1. These are two writ applications filed by the Jaipur Udyog Limited (hereinafter referred to as the Company) and E. C. Gautam, one of the shareholders of this company, to challenge the jurisdiction of the Income-tax Officer and that of the Sales Tax Officer to assess the petitioner company for income-tax and sales tax. Since the questions of law which have been raised by the petitioners are common to both the writ applications, we propose to dispose them of by one judgment.
2. Writ application No. 366 of 1961 is filed against the Union of India and the Income-tax Officer, Estate Duty-cum-Income-tax Circle, Jaipur impleading therein the State of Rajasthan merely as a pro forma respondent whereby the company has challenged the assessment orders passed by the respondent No. 2 assessing the petitioner company under the Indian Income Tax Act, 1922 for the assessment years 1953-54, 1954-55, 1955-56 and 1956-57. Writ Application No. 114 of 1962 is filed against the Commissioner of Sales Tax, Udaipur, the Sales Tax Officer, District Sawai Madhopur, Gangapur city and the State of Rajasthan challenging the assessment order passed by the Sales Tax Officer on 23rd February, 1957 under Rajasthan Sales Tax Act, 1954.
3. We first of all deal with writ application No. 368 of 1961. The petitioner's case is that the Government of the erstwhile Jaipur State was desirous of industrialising the State and therefore it had made an approach to the petitioner company for setting up a cement factory at Sawai Madhopur. The company agreed to establish the present cement factory on the terms and conditions which were ultimately incorporated in an agreement entered into with the State of Jaipur on 18th November, 1948 ( Annexure A) and consequently started the production of cement in the year 1953. The main term of the said agreement on which the company has built up the whole) structure of its case is as under :
'Clause 16 (a) : The licensee (petitioner company) shall not be liable to pay to the State any income, business profits, excess profits, capital gains and. corporation taxes or any other tax of the nature of: these taxes, i.e. any tax, cess or levy assessed on income, profits or gains by whatever name called, for a period to expire fifteen years after commencement of the working of the cement factory. Any dividends paid, credited or distributed or deemed to have been paid, credited or distributed from any profits and gains made during the period to expire five years after the commencement of the working of the said factory shall also be exempted from these taxes in the hands of the shareholders.'
4. It is alleged that due to the political changes brought about after the independence of the country the Ruler of the erstwhile State of Jaipur signed a covenant along with other Rulers of Rajputana States to form a new State namely, the United State of Rajasthan, which, after the Constitution came into force, became the Part B State of Rajasthan. It is averred that after the formation of the United State of Rajasthan, the new State which was a successor State of the erstwhile Jaipur State, adopted, ratified and confirmed the agreement Annexure A, after the Constitution came into force the rights and obligations arising out of the said agreement devolved by virtue of Article 295 of the Constitution on the Union of India. Thus, it is averred that the obligation to keep the petitioner company exempt from the levy and imposition of income-tax for a period of fifteen years specified in Clause 16 (a) of the agreement (Annexure A) became the obligation of the Union of India. It is also stated that the said agreement (Annexure A) was executed by and on behalf of the erstwhile State of Jaipur in pursuance of an order of the Ruler of that State approving the terms thereof and ordering that the company shall not be liable to pay to the State tax on its income for a period specified therein. It is urged that the said order of the Ruler was passed on a note drawn and--submitted by the then Dewan of the State--Shri V. T. Krishnamachari on 29th May, 1948, and as it was a command of a sovereign Ruler whereby the company was granted exemption from taxes on its income, it was a special law which governed the rights of the company to claim immunity from such taxes.
