Cement Ltd. & ANR Vs. State of Rajasthan & Ors  INSC 20 (19 January 2000)
S.P.Bharucha, N.S.Hegde Bharucha. J.
State of Rajasthan, the respondent, had Issued
notifications dated 8th
January, 1990, 27th June, 1990 and 7th March, 1994 In exercise of powers conferred by Section 8(5) of the
Central Sales Tax Act. Broadly,the effect of these notifications was- to reduce
the rate of sales tax payable by dealers having their place of business in that
State in respect of inter-State sales. These notifications came to be
challenged by cement manufacturers in the State of Gujarat. The writ petitions in this behalf,
filed before the High Court of Rajasthan, were dismissed. The Gujarat cement
manufacturers came to this Court in appeal by special leave, and a Bench of
three learned Judges of this Court reversed the decision of the High Court and
held that the three 4^ notifications were "void and, therefore, they are
hereby quashed." (Shree Digvijay Cement Co. vs. State of Rajasthan, 1997
(5) SCC 406).
meanwhile, on 12th
March, 1997, the
respondent State issued another notification In much the same terms.
notification was challenged by way of a writ petition in this Court. When the
writ petition came up for admission before a Bench of three Judges, the earlier
decision of this Court in the case of Shree Digvijay Cement was cited and the
Bench observed that It was required to be considered by a larger Bench.
Accordingly, the writ petition was heard and disposed of by a Constitution
Bench (Shree Digvijay Cement Company Ltd. vs. State of Rajasthan, JT 1999 (10)
Constitution Bench held that the decision in Shree Digvijay Cement did not lay
down the correct law and it was, therefore, over-ruled. It may be mentioned that
the earlier judgment of this Court in one case of india Cement & Ors. State
of Andhra. Pradesh & Ors. (1988 (1) SCC
743) was also considered and over-ruled.
petitioners are manufacturers of cement in the respondent State. They had been
assessed to sales tax for the Assessment Years 1994-95 and 1995-96 on the basis
of the reduced rate of sales tax payable on inter-State sales under the
notification dated 7th
March, 1994. For the
Assessment Year 1996-97 no assessment order had been passed. On 26th September, 1997 they were served with show-cause
notices In relation to aU the three assassment years. The show-cause notices
stated that the notification dated 7th March, 1994 had been held void by order
of this Court (.In the case of Shree Digvijay Cement) and that, "(b)ecause
Notification dated 7.3.1994 has become void, on Inter-State sale of cement full
rate of I6% tax is payable; therefore show cause why differential tax 9 12% and
Interest be not levied." These writ petitions impugned the show-cause
counsel for the petitioners has drawn our attention to the decision in the case
of Shree Digvijay Cement, the Constitution Bench judgment which has held that
that earlier judgment does not lay down the correct law and has over-ruled it,
to the order of this Court dated 18th August, 1998 in Review Petitions arising
out of Writ Petition (.c) No. 770/89 and connected matters (M/s Texmaco Ltd.
vs. State of Andhra Pradesh) and to the decision in British Physical Lab India
Ltd. vs. State, of Karnataka & Anr. (1999 (1) SCC 170). It is learned
counsel's submission that the respondent State cannot, in law and in equity and
good conscience, recover the differential rate of sales tax that is demanded by
the three show-cause notices.
is laid on the fact that the respondent State had always contended that the
three notifications were valid and had been issued in the public interest and
that stand of the respondent State stood vindicated by the Constitution Bench
judgment which had over-ruled the decision in Shree Digvijay Cement, based upon
which the show-cause notices had been Issued.
counsel for the respondent State did not dispute that this had been the stand
all through. His submission was that the show-cause notices had been issued implemening
the judgment in the case of Shrea Digvijay Cement.
case of British Physical Lab India Ltd. (ibid),
a notification granting a reduced rate of tax was struck down. The State
Government which had issued the notification then sought to recover the difference
between the reduced rate and the rate generally applicable. This was challenged
by the appellant. This Court relied upon the earlier decision in W.B.Hosiery,Assn.
vs. State of Bihar (1988 (4) SCC 134) and the order in
the case of M/s.Texmaco Ltd. It noted that, having regard to the concerned
notification, Tocal manufacturers had been disentitled to recover the
difference in the amounts of tax from their customers and would have been
liable to penalties if they had done so, and held that they could not now be
placed in a more disadvantage position than before. It was, accordingly, just
and equitable not to permit the State to collect the differential amounts.
very same position exists in this matter also.
the judgment (in the case of Shree Digvijay Cement) which quashed the
notifications has been found not to have laid down the correct law and has been
over-ruled by a Constitution Bench. The submission that the State is Implementing
the judgment In the case of Shree Digvijay Singh cannot be accepted. In the
order therein all that was stated was that the notifications were void and
were, therefore, quashed.
was no direction to the respondent Statfc to recover the difference in tax.
think, in the circumstances, following the orders aforementioned and in the
interest of justice and equity, that the respondent State should be directed
not to collect the amount of sales tax that became payable only by reason of
the order in the case of Shree Digvijay Cement quashing the notifications dated
8th January, 1990, 27th June, 1990 and 7th March, 1994.
writ petition 1s allowed to the aforesaid extent.
shall be no order as to costs.
NOS. 604.605/97. 134. 312-315.
& 101 & 309/99:
facts in these writ petitions are similar to those in W.P.(C) No. 674/1997 (Shree
Cement Ltd. vs. State of Rajasthan). The writ petitions are,
therefore, allowed to the same extent.
order as to costs.