Division Bench defers final orders on challenge to Rajasthan Tax Act, 1999; dismisses writ petitions and awaits Supreme Court decision.

The Division Bench refrained from passing final orders in the case challenging the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999. The court dismissed all writ petitions, discharged interim orders, and forwarded judgments for consideration in a pending Civil Appeal. The court noted that issues on the compensatory nature of the tax and the Act's validity are pending before the Supreme Court, emphasizing that the Act's ultra vires declaration and refund directive exceeded the Supreme Court's mandate.

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Issues Involved:
1. Constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999.
2. Whether the entry tax imposed under the Act is compensatory in nature.
3. Conflict between previous judgments regarding the validity of the Act.
4. Interim orders and their implications on the revenue.

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Act:
The Rajasthan High Court previously upheld the constitutional validity of the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 in the cases of M/s. Godfrey Philips India Ltd. and M/s. Dinesh Pouches Ltd. The Act was challenged on the grounds that it violated the freedom of trade, commerce, and intercourse under Article 301 and was not saved by Article 304(b) of the Constitution of India. The court upheld the Act, following the earlier judgment in the Godfrey Philips case.

2. Compensatory Nature of the Entry Tax:
The Supreme Court in Jindal Stainless Ltd. (2) held that the doctrine of "direct and immediate effect" of the impugned law on trade and commerce under Article 301 and the working test enunciated in Automobile Transport (Rajasthan) Ltd. vs. State of Rajasthan for deciding whether a tax is compensatory or not will continue to apply. The High Courts were directed to deal with the basic issue as to whether the impugned levy was compensatory in nature. The Rajasthan High Court, in M/s. Dinesh Pouches Ltd. (2), found the entry tax to be ultra vires Article 301, concluding that the Act does not provide quantifiable benefit or recompense to the payers of the entry tax.

3. Conflict Between Previous Judgments:
There was a conflict between the judgments in M/s. Dinesh Pouches Ltd. (1) which upheld the Act, and M/s. Dinesh Pouches Ltd. (2), which declared the Act ultra vires. The Division Bench in Lakshmi Cement vs. The State of Rajasthan & Ors. observed that the earlier order in Dinesh Pouches Ltd. (1) was not set aside by the Supreme Court, and the subsequent Division Bench could not have allowed the writ petition by striking down the provisions of law. The matter was referred to a larger Bench for examination due to contradictory judgments.

4. Interim Orders and Revenue Implications:
Interim orders were passed by the Rajasthan High Court staying the recovery of entry tax, which affected the revenue collection. The court directed petitioners to deposit 50% of the assessed tax and furnish solvent security for the balance. The Supreme Court, in a transfer petition, directed the High Court to take up the matter after the disposal of the special leave petition. The Division Bench in the present case noted that the revenue from entry tax to the extent of Rs. 1163.41 crores had been stayed by the court.

Conclusion:
The Division Bench in the present case concluded that the Division Bench in M/s. Dinesh Pouches Ltd. (2) exceeded the mandate of the Supreme Court's order by declaring the Act ultra vires and directing a refund of the entry tax. The court held that the issues regarding the compensatory nature of the tax and the validity of the Act are still pending before the Supreme Court. Therefore, the High Court refrained from passing any final orders and dismissed all the writ petitions, discharging the interim orders. The judgments dated 21.8.2007 and 18.1.2008 were directed to be forwarded to the Supreme Court for consideration in the pending Civil Appeal No. 3453/2002.

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