TMI Blog1979 (2) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... ignment basis by a lorry. One Ahammed was its driver and he took with him the invoice and the way-bill relating to the consignment. The lorry left Tellicherry at 22.00 hours and was to reach Bangalore on the 10th morning as there was an urgent demand for the supply of pepper and ginger. But the Sales Tax Inspector, Chavasseri, intercepted the goods vehicle at Chavasseri in Tellicherry-Kuthupuzha road at about 23.30 hours on 9th March, 1973. The driver produced the invoice and the way-bill to the officer concerned. But the Sales Tax Inspector-the second respondent herein-directed the lorry driver to unload the goods at Kuthupuzha check post and issued a notice to the driver pointing out certain defects in the documents produced by him and also proposing to take action in accordance with sub-section (2) of section 29A of the Act. The notice issued by the second respondent further contained a statement that an opportunity is given to the driver to prove that the documents produced by him are genuine. But before the driver could produce the necessary documents for that purpose, the Sales Tax Inspector changed his camp from Chavasseri to Tellicherry and at about 11.15 A.M. on 10th March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, according to the petitioner, does not remove the vice in section 29 pointed out by the Full Bench decision reported in Yogesh Trading Co. v. Intelligence Officer of Sales Tax[1970] 26 S.T.C. 45 (F.B.); 1970 K.L.T. 154 (F.B). This Court had declared in that decision that sub-sections (3), (4) and (5) of section 29, and sub-rules (3) to (12) and (15) of rule 35 of the Kerala General Sales Tax Rules are unconstitutional and, therefore, invalid. The provisions in section 29A introduced thereafter contain the same vice pointed out by the Full Bench decision(1). 3.. The State opposes these petitions and contends that the vices pointed out in the above Full Bench decision' are not in the new section and the new section is constitutionally valid. The only question for consideration at this stage, therefore, is whether section 29A of the Act is, in any way, beyond the legislative powers of the State Legislature. 4.. The occasion to enact section 29A arose in this way. The provision for confiscation contained in section 29 was challenged as unconstitutional in the above case. That section reads as follows: "29. Establishment of check posts and inspection of goods in transit.-(1) If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re being transported by a vehicle or vessel and not covered by a bill of sale or delivery note or way-bill or certificate of ownership and where the vehicle or vessel enters or leaves the State limits, the declaration referred to in clause (b) of sub-section (2) also, or (b) where the declaration is false or is reasonably suspected to be false in respect of the particulars furnished therein: Provided that before taking action for the confiscation of goods under this section, the officer shall give the person in-charge of the goods and the owner, if ascertainable, an opportunity of being heard and make an enquiry in the manner prescribed. (5) Whenever confiscation is authorised by this section, the officer adjudging it shall give the owner or the person in-charge of the goods an option to pay, in lieu of confiscation, a penalty not exceeding double the amount of tax calculated at the rates applicable to the goods liable to confiscation: Provided that the officer may release the goods on cash security being furnished by the person concerned to the extent of the penalty leviable, if, in the opinion of the officer, further time is required to arrive at a correct finding as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g twice the amount of tax payable on the goods under clause (5) of section 29 read with clause (15) of rule 35. The effectiveness of these provisions as a sufficient safeguard stands considerably attenuated, if not entirely destroyed, by the prospect of his having to do so at successive check posts, or in respect of successive consignments of goods at the same check post, to allay the suspicions of the officers-in-charge. Both by the terms of the section and the rule, the confiscated goods are to be sold in public auction, and all that the deprived owner can get in case he eventually succeeds in appeal against the order of confiscation would be, not even the market value of the goods, but the proceeds fetched at the auction, less the charges incurred for conducting the same. We have no doubt that these provisions operate as unreasonable restrictions on the fundamental right of a person with respect to his property and with respect to his right to carry on a trade or business in goods." Some of the provisions in rule 35 were also found to be invalid for the same reason and finally the Full Bench held thus: "We hold that the provisions of section 29(4) and (5) and of rule 35(5) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative due to the decision of the High Court, it was considered advisable to retain the section, pending decision of the Supreme Court in the appeals and to insert a new section 29A in the Act for the above purpose. 3.. Since the Legislative Assembly was not in session, the required amendments were made by the promulgation of the Kerala General Sales Tax (Second Amendment) Ordinance, 1971 (24 of 1971)**. The Bill seeks to replace the Ordinance by an Act of the State Legislature. " (Kerala Gazette, Extraordinary No. 174, dated 19th March, 1972). 