Supreme Court upholds validity of Rajasthan notification dismissing writ petition, finds it not violating Constitution.

The Supreme Court upheld the validity of the notification dated March 12, 1997, issued by the State of Rajasthan, dismissing the writ petition. The Court found that the notification did not violate Articles 301 and 303 of the Constitution, did not facilitate tax evasion, and was issued in public interest. The precedents set by Indian Cement Ltd. v. State of Andhra Pradesh and Shri Digvijay Cement Co. v. State of Rajasthan were overruled.

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Issues Involved:
1. Validity of the notification dated March 12, 1997, issued by the State of Rajasthan under section 8(5) of the Central Sales Tax Act.
2. Whether the notification violates Part XIII of the Constitution, specifically Articles 301 and 303.
3. The impact of not requiring the furnishing of declaration in form C or certificate in form D as per section 8(4) of the Act.
4. The interpretation of "public interest" under section 8(5) of the Act.
5. The correctness of the precedents set by Indian Cement Ltd. v. State of Andhra Pradesh and Shri Digvijay Cement Co. v. State of Rajasthan.

Detailed Analysis:

1. Validity of the Notification:
The challenge in this writ petition is to the notification dated March 12, 1997, issued by the State of Rajasthan under section 8(5) of the Central Sales Tax Act. This notification reduced the rate of sales tax on inter-State sale of cement to 4% and removed the requirement of furnishing declaration in form C or certificate in form D. The petitioners, cement manufacturers in Gujarat, argued that this reduction made cement from Rajasthan cheaper in neighboring states, adversely affecting local sales in Gujarat.

2. Violation of Part XIII of the Constitution:
The petitioners contended that the reduction of sales tax was contrary to the scheme contained in Part XIII of the Constitution and was liable to be struck down. They argued that the notifications had a direct and immediate adverse effect on the free flow of trade, violating Articles 301 and 303 of the Constitution. However, the Supreme Court held that the impugned notification did not prevent or hinder the free movement of goods but instead increased the movement of cement from Rajasthan to other states. The Court concluded that the notification had the opposite effect of lowering the sales tax barrier, resulting in increased inter-State trade.

3. Impact of Not Requiring Declaration in Form C or Certificate in Form D:
The petitioners argued that dispensing with the requirement of furnishing form C or form D facilitated tax evasion and was violative of the scheme of the constitutional provisions. The Court disagreed, stating that the notification required the seller to record the name and address of the purchaser on the bill or cash memo and the dealer to prove that the transaction was an inter-State sale. The Court found that this substitution did not facilitate tax evasion, as the State of Rajasthan experienced increased tax revenue on inter-State sales of cement.

4. Interpretation of "Public Interest":
The respondents argued that the notification was issued in public interest, as it led to increased revenue, industrial activities, and employment. The Court agreed, stating that the reduction of the tax rate resulted in increased revenue and industrial activities, providing employment in the industry and mining of limestone. The Court held that the issuance of the notification was in public interest as envisaged by section 8(5) of the Act.

5. Correctness of Precedents:
The petitioners relied on the decisions in Indian Cement Ltd. v. State of Andhra Pradesh and Shri Digvijay Cement Co. v. State of Rajasthan, which had struck down similar notifications. The Court overruled these precedents, stating that the conclusions in Indian Cement and Shri Digvijay Cement did not flow from the decisions of the Constitution Benches of the Court. The Court held that section 8(5) of the Act, which allows for the reduction of the inter-State sales tax rate, was valid and that the impugned notification was issued in public interest.

Conclusion:
The Supreme Court upheld the validity of the notification dated March 12, 1997, issued by the State of Rajasthan, dismissing the writ petition. The Court found that the notification did not violate Articles 301 and 303 of the Constitution, did not facilitate tax evasion, and was issued in public interest. The precedents set by Indian Cement Ltd. v. State of Andhra Pradesh and Shri Digvijay Cement Co. v. State of Rajasthan were overruled.

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