TMI Blog2001 (10) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Appeals No. 1321 of 2001, are accordingly allowed. Civil Appeal No. 1321 of 2001 is dismissed. - Civil Appeal No. 5085, 5086-5088, 5763, 5764 of 2000, - - - Dated:- 4-10-2001 - KIRPAL B.N. AND SANTOSH HEGDE N. AND AGRAWAL B.N. JJ. Civil Appeal No. 5085, 5086-5088, 5763, 5764 of 2000, Civil Appeal No. 1321, Civil Appeal No. 1736, Civil Appeal No. 1737, Civil Appeal No. 1738, Civil Appeal No. 1739, Civil Appeal No. 1740, Civil Appeal No. 1741, Civil Appeal No. 1742, Civil Appeal No. 1743, Civil Appeal No. 1744, Civil Appeal No. 1745, Civil Appeal No. 1746, Civil Appeal No. 1747, Civil Appeal No. 1748, Civil Appeal No. 1749, Civil Appeal No. 1750, Civil Appeal No. 1751, Civil Appeal No. 1752, Civil Appeal No. 1753, Civil Appeal No. 1754, Civil Appeal No. 1755, Civil Appeal No. 1756, Civil Appeal No. 1757, Civil Appeal No. 1758, Civil Appeal No. 1759, Civil Appeal No. 2557, Civil Appeal No. 2893, Civil Appeal No. 3424, Civil Appeal No. 3425, Civil Appeal No. 3426, Civil Appeal No. 3427, Civil Appeal No. 3697, Civil Appeal No. 4033 of 2001, Sushil Kumar Jain, Ms. Anjali Doshi, A.P. Dhamija, A. Raghunath, Manish Singhvi, Vineet Kothari, Anjay Kothari, K.K. Gupta, M.P. Jha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orised officer under section 78 as part of machinery provision for collecting evidence about goods coming in or going out of or moving within the State, can be considered as intended to prevent and check evasion and avoidance of tax and in aid of making effective the levy which has arisen or likely to arise within the State, are provisions incidental and ancillary in aid of main subject of levy and collection of sales tax. (ii) Provision as to notice before imposing penalty is not an empty formality for imposing penalty, for non-production or production of incomplete documents, but is intended to give an effective opportunity of hearing to show that no penalty is at all leviable. If it is reasonably established that such default is not with any intention to evade or avoid tax, but is bona fide default, the breach does not travel beyond technical breach, for which it is not compulsory to impose penalty. Such question has to be determined in each case on its own facts and circumstances. (iii) No opinion is expressed on the validity of requirement to carry declarations in form S.T. 18A or 18AA with goods, in view of no challenge made in the petitions. (iv) The provisions for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was total absence of mens rea and the breach is unintentional and completely bona fide still an innocent transporter can be subjected to penalty under section 78(5) of the 1994 Act. It was submitted that section 78(5) was analogous to section 38 of the Haryana General Sales Tax Act, 1973, which had been held to be ultra vires by this Court in State of Haryana v. Sant Lal [1993] 91 STC 321; (1993) 4 SCC 380. It was urged that the breach of obligation of carrying the documents over which the transporter may have no control cannot be attributed to him and levy of penalty at 30 per cent merely on account of such breach is harsh and oppressive. Penalty under section 78(5) could not be regarded as being linked with evasion of tax. It was further contended that the only way in which the validity of section 78(5) can be upheld is to read into it the element of mens rea as a precondition for imposition of penalty and mere technical breach without any mens rea should not by itself invite penalty under section 78(5). While referring to a decision in the case of Check Post Officer v. K.P. Abdullah and Bros. [1971] 27 STC 1 (SC); (1970) 3 SCC 355, it was submitted even in cases like carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng proviso and the vehicle, boat or animal carrying the goods may be kept seized and detained for a period not exceeding 30 days after the date of the payment of the penalty or furnishing of the security. Provided also that where a transporter is found to be in collusion with a trader to avoid or evade tax during the course of movement of the goods through his vehicle, such vehicle may, after an opportunity of being heard has been afforded, be confiscated by the Commercial Taxes Officer of the area in whose jurisdiction the case was detected, with the prior approval in writing of the Deputy Commissioner (Administration) having jurisdiction and in case of confiscation of the vehicle, no penalty shall be imposed in the preceding first proviso; and (b) such officer may release any of the goods seized under sub- section (5) or sub-section (6) on payment of the penalty under clause (a) or on furnishing such security in such form as may be prescribed for the payment thereof, as he may consider necessary. (c) such officer may, for sufficient reasons, release any of the goods seized as aforesaid even before proceeding under clause (a) or during the course of proceeding under that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half may stop the vehicle or the carrier or the person carrying such goods, for inspection, at any place within his jurisdiction and the provisions of sub-section (2) shall mutatis mutandis apply. (4) Where any goods in movement, other than exempted goods are without documents, or