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TMI Blog2001 (10) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... r Jain, Ms. Anjali Doshi, A.P. Dhamija, A. Raghunath, Manish Singhvi, Vineet Kothari, Anjay Kothari, K.K. Gupta, M.P. Jha, Ram Ekbal Roy and Anil Chopra, Other Advocates. Harish N. Salve, Solicitor-General of India. -------------------------------------------------- The judgment of the Court was delivered by B.N. KIRPAL, J.-The State of Rajasthan has filed these appeals against the decision of the High Court which had, while allowing the writ petition of the respondents, held that section 78(5) of the Rajasthan Sales Tax Act, 1994, was unconstitutional and ultra vires. 2.. In order to examine the issues arising in this case, we may briefly refer to the facts of the case of M/s. D.P. Metals. D.P. Metals carries on the business of manufacturing stainless steel sheets and had been registered under the provisions of the Rajasthan Sales Tax Act and the Central Sales Tax Act, 1956. On January 22, 1997, a truck was seized by the Assistant Commercial Taxes Officer, Jodhpur, and as the same was found not to be carrying the declaration form ST-18A, a show cause notice was issued to M/s. D.P. Metals. After hearing, a penalty of Rs. 63,200 was levied under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larations in form S.T. 18A or 18AA with goods, in view of no challenge made in the petitions. (iv) The provisions for carrying declaration of the importer in the form No. S.T. 18A or S.T. 18AA by the transporter or carrier is not treated to be mandatorily required and it is held that the production of such declaration later on during the course of enquiry even by the importer is substantial compliance of the provision. (v) Lastly, the penalty under section 78(5) linked with value of goods equal to 30 per cent thereof imposable on person in-charge of the goods in transit who is not owner of the goods and who is also not a dealer in the goods, for breach of obligation of divulging information and particulars relating to goods in his charge and the consignor and the consignee is highly unreasonable having no reasonable and proximate nexus with the obligation cast on the transporter and the object of the provision, the same, therefore, is unconstitutional. [Sant Lal's case [1993] 91 STC 321 (SC)]. (vi) However a reasonable penalty is imposable on transporter as a consequence for breach of obligation to divulge such information truly and faithfully which is in his possession and can r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer v. K.P. Abdullah and Bros. [1971] 27 STC 1 (SC); (1970) 3 SCC 355, it was submitted even in cases like carrying personal goods for consumption penalty under section 78(5) would be leviable because of alleged breach of section 78(2) even though sale of goods is not involved. Section 78(5), it was submitted, contained no guidelines saving such bona fide cases from the vice of section 78(5) and, therefore, was violative of article 14 of the Constitution. 8.. The Rajasthan Sales Tax Act, 1954, was a precursor to the 1994 Act. In the 1954 Act, section 22A(7) was the provision which enabled the appellant to impose penalty in the event of the person incharge of the goods not possessing or producing mandatory documents or if a false declaration was made. Section 22A(7) of the 1954 Act reads as follows: "(7)(a) The officer-in-charge of the check-post or barrier or any other officer not below the rank of an Assistant Commercial Taxes Officer, empowered in this behalf may, after giving the owner or person in-charge of the goods a reasonable opportunity of being heard and after holding such further enquiry as he may deem fit, impose on him for possession of goods not covered by goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized as aforesaid even before proceeding under clause (a) or during the course of proceeding under that clause, on furnishing of security of an amount equal to the estimated value of the goods to be released if he considers it necessary so to release the goods." 9.. With the repeal of the 1954 Act, a provision similar to section 22A(7) of the old Act was incorporated as section 78(5). It will, however, be appropriate to refer to section 78. Section 78 provides for establishment of check-post and inspection of goods while in movement. The said section, along with incorporation of sub- sections (11) and (12) in 1999 reads as follows: "78. Establishment of check-post and inspection of goods while in movement.