It is further urged that the special law remained in force even after the merger of the State of Jaipur on account of Ordinance No. 1 of 1949 promulgated by the Rajpramukh of the United State of Rajasthan whereby all the existing laws of the covenanting States were kept intact in that territory. It is also stated that the agreement (Annexure A) was executed in pursuance of the said command of the sovereign Ruler, and therefore, the agreement was also a law and since the United State of Rajasthan, as a successor State of Jaipur State, had affirmed and ratified the said agreement, the obligation contained therein became the obligation of the United State of Rajasthan and on coming into force of the Constitution, this obligation ultimately devolved on the Union of India by virtue of Article 295 of the Constitution. It is averred that the Indian Income Tax Act of 1922 was applied by the Parliament to the Part B State of Rajasthan from 1st April, 1950, and it is under the provisions of this Act that the respondent No. 2--the Income Tax Officer, Jaipur--proceeded to assess the company for the assessment years 1953-54 to 1958-57, and that for the assessment years 1953-54 to 1955-56 no demands were created against the company as no taxable income had accrued to it in the said years, but for the year 1956-57 the assessment order passed by the Income Tax Officer on 31st March, 1961 created a tax demand of Rs. 6, 40, 276-49 nP: petitioner's allegation is that in spite of the specific objections raised by the company before Income-tax officer that the company was not liable to be assessed for the taxes on its income by virtue of agreement (Annexure A) even after the application of the Indian Income-tax Act, 1922 to the Part B State of Rajasthan, the Income Tax Officer passed the impugned order and did not even care to deal with this objection which was emphatically urged before him by the company. An appeal was, therefore, filed by the company before the Assistant Appellate Commissioner which is said to be still pending.
As certain important constitutional and legal questions including the question of the jurisdiction of the assessing authority under the Indian Income Tax Act were specifically raised by the company, and were left undecided by the Income Tax Officer, it became necessary for the company to move this court for an appropriate relief under Article 226 of the Constitution of India. It is in this background that the present writ application has been filed by the company taking along with it one of its shareholders as the petitioner, and has prayed that a writ, order or direction in the nature of certiorari be issued to quash the impugned assessment orders and the respondents be directed by issuing a writ of mandamus not to levy any tax and/or duty on the petitioner company in disregard of Annexure A.
5. It may be noted that in this writ application no relief has been sought by the petitioner company against the State of Rajasthan and, therefore, the State of Rajasthan has not filed any written reply to this writ application, but learned Government Advocate, while denying the fact of the affirmance of the agreement (Annexure A) by the United State of Rajasthan, has contested this writ application during the course of his oral arguments, and has prayed that the company cannot claim any immunity from taxes on the basis of the agreement (Annexure A).
6. Union of India, in its reply, has admitted the execution of agreement (Annexure A) by the Government of Jaipur State, but it has denied the effect of the agreement and that of the conditions contained in Clause 16 (a) as urged by the petitioner company. Regarding the affirmance of Annexure A by the successor State, namely, the United State of Rajasthan and Pait B State of Rajasthan, the Union of India has expressed its ignorance, and therefore it has not admitted the averments made by the petitioner company in that behalf.
7. Mr. Kapoor on behalf of the petitioner company has urged before us the following points :
(1) That the order of the Ruler of the erstwhile State of Jaipur and the agreement (Annexure A) executed in pursuance thereof granting exemption to the petitioner company from the income-tax was a special law which, after the merger of that State, bound the United State of Rajasthan and with the coming into force of the Constitution bound the Union of India by virtue of Article 295 of the Constitution not to levy or impose income-tax on the company.
(2) That the agreement (Annexure A) was in the nature of a legislative contract which created rights in favour of the company to claim exemption from income-tax even after the Indian Income-tax Act, 1922 was extended by virtue of the Indian Finance Act, 1950 to the Part B State of Rajasthan.
(3) Even assuming that Annexure A was not a law the obligation created under the agreement not to impose or levy income-tax on the company devolved on the Union of India by virtue of Article 295 of the Constitution, and as such this immunity could not be washed away by the Union of India by applying the Indian Income-tax Act to the company for the period specified in Clause 16 (a) of the agreement. It has also been argued that no law enacted by the Parliament can abrogate the exemption granted to the company by the Ruler of Jaipur State under Clause 16 (a) of Annexure A as the corresponding obligation to keep the company immune from such taxes has devolved on the Union of India by means of the provisions of the Constitution which is the supreme law .of the land.
