R. R. YADAV, J. - (1.) THE petitioners, by filing the present writ petition, assail the constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 (hereinafter referred as "act No. 13 of 1999" (See [200] 120 STC Statutes 1)), together with notification dated October 15, 1999 and circular dated October 23, 1999, on the ground, inter alia, that tax levied under the aforesaid Act No. 13 of 1999; notification dated October 15, 1999 and circular dated October 23, 1999 impose restrictions on the freedom of trade, commerce and intercourse, guaranteed by article 301 of the Constitution of India and that as Act No. 13 of 1999 is not law passed after obtaining the previous sanction and thereafter assent of the President of India, within the meaning of article 304 (b), read with article 255 of the Constitution, hence, tax levied upon them is invalid. It is prayed that it may be declared that the petitioner No. 1 is not required to take dealership licence and also not required to pay any entry tax on the import of cigarettes, within the local area of the State of Rajasthan.
(2.) WE consider it expedient to narrate in brief the material facts, which have given rise to filing of the present petition, before itemising the contentious posers springing from the competing submissions advanced by the learned counsel for the parties. It is averred in the writ petition that the petitioner No. 1 is a company registered under the provisions of the Companies Act, 1956, having its registered office at Chakla, Andheri East, Mumbai, carrying on business, inter alia, of manufacture, distribution and sale of cigarettes. The said petitioner has several branches, offices all over India, stocking points in the State of Rajasthan, including Jaipur and wholesale dealers in the State of Rajasthan to whom the said petitioner, from time to time, sends consignments of cigarettes for delivery, distribution in the State of Rajasthan and also to other adjoining States. The said consignments are despatched by way of stock transfer from the company's stocking points/clearing and forwarding agents and sometime also, by way of inter-State sale. It is averred that the petitioner No. 2 is a shareholder in the petitioner No. 1 and thus possesses a substantial interest in the affairs of the petitioner No. 1. It is averred that in exercise of powers conferred under section 3 of Act No. 13 of 1999, the State Government has issued notification dated October 15, 1999, annexure 2 to the writ petition, whereby, it has notified the rates of tax on lottery tickets, foreign liquor, opium (other than lanced poppy head), sugar, tobacco and all kinds of textiles. Although, under the aforesaid notification, annexure 2 to the writ petition, tax has been levied on tobacco only and not on its products, which is explicit from reading of the language of the notification itself, yet, the Commissioner of Commercial Taxes, Rajasthan, Jaipur, has issued a circular on October 23, 1999, annexure 3 to the writ petition, whereby, it is clarified that tobacco mentioned in the notification referred to above shall mean all types of tobacco and its products, namely, tobacco, cigar, cigarettes, bidi, chewing tobacco, cigarillos and tobacco used in hukka, chilam, zarda, soti, kheni, kimam, naswar, etc. In pith and substance, it is averred in the present writ petition by the petitioners that levy of tax on cigarettes under Act 13 of 1999 has direct and close nexus with manufacture and production of cigarettes and, it is thus a colourable piece of legislation, attracting infringement of freedom of trade and commerce, conferred under article 301 and its enactment is not saved under article 304 (b) of the Constitution. It is also averred in writ petition that the entire legislative history of tobacco taxation establishes that it has been over-taxed by the States, therefore, a scheme was arrived at between the Centre and the States, whereby, States surrendered their right to levy various taxes on tobacco, by whatever name called. It is borne out by reference to the report of the Taxation Enquiry Commission, which was appointed by the Ministry of Finance, Government of India, in April, 1953, under the Chairmanship of Dr. John Mathai, for the purposes of examining, inter alia, the incidence of suitability of the Central, State and local taxation, with a view to recommending modifications, which were required in systems of taxation. In pursuance of the above recommendations of the Commission, in the meeting of the National Development Council, held in December, 1956, it was agreed unanimously that sales tax levied in States, on mill-made textiles, tobacco, including manufactured tobacco and sugar, should be replaced by a surcharge on the Central excise duties on these articles with the income derived therefrom being distributed among the States on the basis of consumption. In implementation of the aforesaid agreement between the States and the Centre and the recommendations of the Second Finance Commission, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was enacted on December 24, 1957.
(3.) IT is further averred in the writ petition by the petitioners that the tax imposed pursuant to entry No. 52 of List II of the Seventh Schedule to the Constitution, is popularly known as octroi. According to the averments made in the writ petition, an essential feature of octroi is that it is a tax on the entry of goods into a definite local area and the goods must enter for the purpose of consumption, use or sale therein. The entry tax referred to under the said entry No. 52 of State List of the Seventh Schedule is levied by a local authority, and the State Legislature cannot be allowed by enacting Act No. 13 of 1999 to empower State Government to arrogate the power to levy and collect the entry tax into the local areas. The respondents have filed joint return of the instant petition. It is averred by the respondents, State of Rajasthan and the Commissioner of Commercial Taxes Department, Government of Rajasthan, Jaipur, that the averments made in the writ petition regarding challenge to the constitutional vires of Act No. 13 of 1999; the notification dated October 15, 1999 and the circular dated October 23, 1999, annexures 1, 2 and 3, are based on misconception of law and facts. It is denied in the reply filed by the respondents that the entry tax impedes free-flow of trade, commerce and intercourse. It is averred in the reply filed by them that there is no violation of article 301 of the Constitution, as the levying of the entry tax in the present case, is compensatory in nature, therefore, no previous sanction or assent of the President, is required within the meaning of article 304 (b) of the Constitution. It is averred in the return filed by the respondents that the Commissioner is empowered to issue such circulars under section 45, read with section 93 of the Rajasthan Sales Tax Act, 1994, as the provisions of Rajasthan Sales Tax Act, regarding procedure, are applicable to Act No. 13 of 1999. It is further averred that even if the circular of the Commissioner is ignored, the word "tobacco" will carry the same meaning, as is assigned to it under the provisions of the Rajasthan Sales Tax Act, and it will be for the assessing officer to determine the correct meaning of the word "tobacco" in the light of the material placed before him. In this regard, reference has been made to section 4 (2) of the Rajasthan Sales Tax Act, 1954, notification dated August 12, 1980 issued thereunder, section 2 (c) of Act 58 of 1957 and item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944. It is averred in the reply by the respondents that the power to levy entry tax is not taken away by any agreement between the State of Rajasthan and the Government of India. In any view of the matter, the agreement relates to the non-levy of sales tax and does not deal with levy of entry tax on tobacco. The respondents are not levying sales tax on tobacco, but had levied entry tax. It is denied that entry tax can be levied only by local authorities. ;