it has not made any discrimination in the matter of gunny bags as they are only imported into Rajasthan but are neither produced nor manufactured in Rajasthan. There is, however, no mention regarding other types of 'bardana' in the reply filed on behalf of the State. Assuming for the sake of argument that no gunny bags are produced or manufactured in Rajasthan, the question still remains whether any other type of 'bardana' is also not produced or manufactured in Rajasthan. There is no denying the fact that besides gunny bags, there are other types of 'bardana' which are being used by traders and business men in Rajasthan. It is even apparent from the wordings of the notification itself that the word 'bardana' has been used in the sense of a 'container'. It would, therefore, be not correct to say that the word 'bardana' as used in the notification refers to only gunny bags. 'bardana' is thus a container in which an article may be supplied by the dealer. It may be gunny bag or a wooden packing or a tin or any other container. 'bardana' is a term of Hindi language and it has been defined in Nalanda Vishal Sabdh Sagar as under:- *** Thus, there is no escape from the conclusion that the term 'bardana' used in the impugned notification is not equivalent to 'gunny bags' only but it refers to all types of containers including gunny bags. It is not the case of the State that none of the several types of 'bardana' is produced or manufactured in Rajasthan. For the purpose of judging the validity of tax on the sale of the 'bardana', we cannot make any distinction between various types of 'bardana' and if no tax is levied on one or more types of 'bardana' produced or manufactured in Rajasthan, it cannot be levied on the sale of any type of 'bardana' imported into Rajasthan. It is, in our opinion, not permissible to the State to pick out one type of 'bardana' and justify the levy of tax on the ground that the 'bardana' of that type is not produced or manufactured in Rajasthan and, therefore, there is no discrimination. If that was the intention of the Government, there was nothing to prevent it from making specific mention of the particular type of 'bardana' in the notification which it wanted to tax. Since this has not been done, we do not see any justification in this argument advanced on behalf of the State.
The position therefore is that while imported 'bardana' has been subjected to sales-tax on the first point at the hands of the importer, no such tax has been levied on the 'bardana', old or new, produced or manufactured in Rajasthan. This tax is, therefore, not within the saving provisions of Art. 304 (a) of the Constitution. As already pointed out above, it contravenes the provisions of Art. 301 of the Constitution and must, therefore, be declared as violative of Art, 301.
An attempt was made by the learned Deputy Government Advocate to show that the sales-tax on the imported 'bardana' would not be hit by Art. 301 of the Constitution as it is not a tax on an imported article at all, and the tax is attracted only when the article is actually sold in Rajasthan. Quite correctly, however, by far the greater part of the 'bardana' imported into Rajasthan would be sold in Rajasthan. There can be no doubt therefore that even though it is the sale in Rajasthan of the imported 'bardana' that creates liability to tax and not the import by itself, it would nonetheless impede the trade and commerce as between Rajasthan and other parts of India. In this connection, we may refer to the following observations of their lordships of the Supreme Court in Firm A. T. B. Mehtab Majid & Co. vs. State of Madras (2) : " It is therefore now well settled that taxing laws can be restrictions on trade, commerce and intercourse, if they hamper the flow of trade and if they are not what can be termed to be compensatory taxes or regulatory measures. Sales tax, of the kind under consideration here, cannot be said to be a measure regulating any trade or a compensatory tax levied for the use of trading facilities. Sales tax, which has the effect of discriminating between goods of one State and goods of another, may affect the free flow of trade and it will then offend against Art. 301 and will be valid only if it comes within the terms of Art. 304 (a ). " There is thus no scope for the argument advanced by the learned Deputy Government Advocate that the sales-tax in question does not offend Art. 301 of the Constitution. It is not suggested in the present case that the tax in question can be justified as a measure regulating any trade or as a compensatory levy for the use of trading facilities.