(4) That Section 13 of the Indian Finance Act of 1950 did not repeal the special law under which the petitioner company has sought immunity from tax on its income, and, therefore, it is urged that the respondent No. 2 had no authority to assess the petitioner company during the terms of the agreement (Annexure A) and his action to pass assessment orders was ultra vires of his powers.
8. Mr. Lodha appearing on behalf of the Union of India, has urged that in the absence of any specific order of the Ruler, it cannot be presumed that the order even if it was passed by the Ruler was in the nature of a command of a sovereign. His contention is that according to the allegations made by the petitioner itself the agreement and the alleged order, if any, was executed or passed as a result of prolonged negotiations between the parties, that is, the company and the State Government, and, therefore, under the circumstances neither the agreement nor the alleged order of the Ruler, if any, could be given the status of a special law as the agreement does not show the characteristics of a law. It is also urged that the agreement (Annexure A) is obviously a consequence of the meeting of the minds of the parties to this agreement who were entering into a bargain and therefore, it cannot, by any stretch of imagination, be said to have contained any command from the sovereign Ruler as its implementation solely depended upon its acceptance by the parties thereto.
In this connection, Mr. Lodha has relied on the observations of their Lordships of the Supreme Court in the case of Maharaja Shree Umaid Mills Ltd. v. Union of India, AIR 1963 S C 953 and has contended that the observations of the Supreme Court apply on all fours to the facts and circumstances of the instant case. It has also been urged on behalf of the Union of India that Annexure A does not contain any guarantee from exemption of income-tax if levied by the Union of India as it simply says that the State of Jaipur would exempt the company from the income-tax if and when finch a tax is imposed by the State. Mr. Lodha has further urged that for the sake of argument if it is assumed that the terms and conditions of the agreement were adopted and affirmed by the successor State of Rajasthan and that the agreement was a special law even then it is not open to the petitioner company to seek exemption from income-tax as Section 13 of the Indian Finance Act of 1950 does not save such a law nor does it save any such exemption claimed under that law. Mr. Lodha has also argued that even if there be any contractual obligation devolved on the Union of India by virtue of Article 295 of the Constitution, such obligation could be abrogated or wiped out by the Parliament by enacting a law. According to his contention extension of the Indian Income-tax Act of 1922 to the Part B State, of Rajasthan without specifically saving the rights of the petitioner company tantamounts to repealing the alleged law where-under the immunity is claimed by the company or if there is no such law then abrogating all the contractual rights or obligations even though they devolved on the Union of India by means of the constitutional provisions. It is also contended that Indian Income-tax Act, 1922 is quite exhaustive and the company cannot seek exemption under any other provision except Sections 60 and 60A of the Act, under which the assessee can seek exemption from the tax. It has been argued that no contractual obligation whether devolving on the Union of India by virtue of the constitutional provisions or otherwise can override the specific provisions of the law enacted by the sovereign Parliament.
9. Mr. Kan Singh appearing on behalf of the State of Rajasthan has, however, urged that the document Annexure A is an agreement simpliciter and it cannot be treated as a valid contract between the State of Jaipur and the petitioner as there was no consideration for such an agreement and, therefore, the company cannot claim any exemption under such an agreement.
10. At the time of the argument it was requested by the learned counsel for the petitioner company that the order of the Ruler of the Jaipur State may be summoned so that the Court may examine it to ascertain its correct nature and the scope to find out whether it was a command of a sovereign Ruler or not. Learned Government Advocate was, therefore, directed to produce the Government file containing the said order but the Government of Rajasthan vide its letter D/-5-4-1963 expressed its regret to place the file before the Court as it was found untraceable. It was under these circumstances that the alleged order of the Ruler of the then Jaipur State could not be brought on record, and we are now required to decide the objection of the company without going through the alleged order of the Ruler.
