TMI Blog1985 (9) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the arecanut belonging to nearby villagers was being transported in his lorry to Sagar for hire. 3.. The ACTO after considering the cause shown and comparing the names furnished by the driver in his statement recorded on 29th March, 1980 and the list of agriculturists furnished by M/s. R.A. Manjunathappa Sons, Arecanut Merchants, Sagar, levied a penalty of Rs. 4,200 under section 28A(4) of the Act. 4.. This is being challenged by the petitioner in this writ petition on several grounds, namely: (i) that no sale was involved in respect of the arecanut transported in the lorry at the time it was checked, and there was no evasion of tax under the Act. Hence, the ACTO had no jurisdiction to levy the penalty; (ii) that the ACTO's order is based on irrelevant considerations; (iii) that no penalty can be levied even before a sale takes place inside the State; and (iv) section 28A of the Act is beyond the competence of the State Legislature. 5.. In W.P. No. 1338 of 1981, the petitioner is a student studying in B.E. at Bangalore. His uncle purchased a Luna Moped at Poona and sent it to Bangalore in a lorry. The said lorry was stopped and checked at Kumarapatnam Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Check Post Officer and he demanded an ad hoc sum of Rs. 30,000 to release the lorry and the petitioner issued a cheque for Rs. 30,000 and got release of the lorry. But, later, the petitioner advised the bank not to honour the cheque and complained to the Commissioner about the alleged harassment. The Commissioner replied that on enquiry it was found that the Check Post Officer was justified in levying the penalty. 9.. The order of the Check Post Officer is now challenged in the writ petition on the ground that no order levying penalty was served on the petitioner. But the prayer is to restrain the Check Post Officer from recovering the penalty of Rs. 30,000 levied on the petitioner. 10.. It is asserted on behalf of the Check Post Officer that the penalty order which was sent by registered post to the petitioner's address was returned as "refused". It is also stated that the goods which were checked on 6th August, 1980 were not the same as covered by the invoice dated 31st July, 1980 and the levy of penalty was, therefore, justified. 11.. The learned counsel, in elaborating his contentions, submits that the provisions of the KST Act can be enforced only in case of a tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Constitution and were therefore invalid. 15.. The petitioner's contention is that the provisions of section 28A(4) of the KST Act even after amendment in 1969 has not made any change and are therefore, liable to be struck down as beyond the powers of the Legislature and that therefore, this Court should declare the said provisions as unconstitutional and has, as a consequence, pray for issue of a writ of certiorari quashing the order dated 3rd December, 1980 passed by the ACTO, Sagar, levying penalty of Rs. 4,200 in W.P. No. 1218 of 1981 and the penalties levied similarly in the other writ petitions. 16.. Let us now compare the provisions of the Madras General Sales Tax Act and those of the Karnataka Act in order to find out if they are in pari materia and are meant to achive the same purpose. 17.. Section 42 of the Madras General Sales Tax Act, 1959 provides: "(1) If the Government consider that with a view to prevent or check evasion of tax under this Act in any place or places in the State, it is necessary so to do, they may, by notification, direct the setting up of a check post or the erection of a barrier or both, at such place or places as may be notified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sub-section (2) or (3) or (3A) and for which sufficient cause is not furnished, levy a penalty not exceeding the limits specified in sub-section (5). The aforesaid officer may also levy penalty where the declaration made under sub-section (2) is false in respect of the materials furnished therein or where the particulars furnished in the records do not tally with the goods actually being transported or are found to be not relating to such goods: Provided that before levying any penalty under this sub-section, the officer shall give the person in-charge of the goods vehicle or boat a reasonable opportunity of being heard. (5) The penalty leviable under sub-section (4) shall not exceed double the amount of tax leviable in respect of the goods under transport: Provided that in the case of goods specified in the Second, Third and Fourth Schedules, if the owner or the person in-charge of the goods vehicle or boat produces proof to show that the goods in question have already suffered the single point tax under this Act, no penalty shall be leviable. (6) Where the penalty levied is not paid, the officer levying the penalty shall have power to take possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bihar Sales Tax Rules, 1959. Under the said rule the State imposed prohibition on any consignment of goods notified under section 42 from transporting the same to any place outside the State of Bihar unless such person had obtained a despatch permit from the appropriate authority. 