The learned Deputy Government Advocate, lastly, placed reliance on Shri Durga Rice and Baba Oil Mills Company vs. State of Andhra Pradesh (3) to show that the tax question could be saved 'by Art. 304 (b) of the Constitution. In that case, the constitutionality of the Andhra Pradesh General Sales Tax (Second Amendment) Act. No. 2 of 1959 was challenged before the Andhra Pradesh High Court. It appears that the impugned Act amended Items 5 and 6 of Schedule III (Paddy, rice) to the Andhra Pradesh General Sales Tax Act, 1957, enhancing the sales-tax payable thereon from three naya paisa to four naya paisa in the rupee and the validity of the Act was questioned on the ground that it operated as a restriction on the freedom of trade contemplated by Part XIII of the Constitution. The learned Judges of the Andhra Pradesh High Court held that the impugned Act merely increased the rate of tax payable on certain commodities and did not relate to inter-State trade or commerce and consequently the proviso to Art. 304 (b) of the Constitution was not attracted. We may state, atonce, that this authority has no relevance whatever to the question at issue before us. !0. After a careful examination of the law on the subject, we are firmly of the view that the levy of sales-tax on the imported 'bardana' on the first point at the hands of an importer in Rajasthan in the present circumstances without levy of a similar-tax on 'bardana' produced or manufactured in Rajasthan is unconstitutional and cannot be upheld. As a necessary, corollary, the assessment of tax on the imported gunny bags in the hands of the assessee under the notification is invalid in law.
Learned counsel for the petitioner submits that his client only deals in salt and gunny bags out of which salt is admittedly exempt from sales-tax and the taxing authority had assessed sales-tax only on the 'bardana' imported by the petitioner for both the years 1963-64 and 1964-65 and the moment this tax is held invalid, the assessment orders for 1963-64 and 1964-65 are liable to be quashed. He also submits that since the petitioner was not liable to pay any tax, the order of imposition of penalty must also be quashed. The submission is correct and the learned Deputy Government Advocate also conceded, in all fairness, that if the order of assessment goes, the imposition of penalty also cannot stand. Consequently, both the assessment orders one for the year 1963-64 and the other for the year 1964-65 dated 18-2-65, copies of which have been placed on the record and marked Exs. 13 and 14 respectively must be set aside.
Learned counsel for the petitioner has also prayed that a suitable direction may be issued to the opposite parties to give consequential relief by ordering repayment of money realised by the Government by way of sales-tax on the imported 'bardana'. It is enough to state that the Government must in law repay the tax paid to if under a mistake, but whether repayment should be ordered by the court in the exercise of its discretionary powers under Art. 226 of the Constitution would depend in each case on its own facts and circumstances. It is note-worthy that nothing has bean stated in the writ petition as to how much amount of tax which has been impugned before us, was paid by the assessee-petitioner and at what time ? Only in the relief clause, it has been prayed that "a writ of certiorari be issued against the respondent No. 2 quashing and setting aside all assessment and penalty proceedings for the years 1963-64 and 1964-65 dated 18-2-65 and also to refund the amount paid as tax by the petitioner. "
The prayer for refund has been resisted by the learned Deputy Government Advocate on the ground that no details of payment as regards the impugned tax have been given by the petitioner in its writ petition and, therefore, the Government had no opportunity to meet the case for refund. It is, therefore, urged on behalf of the State that the present case is not a fit one in which a writ of mandamus should be issued for repayment of the amount of the impugned tax alleged to have been paid by the petitioner. The objection raised by the learned Deputy Government Advocate on this score is not without force, and we are of opinion that in the facts and circumstances of the present, case, we are unable to exercise our discretion in favour of the petitioner by ordering repayment of money which may have been realised by the Government in lieu of the impugned tax and would leave it to the petitioner to pursue an appropriate remedy either under the Rajasthan Sales Tax or under the ordinary civil law for repayment of the amount.
The result is that we allow this writ petition in part and hold that the assessment of sales tax on the imported 'bardana' on the first point at the hands of the assessee-petitioner, an imported, in the series of sales in the State of Rajasthan under the notification dated 11-8-59, is invalid in law. The imposition of penalty by the assessing authority on the petitioner for the assessment years 1963-64 and 1964-65 is also bad. Consequently, the assessment orders dated 18-2-65 for the years 1963-64 and 1964-65 are set aside. 15. In the circumstances of the case, we leave the parties to bear their own costs. .