11. We have carefully perused the agreement (Annexure A) and we find that nowhere in that document it has been mentioned that the agreement was executed in pursuance of an order of the Ruler and the term embodied in Clause 16 (a) granting exemption to the company from income tax was a consequence of such a command from the sovereign. The reading of this agreement throughout gives an idea that the document was executed as a result of the meeting of the two minds, namely, the parties to the agreement and the exemption mentioned therein was not incorporated as a consequence of the command of the sovereign. It has been pointed out to us that the, company, in its petition has stated that it was at the request of the Government of Jaipur that it had agreed to establish the cement industry in the State on the terms and conditions mentioned in the said agreement. This statement of the petitioner, when read in the context of the agreement makes it clear that the terms and conditions mentioned therein were agreed upon by the parties to the agreement, and when we peruse other documents on the record, our conclusion is all the more strengthened that the execution of document Annexure A was a result of a prolonged negotiations between the State Government and the company. It may be noted that the company has not given any details about the alleged order of the Ruler on which it places its reliance except that it has filed a copy of the note of the then Prime Minister Shri V. T. Krishnamachari, and from this note it is urged that the court may infer the existence of some order of the Ruler whereunder the authorities concerned were empowered to grant exemption to the company before the document Aunexure A was executed. The note of Shri V. T. Krishnamachari drawn by him on 29th May, 1948 reads as follows:--
'When I was in Delhi I spoke to Mr. S. A. Ven-kataraman Secretary, Industries and Supplies Department, about a license for a cement factory in Jaipur. He said that strong objection had been taken to this by the 'Associated Cement' on the ground of unfair competition with the Lakheri Works. I pointed out that this objection was untenable as the demand in Jaipur State itself would be enormous. He promised to put up the case to the Hon'ble Member and let me know the decision.
In the meantime, pending the issue of a licence, it will be a good idea to have the concessions etc. granted to Dalmia approved by the Cabinet and His Highness the Maharaja Sahib Bahadur. Will you kindly take urgent action so that the sanction of His Highness the Maharaja Sahib Bahadur may be obtained before he leaves for England.'
12. This note does not in any manner throw light on the question whether the concessions given to the company were ordained by the Ruler or they were the result of the prolonged negotiations between the State Government and Dalmia who has been named in the said note. It may be pointed out that the note of the Prime Minister is conspicuously silent about the grant of the exemption to the company from income-tax and therefore it cannot provide a basis to infer the existence of an order of the Ruler granting exemption to the company from income-tax. In the absence of the alleged order of the Ruler and in view of the scanty material that has been placed before us by the company, it is difficult for us to accept the contention of the learned counsel for the company that there was an order of the Ruler in the nature of the command whereby the company was granted concession embodied in Clause 16 (a) of the agree-merit. On the contrary, when we read the note of Shri Krishnamachari in'the light of the averments made by the company in its writ application, we start feeling that there is a considerable weight in the argument of Mr. Lodha that the company was granted exemption for income-tax by incorporating Clause 16 (a) in Annexure A as a result of the negotiations between the two parties to that agreement, and it became binding only when it was accepted by the signatories to the agreement. Nobody on behalf of the company has come forward to state on oath that during the course of the negotiations such an order containing the command of the Ruler was seen by him. We feel that in the absence of the order of the Ruler, the Court cannot record any finding about the existence and the nature of the order of the Ruler and therefore it cannot be held that the exemption claimed by the company originated from the command of the Ruler which was a special law to govern the rights and the obligations of the parties.
The only document that is now left in this connection for our consideration is Annexure A for which we can confidently say, after taking all the circumstances placed before us that it was executed by the parties after prolonged negotiations and it was in pursuance of this document that the company established the cement factory in the territory of the then Jaipur State. In this connection, our attention has been drawn to the Supreme Court decision in AIR 1963 SC 953, wherein it has been held that every order of a Ruler, who combines in himself all the three functions of the State, namely, executive, judicial and legislative, cannot be treated as law. In order to declare a particular order of the Ruler as law the Court shall have to see its nature and character and it is only then that the order can be declared as having a force of law. It will be convenient in this connection to reproduce the observations of their Lordships of the Supreme Court which are as follows :
'We think that the true nature of the order must be taken into consideration, and the order to be law must have the characteristics of law, that is, of a binding rule of conduct as the expression of the will of the sovereign, which does not derive its authority from mere consensus of mind of two parties entering into a bargain ..... A. contract is essentially a compact between two or more parties; a law is not an agreement between parties but is a binding rule of conduct deriving its sanction from the sovereign authority. From this point of view there is a valid distinction between a particular agreement between two or more parties even if one of the parties is the sovereign Ruler, and the law relating generally to agreements. The former rests on consensus of mind, and the latter expresses the will of the Sovereign. If one bears in mind this distinction, it seems clear enough that the agreement of April 17, 1941 even though sanctioned by the Ruler and purporting to be on his behalf, rests really on consent.'