-(1) The Commissioner may, with a view to prevent or check avoidance or evasion of tax, by notification in the official Gazette, direct the setting up of a check-post at such place and for such period as may be specified in the notification, and every officer or official who exercises his powers and discharges his duties at such check-post by way of inspection of documents produced and goods being moved, shall be its in-charge. (2) The driver or the person in-charge of a vehicl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timated value of the goods is furnished. (5) The in-charge of the check-post or the officer empowered under sub-section (3), after having given the person in-charge of the goods a reasonable opportunity of being heard and after having held such enquiry as he may deem fit, shall impose on him for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to the amount of five times of the tax leviable on such goods or thirty per cent of the value of such goods, whichever is less. (6) During the pendency of the proceeding under sub-section (5), if anybody appears before the in-charge of the check-post or the officer empowered under sub-section (3) and prays for being impleaded as a party to the case on the ground of involvement of his interest therein, the said in-charge or the officer on being satisfied may permit him to be impleaded as a party to the case; and thereafter, all the provisions of this section shall mutatis mutandis apply to him. (7) The in-charge of the check-post or the officer empowered under sub-section (3) may release the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or evasion of tax. These check-posts are to be set up by issuance of a notification in that behalf and every officer appointed at the check-post shall be the in-charge of the check-post. 11.. Sub-section (2) of section 78 imposes an obligation on (a) driver, or (b) person in-charge of a vehicle or carrier (compendiously referred to as the person in-charge of the vehicle) and (c) person in- charge of the goods in movement. Persons so named in sub-section (2) then have an obligation to comply with sub-clauses (a) to (e) of section 78(2). Such a person under section 78(2)(a) is required to carry with him (a) goods vehicle record including challans and bilties; (b) bills of sale or despatch memos and (c) prescribed declaration forms. 12.. Sub-section (3) of section 78 permits an officer empowered by the State Government to stop the vehicle or the carrier or the person for inspection of the goods in movement within the territory of the State of Rajasthan. In case of goods, other than exempted goods, which are in movement are found to be without documents or are not supported by documents referred to in sub-section (2) or the documents produced are false or forged, then under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein. It was held that the power to con- fiscate the goods carried in a vehicle cannot be said to be fairly and reasonably comprehended in the power to legislate under entry 54 of List II in respect of taxes on sale or purchase of goods. The reason for this conclusion was that sub-section (3) assumed all goods carried in the vehicle as being those which had been sold within the State and authorised the check-post officer to seize them unless the specified documents were produced at the check-post or the barrier. A provision so enacted on the assumption that goods carried in a vehicle from one State to another must be presumed to have been transported after sale within the State was held to be unwarranted and, therefore, the power to seize and confiscate was struck down and was held not to be ancillary or incidental with the power to legislate for levy of sales tax. 16.. The aforesaid decision can be of little assistance because the provisions of section 78(5) are radically different from section 42(3) of the Madras Act with which this Court was concerned in K.P. Abdulla's case [1971] 27 STC 1; (1970) 3 SCC 355. Section 78(5) does not contain any power of confiscation of goods an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State, the State Government, considers it necessary so to do, it may, by notification direct the establishment of a check-post or the erection of a barrier or both, at such place or places, as may be notified. (2) The owner or person in-charge of the goods, and, when the goods are carried by a goods carrier, the driver or any other person in-charge of the goods carrier, shall carry with him a goods carrier record, a trip sheet or log book, as the case may be, and a delivery note containing such particulars as may be prescribed, along with a bill of sale in respect of the goods meant for the purposes of trade and are carried by him or in the goods carrier and produce the same before an officer-in-charge of a check-post or barrier or any officer of the department not below the rank of an Assistant Excise and Taxation Officer or such other officer, as the State Government may, by notification, appoint, for checking the goods carrier at any place. (3) At every check-post or barrier or at any other place, when so required by any officer referred to in sub-section (2) in this behalf, the owner or person-in-charge of the goods shall stop and the driver or any other person-in-charge of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his exit from the State, failing which he shall be liable to pay a penalty, to be imposed by the officer- in-charge of the check-post or barrier of the entry, not exceeding two thousand rupees or twenty per centum of the value of the goods, whichever is greater: Provided further that no penalty shall be imposed unless the person concerned has been given a reasonable opportunity of being heard: Provided further that where the owner or person-in-charge of the goods or the driver or the person-in-charge of the goods carrier bound for any place inside the State has to pass through another State, such owner or person or the driver or