( 1. ) THIS is a petition under Article 226 of the Constitution for quashing the assessment order dated 1st April, 1968, passed by the Assistant Commissioner of Sales Tax, Jabalpur, imposing a penalty under Section 8 (2) of the M. P. General Sales Tax Act, 1958, (hereinafter called the Act), and for directions to restrain the respondents from taking action under the said Section 8 (2) in future. The petitioners contention is that Section 8 (2) is ultra vires the Constitution as it infringes the petitioners fundamental right under Article 19 (1) (g) and is also violative of articles 301 and 304 of the Constitution.

( 2. ) SECTION 6 of the Act provides for imposition of sales tax and section. 7 provides for purchase tax. Section 8 (as it stood at the relevant time) enacted as follows :

8. Rate of tax for raw material. (1) Notwithstanding anything contained in Section 6 or Section 7 but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of. any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent, of the sale or purchase price of such raw material. (2) Where any raw material purchased by a registered dealer under Sub-section (1) is utilised by him for any purpose other than a purpose specified in the said sub-section, such dealer shall be liable to pay as penalty an amount not less than the difference between the amount of tax on the sale of such raw material at the full rate mentioned in column (3) of Schedule II and the amount of tax payable under Sub-section (1) and not exceeding one and one-quarter times the amount of tax at such full rate as the Commissioner may determine having regard to the circumstances in which such use was made :

Provided that no such penalty shall be imposed on a registered dealer where any raw material purchased by him under Sub-section (1) is sold by him, subject to such restrictions and conditions as may be prescribed, to another registered dealer, for the purpose specified in that sub-section :

Provided further that where such registered dealer subsequently purchasing the raw material as aforesaid, utilises it for any purpose other than the purpose specified in Sub-section (1), he shall be liable to pay the penalty specified under Sub-section (2 ).

( 3. ) THE petitioner is a registered partnership firm carrying on business, inter alia, of bidi manufacturers at Sagar in the State of Madhya Pradesh and other places, It is registered as a "dealer" under the Act. It has its branches at other places in the State of Maharashtra. For the purpose of carrying on business of manufacturing bidis, the petitioner buys raw material, particularly tendu leaves in which tobacco is rolled for making hand-made bidis. The petitioner purchased tendu leaves for the purpose of manufacturing bidis from the Forest Department of the Government of Madhya Pradesh and paid sales tax at the concessional rate of one per cent, of the sale price.

( 4. ) FOR the period from 25th October, 1965, to 12th November, 1966, the Assistant Commissioner of Sales Tax assessed the petitioner to sales tax and, while computing the taxable turnover, he imposed a penalty in the sum of Rs. 93,511. 88-under Section 8 (2) of the Act, holding as under:

The dealer has transferred bidi leaves worth Rs. 12,46,824. 62 to his branches outside the State. The bidi leaves have been purchased by the assessee at the concessional rate of 1 per cent, from the Forest Department on production of declarations in form XII-A. The dealer. . . has stated that he has not committed any breach of the provisions of Section 8 (1) because the bidi leaves have been utilised for the purpose of manufacturing bidi outside the State. The reply is not to the point because the concessional rate is for sales within the State or in the course of inter-State. The dealer has made himself lia