13. Mr. Kapoor has, however, urged that these observations of their Lordships of the Supreme Court do not apply to the present case as the facts of the present case are different from those of that of Maharaja Shree Umaid Mills' case AIR 1963 SC 953 which he has tried to distinguish by pointing out that in that case no sanction of the Ruler of Jodhpur State was obtained to enter into the agreement and it was the Government of Jodhpur State mat was a party to that agreement, and therefore it was in that background that the Supreme Court has made the above observations in that judgment. In our opinion, this distinction is not borne out from the facts of that case as we find in para. 22 of the judgment as reported in AIR 1963 SC 953 at p. 960 that their Lordships have referred to the agreement as follows :
'The right which the appellant claims stems from the agreement entered into by the Ruler of Jodhpur.'
14. The above referred observations of the Supreme Court clearly lay down the principles that should guide the Courts to assess the true nature of the order of a sovereign Ruler, and it is in this background that we have to decide the objection of the company. In the present case it is evident from the note of Shri V. T. Krishnamachari that the matter was put before the Ruler to obtain his sanction at some stage of the case, but it cannot be definitely said whether such a sanction was obtained prior to the execution of the agreement or thereafter. In our opinion the point of time is not of much significance as the sanction of the Ruler cannot be deemed to have been obtained independently of the negotiations between the parties, as a result of which the document Annexure A was executed. Under these circumstances, while applying the principle laid down by their Lordships of the Supreme Court we are of opinion that the order of the Ruler even if it be there or the agreement (Annexure A) cannot be held to be a special law to create statutory exemption from taxes on income in favour of the company.
15. As regards the contention of the learned counsel for the petitioner that the agreement (Annexure A) is a legislative contract, we feel that it does not now require any decision from this court as the question stands decided by the judgment of the Supreme Court in the case of Maharaja Shree Umaid Mills Ltd., AIR 1963 SC 953. Their Lordships of the, Supreme Court have discussed this question at length and have come to the conclusion that agreement like Annexure A cannot fall within the category of 'legislative contract.
16. Learned counsel for the petitioner has, however, addressed this Court at length to show that the obligations of the State of Jaipur to keep the company immune from income-tax by virtue of Clause 18 (a) of Annexura A devolved on the successor State viz., the United State of Rajasthan after it was formed in April, 1949, and that this newly formed State had affirmed the said agreement and acted upon the same. In this connection certain facts have been mentioned by the petitioner in para. 21 of its petition, but they have been denied by learned Government Advocate in his oral arguments, and the Union of India has also not admitted them for want of knowledge. We feel that we need not go into these controversial matters relating to facts while exercising our extraordinary jurisdiction under Article 226 of the Constitution, nor, in our opinion, are these facts necessary to determine the contentions raised by the company.
