BALIA, J. - (1.) VIDE State Finance Act, 2004, Section 4-A was inserted in the Rajasthan Sales Tax Act, 1994 which reads as under:- "4A. Levy of tax on retail sale price- (1) notwithstanding anything contained in an other provisions of this Act or the rules made thereunder, tax on sale of such goods, as may be specified by the State Government by notification in the Official Gazette, shall be levied and collected on the retail sale price of such goods abated by the rate specified in the said notification. (2) The goods to be specified under sub-section (1) shall be those in relation to which it is required under the provisions of the Standards of Weights and Measures Act, 1976 or the rules made thereunder or under any other law for the time being in force, to declare on the package thereof the retail sale price of such goods. (3) The State Government may, for the purpose of fixing the rate of abatement under sub-section (1), take into account the amount of sales tax and other local taxes, if any, payable on such goods. Explanation- (i) Where on the package of any goods different retail sale prices are declared with reference to different areas, the retail sale price declared with reference to the area with the State in which it is sold shall be deemed to be the retail sale price for the purposes of this section. (ii) Where on the package of any goods different retail sale prices are declared with reference to different areas and none of the areas falls within the State, the maximum of such retail sale prices shall be deemed to be the retail price for the purposes of this section."
(2.) THE present writ petition has been filed to challenge the constitutional validity of the aforesaid provision. It envisages levy of sales tax on any transaction of sale of notified goods not on the actual price of consideration which is paid or becomes payable by the buyer to seller on such sales have taken place, but on the "maximum retail price" of the goods declared on the package as per the provisions of the Standards of Weights and Measures Act, 1976 or the Rules framed thereunder or under any other law for the time being in force which is chargeable only at the last point sale by a retailer. THE provision is not extended generally to all commodities sold in package and in relation to which it is required to print retail price thereon but only to such goods as may be specified by the State Government by notification in the official gazette as may be abated by the rate specified in the said notification. The present writ petition has been filed by registered association of the whole sale dealers/distributor of Chemists and Druggists engaged in the business of selling of medicines, drugs and partnership preparation to the retailers. The principal contention on which the validity of the aforesaid provision has been challenged is that it takes into account the artificial amount as turnover for the purpose of tax on "sales of goods." The tax on sale must be leviable with reference to the something related to taxing event, the sale or purchase of goods which become subject of charge and not de hors it. One or other component of such taxing event, whether be price or quantity of goods may be considered measure of tax to which rate can be applied and can be collected from the person connected with such transaction and not any criterion de-hors the taxing event. Entry 54 of the Second List of Seventh Schedule which provides subject on which State Legislature can make law reads "Tax on sale or purchase of goods other than newspapers subject to provision of Entry 92-A of List I."
(3.) THE expression "tax on sale of goods" used in Entry 54 of the second list of 7th Schedule has been interpreted by the Supreme Court to mean ax on the sale of goods, as defined under the Sale of Goods Act, 1930 as modified/extended by clause 29-A of Article 366 inserted vide 46th Amendment Act, 1942. THE tax on sale of medicines under the Rajasthan Sales Tax Act, 1994 and notification issued thereunder is a single point tax on the sale within the State of Rajasthan. THE first point sale in the State of Rajasthan in most cases which attracts levy of sales tax is by the wholesale distributors to the retailers and not by retailers to end consumer when alone MRP can be charged. Under the Act of 1976 and under the provisions of the Drug Price Control Order 1995 issued by the Central Government under Sec. 3 of the Essential Commodities Act,1955, the maximum retail price is determined in the case of Scheduled Formulations only. But MRP is required to be displayed on the label of container as well as package in respect of all the drugs whether scheduled or non scheduled formulations. It has been urged that by and large the first point sale in State of Rajasthan takes place between C & F Agents/consignees Agents/Depots on the one hand as sellers registered dealers and the wholesalers and in case of inter state transactions such first point sale takes place between Distributors and wholesalers at the negotiated and contracted price agreed to between them (respective buyers and sellers) which obviously cannot exceed the printed retail price minus retailer' margin and wholesaler' margin. With the aforesaid premise, it has further been contended that the mention of price on the package under aforesaid provision is the maximum retail price and not the price necessarily or actually charged at the end sale for any transaction of sale of medicines in the State. The first sale within the State which alone is taxable under the provisions of the R.S.T. Act, much lesser price than the M.R.P. is paid or payable on contractual basis. In this connection, it is also stated that under the DPC Order the margin at which the medicines are to be sold to retailer has also been fixed at a minimum level that is to say unless otherwise permitted, a formulation has to be sold to a retailer keeping at least 16% margin in the case of scheduled drugs. Thus, by devising the aforesaid legal fiction for deeming an artificial sale price for levy of tax having no nexus to the taxable event transactions of sale of goods at a money consideration paid or payable as defined under the Sale of Goods Act, 1930 is beyond the legislative competence of the State Legislature and therefore, the provision is ultra vires. Reliance has been placed on a large number of decisions commencing from Sales Tax Officer, Pillibhit vs. M/s. Budh Prakash Jai Prakash, (AIR 1954 SC 459) holding that the liability to tax on sale of goods arises only in respect of a completed sale as per the provisions of the Sale of Goods Act, 1930. ;