other person shall furnish, in duplicate, to the officer-in-charge of the check-post or the barrier of his exit from the State, a declaration in the prescribed form and obtain from him a copy thereof duly verified and shall deliver the same to the officer-in-charge of the check-post or barrier of his entry into the State, within four hours of his exit from the previous barrier or check-post in the State, failing which he shall be liable to pay a penalty to be imposed by the officer-in-charge of the check-post or barrier of his entry, not exceeding two tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue under this Act, he shall, by order, impose on the owner of the goods and in case the owner is not forth coming or his identity is not disclosed by the person-in-charge of the goods or the driver or person-in-charge of the goods or the goods carrier, in which goods are being carried, on the person-in-charge or the goods or the goods carrier or the driver, a penalty of not less than ten per cent and not more than twenty-five per cent of the value of the goods, and in case he finds otherwise, he shall order the release of the goods: Provided that no penalty shall be imposed unless the owner of the goods or his representative or person-in-charge of the goods or the goods carrier or the driver has been given a reasonable opportunity of being heard. (7) If the owner of the goods or his representative or the driver or other person-in-charge of the goods carrier does not furnish security or execute the bond as required by sub-section (5) within ten days from the date of detaining the goods or goods carrier, the officer referred to in that sub-section may order further detention of the goods, and in the event of the owner of the goods not paying the penalty imposed under sub-section (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he officer who conducted the sale or otherwise disposed of the goods, to the owner of the goods. (14) At every station of transport of goods, bus stand or any other station or place of loading or unloading of goods, other than a post office, when so required by the Commissioner or any other person appointed to assist him under sub-section (1) of section 3, the owner or person-in-charge of the goods or the driver or other person- in-charge of the goods carrier shall produce for examination transport receipt and all other documents and account books concerning the goods carried, transported, loaded, unloaded, consigned or received for transport, to be maintained by him in the prescribed manner and the Commissioner or the person so appointed shall have, for the purpose of examining that such transport receipts and other documents and account books are in respect of the goods carried, transported, loaded, unloaded or consigned or received for transport, the power to break open any package or packages of such goods. If the Commissioner or the person so appointed is satisfied that it is necessary for the purposes of investigation or verification, he may seize the transport receipts, doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Sales Tax Rules, 1975. These writ petitions are disposed of accordingly. There will be no order as to costs." 20.. From the aforesaid decision in Delite Carriers case [1990] 77 STC 170 (SC) it is evident that the court regarded section 37 of the Haryana General Sales Tax Act as being nothing more than a provision which had been enacted in the sales tax law of a State which would facilitate inspection of goods carried from one State to another and would fall within the legislative ambit of entry 54 of List II. The said section 37 of the Haryana Act is in pari materia with section 78 of the Rajasthan Act. 21.. The provisions of sections 22-A and 22-B of the Rajasthan Sales Tax Act, 1954, were the precursor to the present section 78 of the 1994 Act. The validity of section 22-A and other connected provisions were impugned in Writ Petition Nos. 1555-56 of 1983 in Indian Roadways Corporation v. State of Rajasthan. By a short order dated April 23, 1986 the validity of these provisions were upheld in the following words: "We have explained in M/s. Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381 (SC); (1986) 2 SCC 486 decided on March 20, 1986, the object of establishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 78 of the 1994 Act. 24.. Mr. Singhvi learned counsel for the respondents, however, relied upon a Division Bench decisions of this Court in the case of Sant Lal case [1993] 91 STC 321; (1993) 4 SCC 380. It is primarily because of this decision that the High Court in the present case has come to the conclusion that section 78(5) was ultra vires. In Sant Lal's case [1993] 91 STC 321 (SC); (1993) 4 SCC 380, the challenge before the High Court, which succeeded, was to the validity of section 38 of the Haryana General Sales Tax Act, 1973 and rule 53 of the Haryana General Sales Tax Rules, 1975, framed thereunder. Section 38 required the clearing or forwarding agents, etc., to furnish information and to get a licence. The same reads as follows: "38. Furnishing of information by clearing and forwarding agents, etc.