The question whether the company can claim exemption from Income-tax even after Indian Income-tax Act, 1922 was extended to the State of Rajasthan can be decided without going into the merits of the controversial issue of affirmance of the said agreement by the successor State of Rajasthan. We do not think that the petitioner can draw any additional strength to his contention by establishing the fact of affirmance of the said agreement. In view of our finding that the agreement Annexure A was not a special law, we feel that the obligations arising out of such an agreement, after devolution on the Union of India by virtue of Article 295 would not lose the character of being the contractual obligations. Mr. Kapoor has, however, strenuously urged that the obligations of the Jaipur State have now become constitutional obligations as they have devolved on the Union by virtue of the constitutional provisions, and therefore, they shall have to be given greater sanctity than to those which are mere contractual obligations. He has contended that such obligations can be abrogated only by a legislative measure specifically smashing away such obligations. According to him extension of the Indian Income-tax Act, 1922 to the territory of the Part B State of Rajasthan would not affect his clients' rights and the corresponding obligations of the Union of India arising out of the said agreement and he claims that his clients can still claim exemption from income-tax under Clause 16 (a) of the said agreement for the period mentioned therein. In our opinion, obligation of the Union of India arising out of the agreement Annexure A cannot be placed on a footing higher than any other contractual obligations simply because such an obligation has devolved on the Union of India under a constitutional provision. In view of the observations of the Supreme Court in Maharaja Shree Umaid Mills' case AIR 1963 S C 953, Mr. Kapoor has candidly accepted to this position that the obligation of the Union of India cannot be put at par with the constitutional guarantee, but all the same he has vehemently advocated for attaching greater sanctity to those obligations which have devolved on the Union of India on account of the constitutional provisions. This contention leads us to examine the scope of Article 295 of the Constitution. Such a question had come up for the consideration of the Supreme Court in Maharaja Shree Umaid Mills' case, AIR 1983 SC 953 also where their Lordships carefully examined the true scope and the effect of Article 295 of the Constitution and observed as follows :--
'Clause (b) states that all rights, liabilities and obligations of the Government of any Indian State corresponding to a State specified in Part B of the first schedule, whether arising out of any contract or otherwise shall be the rights, liabilities and obligations of the Government of India if the purposes for which such rights were acquired or liabilities and obligations were incurred be purposes of the Government of India. There is nothing in the Article to show that it fetters for all time to come the power of the Union legislature to make modifications or changes inthe rights, liabilities etc, which have vested in the Government of India. The express provisions of Article 295(1) deal with only two matters, namely (1) vesting of certain property and assets in the Government of India, and (2) the arising of certain rights, liabilities and obligations on the Government of India. Any legislation altering the course of vesting or succession as laid down in Article 295 will no doubt be bad on the ground that it conflicts with the Article. But there is nothing in the Article which prohibits Parliament from enacting a law altering the terms and conditions of a contract or of a grant under which the liability of the Government of India arises. The legislative competence of the Union Legislature or even of the State Legislature can only be circumscribed by express prohibition contained in the constitution itself and unless and until there in any provision in the Constitution expressly prohibiting legislation on the subject either absolutely or conditionally, there is no fetter or limitation on the plenary powers which the legislature enjoys to legislate on the topics enumerated in the relevant Lists, Umeg Singh v. State of Bombay, (S) AIR 1955 SC 540. In our opinion there is nothing in Article 295 which expressly prohibits Parliament from enacting a law as to income-tax or excise duty in territories which became Part B States, and which were formerly Indian States, and such a prohibition cannot be read into Article 295 by virtue of some contract that might have been made by the then Ruler of an Indian State with any person.'
17. From this discussion it is obvious that the Parliament, if it so chooses, can abrogate or wipe out all such contractual obligations that have devolved on the Union of India by virtue of Article 295 of the 'Constitution.
18. The next question that arises out of this situation is whether the application of the Indian Income-tax Act to the Part B State of Rajasthan by declaring the territory of the State of Rajasthan as a taxable territory has taken away the rights of the company claimed by it under Clause 16 (a) of the agreement.
19. In our opinion, the effect of the extension of the Income Tax Act to the State of Rajasthan is that every citizen residing in the territory of the State of Rajasthan is liable to be taxed under the Indian Income-tax Act unless he is specifically saved from the operation of that law. Income-tax Act is an exhaustive Code that deals with all aspects of the questions of levy, imposition and collection of income-tax and if anybody wants to seek an exemption from taxes on his income he can do so under Section 60 or 60A of the Act. Section 13 of the Indian Finance Act of 1950 deals with repeals and savings of the old laws and we find that it does not save exemption of the company which is claimed under the provisions of the agreement Annexure A.
