Rajesh Balia, J. - The petitioner is a manufacturer of "sada pan masala", mixed with tobacco in the brand name of Geetanjali, Zafri 2100 Gutkha, etc. The petitioner as a manufacturer is subject to excise duty and is also liable to sales tax under the State sales tax or Central sales tax, as the case may be, in respect of the transactions of sale entered by it.

Vide impugned notification dated January 3, 2001 "zarda mixed pan masala including gutkha and churi" was added to the list of commodities on which the levy of tax under the Rajasthan Tax on Entry of Goods into Local Areas Act, 1999 was extended. The petitioner is aggrieved with the levy of tax under the Act of 1999 on its product when its brand is carried into local area of State of Rajasthan for use, consumption or sale within such local area. He has challenged the constitutional validity of the Act of 1999 and the aforesaid notification issued thereunder.

Amongst other grounds, the petitioner has challenged the levy being ultra vires article 301 under Chapter XIII of the Constitution of India. It is submitted by learned counsel for the petitioner that the impugned tax on the entry of goods into local area has direct impact on movement of trade from any place to a local area within the State of Rajasthan as it is a levy on entry of its product or movement of its product from any place outside the local area to within the local area where it is to be used, sold or consumed. That being so, it is hit by article 301 of the Constitution. In view of the fact that before enacting the impugned Act the Bill has not been laid before the President for his assent as envisaged under proviso to article 304(b) of the Constitution. Hence, it is not saved from restriction imposed under article 301. He has pressed into service the principle enunciated in;

(1) Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232.

(2) Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406.

(3) Jindal Stripe Ltd. v. State of Haryana [2004] 134 STC 303 (SC) (1st Jindal case).

(4) Jindal Stainless Ltd. v. State of Haryana [2006] 145 STC 544 (SC) (2nd Jindal case).

On the other hand, respondents have contended that :

(i) the tax in question is not suffered by the trade because the same is transmitted to the end - consumer and it being an indirect tax, it does not impede the activity of goods and is not hit by article 301 of the Constitution and consequently it is inapt to refer to the procedure provided under article 304 of the Constitution for the purpose of saving it from the restriction imposed under article 301 of the Constitution to be a reasonable restriction.

(ii) The contention was also that the entry tax is not merely on the entry of goods within the local area but it requires something more than that, i.e., to say entry of goods into local area must be for its use, consumption or sale therein.

(iii) It was also argued that octroi being a compensatory tax, it does not fall within the province of article 301 of the Constitution at all, which also obviate necessity to follow procedure for making a law by State Legislature to overcome the prohibition imposed under article 301 of the Constitution.

In this regard, the specific case of the respondents is that prior to introducing entry tax under the Act of 1999, the octroi duty on entry of goods within local limits of municipality or panchayat for use, sale or consumption at such rates as may be notified by the State Government in each local area under municipality or panchayat, as the case may be, was being levied and collected by the concerned local self-Government institution. The amount realised by way of octroi was not only the major source of revenue for such authority but it was basically a lifeline for such authorities. However, levy and collection of octroi as such was creating hindrance to smooth flow of traffic on account of check-posts at various points within the local area and led to harassment to the transpor