are not supported by documents as referred to in sub-section (2), or documents produced appear false or forged, the in-charge of the check-post or the officer empowered under sub-section (3), may- (a) direct the driver or the person in-charge of the vehicle or carrier or of the goods not to part with the goods in any manner including by retransporting or rebooking, till a verification is done or an enquiry is made, which shall not take more than seven days; (b) seize the goods for reasons to be recorded in writing and shall give a receipt of the goods to the person from whose possession or control they are seized; (c) release the goods seized in clause (b) to the owner of the goods or to anybody else duly authorised by such owner, during the course of the proceeding if the adequate security of the amount equal to the estimated value of the goods is furnished. (5) The in-charge of the check-post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall detain the vehicle or carrier of such transporter and after affording him an opportunity of being heard and with the prior approval in writing of the Deputy Commissioner (Administration) having jurisdiction, may confiscate such vehicle or carrier. (11) If a transporter fails to give information as required from him under clause (d) of sub-section (2) about the consignor, consignee or the goods within such time as may be specified or transports the goods with forged documents, besides imposing the penalty under sub-section (5), it shall be presumed that the goods so transported have been sold in the State of Rajasthan by him and he shall be deemed to be a dealer for those goods under this Act. (12) The provisions of this Act shall, for the purpose of levy, collection and assessment of tax, determination of interest, payment and recovery of tax and interest, appeal, review or revision, apply to the transporter deemed to be a dealer under sub-section (11)." 10.. The scheme of section 78 is that sub-section (1) authorises the Commissioner to set up check-posts with a view to prevent or check avoidance or evasion of tax. These check-posts are to be set up by issuance of a not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. He may, in a given case, be the driver or any other person, if any, accompanying the goods as the in-charge thereof. 14.. Whereas movement of goods in violation of sub-section (2)(a) attracts the provisions of sub-section (5) in respect of vehicle or carrier which is found guilty or violating the provisions of sub-section (2) of section 78, sub-section (8) allows the detention of such vehicle or carrier. Penalty as provided under sub-section (5) can be imposed after hearing the driver or the person-in-charge of the vehicle. Release of the vehicle is provided for by sub-section (9) and if the transporter is found to be guilty of collusion with the trader to avoid or evade tax, power is given under sub-section (10) for confiscation of such vehicle or carrier. 15.. In K.P. Abdulla's case [1971] 27 STC 1; (1970) 3 SCC 355 this Court considered the validity of section 42(3) of the Madras General Sales Tax Act, 1959 which gave the power to the officer-incharge of the check-post or barrier or any other duly authorised officer to seize and confiscate the goods which were not covered by the documents specified therein. It was held that the power to con- fiscate the goods carried i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the provisions this Court held that the presumption under section 28-B was a rebuttable one and if it was not rebutted it was to be presumed that the goods had been sold in the State of U.P. While upholding the validity of section 28-B and rule 87, it was held that these were machinery provisions, which did not levy any charge by themselves, but were enacted to ensure that there was no evasion of tax. It was noticed that these provisions are enacted to make the law workable and to prevent evasion. Such provisions fall within the ambit and scope of the power to levy the tax itself". Thus it was by reference to entry 54 of List II that the validity of the impugned provisions were upheld. 18.. In Delite Carriers (Regd.) v. State of Haryana [1990] 77 STC 170 (SC), validity of section 37 of the Haryana General Sales Tax Act, 1973, was challenged on the ground of lack of legislative competence. The said section 37 reads as follows: 37.. Establishment of check-post or barriers and inspection of goods in transit.- (1) I f with a view to preventing or checking evasion of tax under this Act in any place or places in the State, the State Government, considers it necessary so to do, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other officer as mentioned in sub-section (2). Where it is contended by the owner of the goods that the goods were not sold within the State after their import and were either consumed or export by him or were sold in the course of inter-State trade or commerce or in the course of export out of the territory of India, the assessing authority may call for such other information and documents as he thinks fit: Provided that where the owner or person-in-charge of the goods or the driver or other person-in-charge of the goods carrier bound for any place outside the State passes through the State, such owner or