BALIA, J. - (1.) THE petitioner is a manufacturer of `sada Pan Masala', mixed with tobacco in the brand name of Geetanjali, Zafri 2100 Gutkha etc. THE petitioner as a manufacturer is subject to excise duty and is also liable to sales tax under the State Sales Tax or Central Sales Tax, as the case may be, in respect of the transactions of sale entered by it.
(2.) VIDE impugned Notification dated 3/1/2001 "zarda mixed Pan Masala "including gutkha and churi" was added to the list of commodities on which the levy of tax under the Rajasthan Tax on Entry of Goods into Local Area Act, 1999 was extended. The petitioner is aggrieved with the levy of tax under the Act of 1999 on its product when its brand is carried into local area of State of Rajasthan for use, consumption or sale within such local area. He has challenged the constitutional validity of the Act of 1999 and the aforesaid notification issued thereunder. Amongst other grounds, the petitioner has challenged the levy being ultra vires Article 301 under Chapter XIII of the Constitution of India. It is submitted by learned counsel for the petitioner that the impugned tax on the entry of goods into local area has direct impact on movement of trade from any place to a local area within the State of Rajasthan as it is a levy on entry of its product or movement of its product from any place outside local area to within local are where it is to be used, sold or consumed. That being so, it is hit by Article 301 of the Constitution. In view of the fact that before enacting the impugned Act the Bill has not been laid before the President for his assent as envisaged under proviso to Article 304 (b) of the Constitution. Hence, it is not saved from restriction imposed under Article 301. He has pressed into service the principle enunciated in 1. Atiabari Tea Co. Ltd. vs. State of Assam & Ors. AIR 1961 SC 232 2. Automobile Transport (Rajasthan) vs. State of Rajasthan AIR 1962 SC 1406 3. Jindal Stripe Ltd. & Ors vs. State of Haryana & Ors. 2004 (134) STC 303 ( 1st Jindal Case)4. Jindal Stainless Ltd. & anr. vs. State of Haryana & Ors. 2006 (145) STC 544 ( 2nd Jindal Case) On the other hand, respondents have contended that: (i) the tax in question is not suffered by the trade because the same is transmitted to the end consumer and it being an indirect tax, it does not impede the activity of goods and is not hit by Article 301 of the Constitution and consequently it is inapt to refer to the procedure provided under Article 304 of the Constitution for the purpose of saving it from the restriction imposed under Article 301 of the Constitution to be a reasonable restriction. (ii) The contention was also that the entry tax is not merely on the entry of goods within the local area but it requires something more than that i. e. to say entry of goods into local area must be for its use, consumption or sale therein. (iii) It was also argued that octroi being a compensatory tax, it does not fall within the province of Article 301 of the Constitution at all, which also obviate necessarily to follow procedure for making a law by State Legislature to overcome the prohibition imposed under Article 301 of the Constitution. In this regard, the specific case of the respondents is that priolimits pality or Panchayat for use, sale or consumption at such rates as may be notified by the State Government in each local area under municipality or panchayat, as the case may be, was being levied and collected by the concerned local self Government Institution. The amount realised by way of octroi was not only the major source of revenue for such authority but it was basically a lifeline for such authorities. However, levy and collection of octroi as such was creating hindrance to smooth flow of traffic on account of check posts at various points within the local area and led to harassment to the transporters and traders. Therefore, octroi was abolished vide notification dated 31/7/1998 and the Act of 1999 was introduced to recoup the loss of revenue of State on account of levy of octroi and to compensate the local authorities on regular basis by way of Grants. Object of providing such financial assistance to all the local bodies was to enable them to undertake various welfare activities, whereby, trades and businesses are directly and immediately benefited. This petition was first listed for hearing on 27/2/2002 and the matter was dismissed by referring to an earlier decision of this Court in M/s Godfrey Philips India Ltd. & Anr. vs. State of Rajasthan & Anr. [ 2000 (7) STT 50 ], which has upheld the validity of the Act of 1999.
(3.) HOWEVER, both the decisions of this Court in Godfrey Philips India's case as well as in this case, which was dismissed by following the Godfrey India's case were challenged before the Supreme Court by way of appeal. BACKDROP IN WHICH CASE WAS REMITTED BACK TO HIGH COURt It may be noticed here that in the meantime another matter has reached before apex court arising from Punjab & Haryana High Court relating to `haryana Local Area Development Tax Act, 2000', challenge has been laid to the validity of said Haryana Act on two grounds: firstly; that the Act is violative of Article 301 of the Constitution and is not saved by Article 304 of Constitution and the Act, in fact, seeks to levy sales tax for inter- State sales, which is outside the competence of State Legislature. The Haryana Act had provided for levy and collection of tax on the entry of goods into local area of the State of Haryana for consumption or use therein and matters incidental thereto and connected therewith. The Haryana Act has sought to impose tax on all goods brought into the local area and phrase "local Area" has been defined in Section 2 (14) of that Act to mean "an area within the limits of a Municipal Corporation established under the Haryana Municipal Corporation Act, 1994, or a municipality established under the Haryana Municipal Act, 1973, or a Town Board or a Cantonment Board established under the Cantonment Act, 1924, or a Zila Parishad established under the Haryana Panchayati Raj Act, 1994, or any other local authority constituted or continued under any law for the time being in force. " Both the provisions under the Haryana Act are pari materia with the provisions of the Rajasthan Tax on Entry of Goods into Local Aea for consumption, use or sale therein. ;