-(1) Every clearing or forwarding agent, dalal or any other person transporting goods, within the State, who, during the course of his business, handles documents of title to goods for or on behalf of any dealer, shall furnish to the Assessing Authority the particulars and information in respect of the transactions of the goods in such form and manner, as may be prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said Act and Rules for the sub-section itself casts that obligation only upon such clearing or forwarding agents, 'dalals' or persons transporting goods who during the course of their business handle 'documents of title to goods for or on behalf of any dealer'. It is, therefore, at best, only such clearing or forwarding agents or 'dalals' or other persons transporting goods who handle documents of title to goods for or on behalf of dealers who can be said to have a connection with the transaction of sale thereof. It is only such clearing or forwarding agents, 'dalals' or other persons transporting goods who can be required to obtain from the assessing authority under the said Act a licence for carrying on their business and be made liable to cancellation of such licence and penalty for breach of their obligations under the said Act. However, inasmuch as the said Act does not define what precisely it means by the expression 'documents of title to goods', it is unclear which class of forwarding or clearing agents or 'dalals' or persons transporting goods it intends to bring within the ambit thereof. To clearing and forwarding agents, 'dalals' and other persons transporting goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of section 37 of the Haryana General Sales Tax Act was upheld by this Court in Delite Carriers [1990] 77 STC 170, it is section 38, dealing with dalal or clearing or forwarding agents being required to take out a licence, that the court held the section to be ultra vires primarily for the reason that the forwarding or clearing agent or dalal does not carry on the business of selling goods and does not have in the customary course of a business authority to sell goods belonging to the dealer whose goods he books or receives. Section 37 (upheld in Delite Carriers case [1990] 77 STC 170 which is similar to section 78 here) and section 38 of the Haryana Act operate differently. The two provisions are not identical and it is presumably for this reason that there is no reference to Delite Carriers case's [1990] 77 STC 170 (SC) decision in Sant Lal's case [1993] 91 STC 321 (SC); (1993) 4 SCC 380. 27.. The applicability of the decisions of Sant Lal's case [1993] 91 STC 321 (SC); (1993) 4 SCC 380 came up for consideration in Tripura Goods Transport Association v. Commissioner of Taxes [1999] 112 STC 609 (SC); (1999) 2 SCC 253. The appellants therein were an association which was doing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than a dealer, to perform such obligation in aid, to check evasion and in case he is made liable for any offence, for his dereliction of duty or deliberate false act contrary to what he is obligated to do. In our opinion, it cannot be construed to be beyond the competence of the State Legislature. The impugned provisions are not charging sections, no tax liability is placed on the transporters. We find neither sections 29, 30, 32 and 36A nor rules 46A, 63A and 64A lack any legislative competence. They are within the legislative competence of the State Legislature and would fall under List II of entry 54 of the Seventh Schedule of the Constitution of India." 28.. It also noticed the decisions of this Court in Sodhi Trans- port Company's case [1986] 62 STC 386. After referring to Sant Lal's case [1993] 91 STC 321 (SC); (1993) 4 SCC 380 it was held that the same was clearly distinguishable inasmuch as the provisions of the Haryana General Sales Tax Act were not similar to those which were impugned in the Tripura Goods Transport Association's case [1999] 112 STC 609 (SC); (1999) 2 SCC 253. It appears to us that the scheme and the provisions under the Tripura Sales Tax Act and the Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been granted under section 78(5) if the requisite documents referred to in sub-clause (2)(a) are not produced, even though the same should exist, would clearly prove the guilty intent. It is not possible to agree with the counsel for the respondents that breach referred to in section 78(5) can be regarded as technical or venial. Once the ingredients of section 78(5) are established, after giving a hearing and complying with the principles of natural justice, there is no discretion not to levy or levy lesser amount of penalty. If by mistake some of the documents are not readily available at the time of checking, principles of natural justice may require some opportunity being given to produce the same. This provision cannot be read as to imply that the penalty of 30 per cent is the maximum and lesser penalty can be levied. The Legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty. The penalty so fixed is meant to be a deterrent and we do not see anything wrong in this. The quantum of penalty under the circumstances enumerated in section 78(5) cannot, in our opinion, be regarded as illegal. The Legislature in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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