person-in-charge of the goods or the driver or other person-in-charge of such carrier shall furnish, in duplicate, to the officer-in-charge of the check-post or the barrier of his entry into the State, a declaration in the prescribed form and obtain from him a copy thereof duly verified. The owner or person-in-charge of the goods carrier or the driver or other person-in-charge of the goods carrier shall deliver within twenty-four hours the said copy to the officer-in-charge of the check-post or barrier at the point of his exit from the State, failing which he shall be liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow such goods to be transported, on the owner of the goods or his representative or the driver or other person-in-charge of the goods carrier, executing, in a prescribed manner, a bond with or without sureties for securing the amount due as security: Provided further that where any goods are detained, a report shall be made immediately and in any case within twenty-four hours of the detention of the goods by the officer detaining the goods to the officer-in-charge of the district seeking the latter's permission for the detention of the goods for a period exceeding twenty-four hours as and when so required and if no intimation to the contrary is received from the latter, the former may assume that his proposal has been accepted. (6) The officer detaining the goods shall record the statement, if any, given by the owner of the goods or his representative or the driver or other person-in-charge of the goods carrier and shall require him to produce proper and genuine documents as referred to in sub- section (2) or sub-section (4), as the case may be. If after the enquiry, such officer finds that there has been an attempt to evade the tax due under this Act, he shall, by order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell such goods or otherwise dispose them of and deposit the sale proceeds of such goods, or the amount obtained by the disposal of such goods otherwise than by way of sale, in the Government treasury. (11) If the order of imposition of penalty under sub-section (6) or of detention of goods under sub-section (7) is in the meantime set aside or modified in appeal or other proceedings, the officer detaining the goods and imposing the penalty, as the case may be, shall also pass consequential order for giving effect to the order in such appeal or other proceedings, as the case may be. (12) Where the detained goods are sold or otherwise disposed of under this section, the owner thereof shall be liable to pay the expenses and other incidental charges incurred in detaining and disposing of the same. (13) If the sale proceeds of any goods sold or the amount obtained on the disposal of any goods otherwise than by way of sale under the provisions herein before contained exceeds the penalty imposed in respect of such goods, such excess amount after deducting the expenses, and incidental charges referred to in sub-section (12) shall be returned by the officer who conducted the sale or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person including a carrier of goods acting on behalf of a dealer, shall take delivery of, or transport from any station of transport of goods, bus stand or any other station or place of loading or unloading of goods, airport or any other place, whether of similar nature or otherwise other than a post office, any consignment of goods referred to above". Emphasis added. 19.. Following the decision in Sodhi Transport Company's case [1986] 62 STC 381 (SC); (1986) 2 SCC 486 this Court in Delite Carriers case [1990] 77 STC 170 held as follows: "We have explained in Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381; (1986) 2 SCC 486, decided on March 20, 1986, the object of establishing check-posts and introducing provisions in the sales tax law of a State which would facilitate inspection of goods which are carried from one State to another through a third State. In the above-mentioned decision we have upheld the provisions of section 28-B of the U.P. Sales Tax Act, 1948 and the rules made thereunder. For the same reasons we uphold the provisions of section 37 of the Haryana General Sales Tax Act, 1973, rule 45 and form Nos. 38 and 39 of the Haryana General Sales Tax Rules, 1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983-Indian Roadways Corporation v. State of Rajasthan. Mr. Puri, learned counsel for the appellants, submitted that, nonetheless, an order should be made in terms of an interim order made by this Court in some matters. There is no prayer for such relief in the writ petition that was filed before the High Court. Secondly, that was an order pending the disposal of the Civil Appeals that were then before this Court. Such an order cannot, therefore, be passed in this matter. The appeal is dismissed. No order as to costs." 