Judgment

Arjan Kumar Sikri, J.

1. The bare minimum facts which are required to be mentioned to decide this appeal are recapitulated, in brief, hereinbelow:

2. The Appellant Nos. 1 and 2 are the units of Grasim Industries Limited, which carries on manufacture and sale of cement. It requires raw material in the form of coal, gypsum and bauxite. On the aforesaid raw materials, the Appellants had been paying entry tax for entry of these goods in the territory of the State of Madhya Pradesh under M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter called the 'Entry Tax Act'). In the year 1997, the entry tax on the aforesaid items of raw materials payable under the Act was at the following rates:

COAL – 2.5%

GYPSUM – 2%

BAUXITE – 10%

In the year 1999, Respondent No. 1-State issued Notification No. A-3-80-98-ST-V (49) dated 4.5.1999. By this Notification it reduced the rate of entry tax, namely, coal, gypsum and bauxite by making the entry tax payable at the rate of 1% only. This Notification remained in force for a limited period, that is from 1.5.1997 to 30.09.1997. The rate of entry tax prior to 1.5.1997 and after 30.09.1997 remained the same, namely, 2.5%, 2% and 10% for coal, gypsum and bauxite respectively.

3. We are concerned here with the aforesaid period when entry tax payable was @ 1% only. However, while reducing the entry tax to 1%, in the same very Notification an Explanation was also appended stating that the amount which is already paid by the dealer at the higher rate shall not be refunded. This Explanation is worded in the following terms:

Explanation-The amount shall not be refunded in any case on the basis that the dealer had paid the tax at a higher rate.

As the Notification was issued only in May 1999 and it related to the past period, i.e. 1.5.1997 to 30.09.1997 and the entry tax is payable at the point of entry of the goods into the State, as and when the Appellants were bringing the aforesaid raw material into the State of Madhya Pradesh, they had been paying the entry tax. During the period 1.5.1997 to 30.09.1997, they had paid the entry tax at the rate which was prevalent at that time, though reduced to 1% vide the Notification dated 4.5.1999. In this manner, according to the Appellants, though they had paid the entry tax at the higher rate, which was now reduced to 1% vide the aforesaid Notification, they became entitled to get the refund of the excess amount paid, but were still deprived of that refund because of the aforesaid Explanation.

4. Naturally, being aggrieved by the said Explanation, the Appellants challenged the validity of the Explanation by filing writ petition in the High Court of Madhya Pradesh. The challenge was led primarily on two counts:

(i) in the first instance, it was pleaded that this Explanation was arbitrary and discriminatory being violative of Article 14 of the Constitution inasmuch as the classification which has carved out because of the said explanation had the effect of treating the Appellants and Others who had paid tax at a higher rate, differently from those who had not paid the tax at all and were defaulted. It was argued that such a classification was not based on any intelligible differentia and had no nexus with any objective sought to be achieved. A number of judgments in support of this contention were cited in the High Court.

(ii) The second argument raised was that it amounted to exaction of tax at a higher rate, namely, at the rate of 2.5%, 2% and 10% for coal, gypsum and bauxite respectively, though the rate fixed ultimately for the period in question by the Notification dated 4.5.1999 was 1%. Therefore, such an 'Explanation' in the Notification was in the teeth of Article 265 of the Constitution and per se illegal.

5. The High Court, though took note of the aforesaid arguments, did not deal with these arguments in the manner in which these submissions were made and dismissed the writ petition vide impugned judgment dated 11.9.2002 only on the ground t