Learned counsel for the petitioner has also argued, that Section 13 of the Indian Finance Act, 1950 does not affect the exemptions of the company as it has not specifically abrogated the concessions contained in the agreement Anuexure A. As has already been observed above, the agreement is not a special law and, therefore, the question of its repeal by Section 13 does not at all arise. We do not find any saving of such exemption in favour of the company in Section 13 of the Finance Act, 1950 and therefore it is not open to the company to claim exemption under the provisions of the agreement. In our opinion, no contractual obligation whether devolving on the Government by virtue of the constitutional provisions or otherwise' can override the provisions of the Income-tax Act which subjected every resident citizen including the company to the operation of the provisions of the Act unless exemption is found in his favour under the Act itself. We do not, therefore, find any force in the argument advanced by Mr. Kapoor to save his client from the operation of the Income-tax Act.
20. Now, we come to the second writ application of the petitioners whereby the company has challenged the jurisdiction of the Sales Tax Officer to assess it for sales tax under the Rajasthan Sales Tax Act, 1954. Contention of the company is that by virtue of Clause 17 of the agreement Annexure A and subsequent agreements of 9th March, 1953 and 30th October, 1958 the State of Rajasthan has exempted the company from Sales Tax on the sales of manufactured goods which are not actually consumed in the State. The State of Rajasthan in its reply has admitted the execution of the aforesaid agreement, but it has contended that the company can claim exemption under the provisions of the Rajasthan Sales Tax Act, 1954 and if the said Act permits such an exemption the Sales Tax Officer would not hesitate to respect the terms of the above said agreements. It is also contended by learned Government Advocate that the Sales Tax Officer has already taken note of the said agreement and has taxed only those sales which are made by the company for the consumption in the territory of the State.
21. Clause 17 of the agreement Annexure A runs as follows :--
'17. The licensee (petitioner company) shall not be liable to pay any sales tax if and when it is imposed, on any sales of manufactured goods not for actual consumption within the territory of the State'.
Clause 7 (b) of the agreement dated 9th March, 1953 does not carry the claim of the company any further, as it only reiterates its promise embodied in the document Annexure A and reads as follows :--
'7. (b) The Government of Rajasthan shall implement the provisions of Clause 17 of the said agreementif such a course is legally and constitutionally permissible after the enactment of the law relating to Sales Tax.'
Clause 7 (b) of the agreement of 1958 is exactly in the same language as that of the agreement of 1953. From the perusal of these clauses it is apparent that the State Government has given an assurance to the company that the exemption embodied in Clause 17 of Annexure A shall be implemented to the extent to which the provisions of the law, namely, the Rajas-than Sales Tax Act and the Constitution permit them to do.
22. Section 4 (2) of the Rajasthan Sales Tax Act, 1954 empowers the State Government to exempt any goods or class of goods, or any person or class of persons from tax under the Act provided it is expedient in the public interest so to do. It is only under this provision of the law that the Government of Rajasthan can exempt the company from the application of the Sales Tax Act on the sales made by the company. Learned Government Advocate has argued that if the company could satisfy the Government that the exemption of the sales in the hands of the company of its manufactured goods is in public interest, the Government would not lag behind to implement its promise made in the aforesaid agreements.'He has also drawn our attention to the fact that the sales made by the company in interstate transactions are not to be taxed under the Rajasthan Sales Tax Act, but they will be subjected to tax under the Central Sales Tax Act for which no exemption can be claimed by the company. We have examined the contentions of both the parties in this connection and we find that the State Government can implement the promise made by it in the aforesaid agreement under : the law only when it is found out that the exemption to be granted under Section 4 (2) of the Rajasthan Sales Tax Act is expedient in the interest of the public. It is for the State Government to determine whether such an exemption is in public interest or not. We cannot, however, assume the role of the State Government, nor did the petitioner request us to do so, to record a finding whether the sales made by the company should or should not be exempted under Section 4 (2) of the Rajasthan Sales Tax Act. Other arguments advanced by learned Counsel for the petitioners are the same with which we have dealt with while deciding writ application No. 366 of 1961.
23. In view of the above discussions, we are of opinion that the contentions raised by the petitioners in both these applications have no force and, therefore, both the applications are dismissed with one set of costs to be paid to the Union of India in writ application No. 366 of 1961 and the State of Rajasthan in writ application No. 114 of 1962.