SB CIVIL WRIT PETITION NO.5503/2001 (M/s. Madhu Cement Pvt. Ltd. Vs. State of Raj.) Date of Order :: 08-02-2008 HON'BLE MR. JUSTICE P.S. ASOPA Mr.J.N.Sharma, for the petitioner. Mr.Ravi Chiraniya and Mr.J.M.Saxena, for the respondents. By this writ petition, the petitioner has sought a declaration from this court that the case reported in [1997] 106 STC 11 (Shri Digvijay Cement Co. Vs. State of Rajasthan and ors.) whereby the notification dated 7.3.1994 has been quashed, is prospective in operation. But during the pendency of the writ petition, the aforesaid decision has been over-ruled by the Constitution Bench of five Judges of the Supreme Court in another case of Shri Digvijay Cement Co.[2000] 117 STC 395 on November 26th, 1998. The case of the petitioner is that the petitioner has acted bonafidely and genuinely upon the aforesaid notification dated 7.3.94 which was valid at that time and had the force of law. Further case of the petitioner is that the respondents had never objected to the petitioner and also to other dealers in cement for charging and/or collecting and depositing sales tax at the reduced rate of 4% on the inter state sales of cement and their returns were accepted as correct at all material times as per notification dt. 7.3.1994 which was issued under Sec.8(5) of the CST Act, 1956, therefoe, they have made prayer that the judgment of Shree Digvijay Cement Co. (supra) reported in 117 STC 395 is prospective in nature. During the pendency of the appeal before the Supreme Court in earlier case of Digvijay cement, the State Government issued another notification on March 12, 1997 which was challenged directly by filing a writ petition before the Supreme Court and the same was not the subject matter of earlier aforesaid appeal before Supreme Court. The Constitution Bench in [2000] 117 STC 395 in para nos.2 to 7 has referred to the facts and details of the earlier case of Shri Digvijay Cement Company reported in [1997] 106 STC 11 and facts of the case before the Constitution Bench and reference of three Judges of the Larger Bench particularly in regard to applicability of Art.301 and 303 of the Constitution of India to the said notification. The Constitution Bench held that if reducing tax result in increase of collection of tax by encouraging more people to pay tax to the State then it cannot be urged that Art.301 of the Constitution of India is violated. Then over ruled the judgment rendered in earlier case of Digvijay Cement Co. in para no.31. Para nos.28,29,30 and 31 are as follows: “28. In the aforesaid judgment in Shri Digvijay Cement case [1997] 106 STC 11 (SC); (1997) 5 SCC 406, it was also observed while dealing with dispensing with the requirement of furnishing declaration in form C, that it was difficult to appreciate how the State of Rajasthan could have effectively checked or prevented evasion of payment of tax or inter- State sale of cement. Under section 8(5) of the Act, the State Government can exercise power notwithstanding anything contained in the said section. Therefore, notwithstanding the requirement of sub-section (4) of section 8 in relation to the furnishing of form C and form D, the State Government could, while lowering the rate of tax, imposed conditions which may not be in conformity with sub- section (4) of section 8 of the Act. When the purpose of furnishing form C and form D is only to ensure that sales are made in the course of inter-State sales, the State Government may provide for a different mode or manner in which this object can be achieved. In the instant case, the condition for availing the benefit of the notification is that in the bill or cash memo the name and complete address of the purchaser has to be stated and, consequently, the burden to prove that the transaction was in the nature of inter-State sales is on the dealer. At the time of assessment, therefore, the dealer who seeks to get the benefit of the said notification will have to establish the identity of the purchaser outside the State and also, in turn, prove that an inter-State sale has taken place. The tax which is collected is allocated to the State from where the movement of goods starts. Therefore, the question whether there is evasion of tax has to be seen with relevance to that State. If reducing tax results in increase in collection of tax by encouraging more people to pay tax to that State then it cannot be urged that article 301 is violated. 29.We cannot subscribe to the view that the said notification by dispensing with the requirement of furnishing declaration in form C had the effect of facilitating evasion of payment of tax and was violative of the scheme of the Constitutional provisions contained in Chapter XIII. 30. In Shri Digvijay Cement Company's case [1997] 106 STC 11 (SC), 91997) 5 SCC 406, it was observed that: “We are also of the view that the justification advanced by the State of Rajasthan that as a result of the impugned notifications the State revenue had increased and thus they were beneficial to the State revenue, is not valid as the said notifications had the effect of creating a preference to cement manufactured and sold in Rajasthan and disadvantage for the sale of cement manufactured and sold in Gujarat and thus had the direct and immediate adverse effect on the free flow of trade.” Lowering of rate of tax by the State of Rajasthan, as we have already noticed, had the direct effect of increasing the flow of trade. The mere fact that the local sale of cement in Gujarat may have been adversely affected cannot result in the impugned notification being regarded as affecting the free flow of trade and being violative of article 301 of the Constitution. The said provision is concerned with the movement of goods from one State to the another and as far as the present case is concerned, with the lowering of tax, the movement has increased rather than decreasing. 31. The decision of three-Judge Bench in Shri Digvijay Cement Co. case [1997] 106 STC 11 9SC); 91997) 5 SCC 406 does not, in our opinion, lay down the correct law and the same is accordingly over ruled.” The assessment of the petitioner-company was made on 7.3.1998 for the assessment year 1995-96 taking into consideration the three judges of Digvijay (supra) dated 21.3.1997 ignoring the fact that during the currency of the said financial year 1995-96, the notification dated 7.3.94 was in force. In the changed circumstances, both the counsel submit that the judgment of Shree Digvijay Cement Co. reported in 117 STC 395 (supra) has been over-ruled and the same remain no more effective. Submission of counsel for the petitioner is that in view of above, the notification dated 7.3.1994 would revive. The counsel for the petitioner further submits that the present case deserves to be remanded back and the order dated 27.3.1998 passed by the C.T.O., Special Circle- 5, Jaipur may be set aside. In view of above, the aforesaid impugned order dated 27.3.1998 passed by CTO, Special Circle-5, Jaipur is set aside and the matter is remanded back to the CTO, Special Circle-5, Jaipur to decide the same after considering the judgment of Constitution Bench, reported in (2000) 117 STC 395. Accordingly, the writ petition is disposed of. (P.S. ASOPA),J. Sandeep/-s/3