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PETITIONER: SHREE CEMENT LTD.  & ANR.

       Vs.

RESPONDENT: STATE OF RAJASTHAN & ORS.

DATE OF JUDGMENT:       19/01/2000

BENCH: S.P.Bharucha, N.S.Hegde

JUDGMENT:

BHARUCHA.  J.

     In W.P.(C) No.674/97:

     The  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

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     notifications  were  "void  and, therefore,  they  are hereby  quashed." (Shree Digvijay Cement Co.  vs.  State  of Rajasthan, 1997 (5) SCC 406).

     In  the meanwhile, on 12th March, 1997, the respondent State  issued  another notification In much the same  terms. That  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) SC 201). The  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.

     The  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

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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 notices.

     Leared  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. Stress  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.

     Learned  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.

     In  the  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.

     The  very  same position exists in this  matter  also. Additionally,  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

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     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. There  was no direction to the respondent Statfc to  recover the difference in tax.

     We  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.

     The  writ petition 1s allowed to the aforesaid extent. There shall be no order as to costs.

     In   W.P.(C)   NOS.    604.605/97.    134.    312-315. 428.429.552/98 & 101 & 309/99:

     The 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.

     No order as to costs.