23.. From the aforesaid decisions, it would be clear that the consistent view of this Court since the case of Sodhi Transport Company's case [1986] 62 STC 381 (SC); (1986) 2 SCC 486 has been that provisions similar to section 78(5) have been held to be within the legislative competence of the State. In fact, validity of sections 22-A and 22-B of the Rajasthan Sales Tax Act which was specifically challenged in Indian Roadways case (W.P. Nos. 1555-56 of 1983 decided on April 23, 1986) and Sarna Transport case (C.A. No. 152 of 1990 decided on July 23, 1996) were upheld by this Court and the said provisions are in pari materia with the new section 78 of the 1994 Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer for a fee, reward, commission, remuneration or other valuable consideration or otherwise; (ii) 'person transporting goods' shall, besides the owner, include the manager, agent, driver, employee of the owner or person in-charge of a place of loading or unloading of goods or of a railway out-agency, city booking office or city booking agency, when run by a private person under a contract with railways but excluding a rail head or a post office or of a goods carrier carrying such goods or a person who accepts consignment of such goods for despatch to other places or gives delivery of any consignment of such goods to the consignee." 25.. After referring to the definition of "dealer" in section 2(c) and taking note of the fact that section 37 provided for the establishment of check-post or barrier and the inspection of the goods in transit, this Court analysed section 38(1) and observed (at page 329 of STC) as follows: "As is clear from a reading of sub-section (1) of the said section 38, it is not every clearing or forwarding agent or 'dalal' or person transporting goods who comes into possession of the particulars and information required to be furnished under the said Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose sales tax upon a person who carries on the business of selling goods and who has in the customary course of business authority to sell goods belonging to the principal. A clearing or forwarding agent, 'dalal' or person transporting goods does not carry on the business of selling goods and does not have, in the customary course of his business, authority to sell goods belonging to the dealer whose goods he books or receives. As we have already stated, there has to be a reasonable and proximate connection between the transaction of sale and the clearing or forwarding agent, 'dalal' or person transporting goods before the State Legislature can, in exercise of the power to levy sales tax, enact legislation concerning him. We are not satisfied that there is such close and direct connection between the transaction of sale of goods by a dealer and the clearing or forwarding agent or 'dalal' who books or receives such goods or a person who transports such goods within the meaning of the said section 38." 26.. It is for the aforesaid reasons that section 38 was held to be beyond the purview of the State Legislature and was struck down. It will be seen that while the validity of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducting the search could seize the goods found in the vehicle along with any container or materials used for packing. Rule 64-A lay down the procedure for the registration of transporter, etc. For the non-compliance of the provisions of the Act and the Rules, punishments were provided. On behalf of the appellants it was contended that they were mainly transporters, carrying goods of the consignor to the consignee, and they were neither a dealer nor were they doing any business of sale or purchase of any goods and hence the obligations cast on them including punishment for the offences was beyond the legislative competence of the State Legislature under entry 54 of the List II of the Second Schedule. While upholding the validity of the aforesaid provisions, this Court observed as follows: "Every taxing statute has charging sections. It lays down the procedure to assess tax and penalties, etc. It also provides provisions to cover pilferage of such revenue by providing such mechanism as it deem fit, in other words, to check evasion of tax and in doing so if any obligation is cast on any person having connections with consignor or consignee in relation to such goods, may be other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) and section 78(8) are part of an integral scheme and deal with two separate classes of people referred to in section 78(2). 30.. Unlike Sant Lal's case [1993] 91 STC 321 (SC); (1993) 4 SCC 380 here under section 78(5) levy of penalty is only on the person-in-charge of the goods. It is he who should have all the requisite documents relating to the title or sale of the goods which are being transported. Penalty under section 78(5) is leviable under two circumstances. Firstly, if there is non-compliance with section 78(2)(a), i.e., not carrying the documents mentioned in that sub-clause or, secondly, if false or forged documents or declaration is submitted. This sub-section cannot relate to personal belongings which are not meant for sale but would relate to those types of goods in respect of which documents referred to in section 78(2)(a) exist or can exist. 31.. Such submission of false or forged documents or declaration at the check-post or even thereafter can safely be presumed to have been motivated by desire to mislead the authorities. Hiding the truth and tendering falsehood would per se show existence of mens rea, even if required. Similarly where, despite opportunity h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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