7.. The counsel for the petitioners attack this new provision. According to them, all the vices in section 29 are substantially present in the new provision. They further contend that, except for keeping track of the goods and the identity of its owner, the power conferred, to demand security and to seize and sell the goods in case the security is not furnished, is beyond the power of taxation contained in entry 54, List II, of the Seventh Schedule. This latter contention may be considered first. 8.. It is well-settled that the legislative entries have to be considered in their widest amplitude and a power authorising an imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, Bombay City[1954] 26 I.T.R. 758 (S.C.); [1955] 1 S.C.R. 829., and Balaji v. Income-tax Officer, Special Investigation Circle[1961] 43 I.T.R. 393 (S.C.); [1962] 2 S.C.R. 983. A taxing entry therefore confers power upon the legislature to legislate for matters ancillary or incidental including provisions for preventing evasion of tax. Sub-sections (1) and (2) of section 42 are intended to set up machinery for preventing evasion of sales tax. But, in our judgment, the power to confiscate goods carried in a vehicle cannot be said to be fairly and reasonably comprehended in the power to legislate in respect of taxes on sale or purchase of goods. By sub-section (3) the officer-in-charge of the check post or barrier has the power to seize and confiscate any goods which are being carried in any vehicle if they are not covered by the documents specified in the three sub-clauses. Subsection (3) assumes that all goods carried in a vehicle near a check post are goods which have been sold within the State of Madras and in respect of which liability to pay sales tax has arisen and authorises the Check Post Officer, unless the specified documents are produced at the check post or the barrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainly within the incidental and ancillary power of taxation and if there is reason to suspect that there is an attempt in that direction, a provision to guard against that attempt is certainly comprehended by the incidental or ancillary powers. The provision that the goods transported should be accompanied by the prescribed documents is part of this provision to check evasion. If that is not properly enforced by some penal step, prevention of evasion will not be effective. Attempt to evade tax may take various forms. Goods for which one rate of tax is leviable may be transported but the documents accompanying them may show a different item of goods for which the tax may be less or nil. The actual quantity transported or its value may or may not be correctly shown in the accompanying documents. It is not possible to exhaustively enumerate all possible attempts to evade tax. The enquiry into this is a process and some time is required to find out the exact state of affairs. If there are reasons to suspect an attempt at evasion, the same is directed to be recorded in writing and the person concerned is called upon to furnish security for the penalty if imposed after enquiry. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , arose for consideration in a recent decision of the Supreme Court in R.S. Joshi v. Ajit Mills[1977] 40 S.T.C. 497 (S.C.); A.I.R. 1977 S.C. 2279. In that case, the provision of the Bombay Sales Tax Act to forfeit the sums collected by the dealers by way of sales tax, though not exigible, to the public exchequer punitively, was held to be within the incidental or ancillary powers under entry 54. In dealing with that question, the Supreme Court has taken the view that the forfeiture, which is plainly punitive, is justifiable under the incidental or ancillary powers of entry 54. 13.. The repugnancy of a case where tax is ordered to be recovered even before the sale in addition to the penalty is also not here in section 29A. Section 29A does not provide for recovery of tax at all but only provides for the imposition of a penalty and stringent measures to recover the same in case an attempt at evasion is made out. Therefore, there is no invalidity on that score. Thus, we hold that section 29A is only a provision to punish those dealers who attempt to evade tax or violate any of the provisions of the Act, which are aimed at checking evasion. All these are part of the incidental or anc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be disputed that evasion of tax has to be prevented and at the same time the movement of the goods shall not be paralysed. Here, the officer-in-charge of the check post has to record his reasons in writing why he suspects a violation and give an opportunity to the owner of the goods or the driver of the vehicle to furnish security for the realisation of the penalty that may likely to be imposed after the enquiry. The reasons stated for suspecting the genuineness of the documents or suspecting an attempt at evasion can be shown to be unfounded. The section requires an enquiry to be held after giving an opportunity to the person concerned before penalty is imposed. This is consistent with the principles of natural justice. Only if security is not furnished within the time allowed, power is given to the officer to seize the goods. The ownership in the goods continues to be in the same person and, if penalty is imposed, the goods seized are sold as his goods and, after realising the penalty, if there is a balance, that is returned to the owner of the goods. Until the sale, it is open to the owner to pay the penalty and take back the goods. Time is also given to pay the penalty afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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