22.. The Supreme Court held, that the said rule and the notification were ultra vires the powers under which the State Government could legislate on matters of tax on sale of goods. The said rule was struck down also on the ground that it impeded the free flow of inter-State trade, since the operation of the rule was made applicable even to transactions which took place in the course of interState trade and commerce. 23.. The power to legislate on transactions which are carried on in the course of inter-State trade or commerce or in the course of export, was held to be without authority of law. This decision has no bearing so far as the interpretation in relation to section 28A of the KST Act is concerned. 24.. It is Sri Srinivasan's contention that sub-sections (4) and (5) as substituted by Act 27 of 1969 are not different from the provisions that were struck down by this Court in Venkatachalapat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments specified in clauses (i), (ii) and (iii) of sub-section (3) of section 42, stands in danger of having his goods forfeited. Power under sub-section (3) of section 42 cannot be said to be ancillary or incidental to the power to legislate for levy of sales tax." 27.. The effect of the application of the ratio of the decision of the Supreme Court in K.P. Abdulla's case [1971] 27 STC 1 (SC) to the facts of this case, according to Sri Srinivasan's contention is, that sub-sections (4), (5) and (6) of section 28A of the KST Act as amended by Act 27 of 1969, is that the provisions as amended have to be declared as beyond the competence of the State's powers. 28.. The Supreme Court held that section 42(3) of the Madras Act was beyond the competence of the State Legislature. The reasoning of the Supreme Court (by Shah, J., as he then was) is that the constitutional entry provided in entry 54, List II of the Seventh Schedule authorised the State Legislature to legislate in respect of taxes on the sale or purchase of goods. The provisions of sub-sections (1) and (2) of section 42 of the Madras Act were intended to set up machinery for preventing evasion of sales tax. But, in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (5) instead of seizure and confiscation as provided before amendment. 30.. Sri Srinivasan has also relied upon a decision of the Orissa High Court in Kamal Kumar Goyal v. State of Orissa [1975] 35 STC 343. Section 16A of the Orissa Sales Tax Act empowers the authorities under the Act to inspect and confiscate goods for any suspected evasion of tax. The validity of section 16A was challenged by the petitioner therein, in the High Court of Orissa under article 226. The High Court held, on a comparison of of the Orissa Act and the Madras Act, that the provisions of section 16A of the Orissa Act are confined to cases of sale only and further held that the mischief under the provisions of the Madras Act is not found in the Orissa Act, and that K.P. Abdulla's case [1971] 27 STC 1 (SC) did not apply to the Orissa Act. (Underlining by us*.) This case, therefore, does not help the petitioners' case. 31.. Sri Rajendra Babu, argued that the provisions substituted by the Amendment Act of 1969 in section 28A(4) are valid in law and there is no question of any lack of competency on the part of the State Legislature in enacting the said provisions. The power to levy penalty is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question that arose in that case was, whether rule 28B of the U.P. Sales Tax Rules requiring vehicles carrying goods from outside this State to other States and passing through the State of U.P. was violative of articles 14, 19(1)(g) and 301 of the Constitution and therefore, beyond the legislative power of the State. The validity of the rule was upheld by the High Court following the decision of the Supreme Court in R.S. Jhaver's case [1967] 20 STC 453 (SC). Though K.P. Abdulla's case [1971] 27 STC 1 (SC) is referred, there is no discussion as to its application or otherwise. Insistence on obtaining a transit pass as per the said rule was held as incidental and ancillary to the power to the sale of goods under the Orissa Act and that such a rule did not impede the free flow of the inter-State trade. We have to observe that the rule which the High Court was examining is not in pari materia with section 28A of the KST Act. The said decision also does not support the case of the respondents. (3) Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 20 STC 453 (SC). It is no doubt true the Supreme Court held in that case that it is competent to the Legislature t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ria with the provisions of sub-sections (4), (5) and (6) of section 28A of the KST Act. Their Lordships, while upholding the validity of the said provisions observed, that the principles laid down in K.P. Abdulla's case [1971] 27 STC 1 (SC) were not applicable to the case before them and this is what their Lordships observed at page 242: "It will be noticed at once that section 14B(6), as it stood originally, provided for the seizure of any goods not covered by documents and section 14B(8) provided for the seizure of all goods in respect of which the declaration was false. The seizure might be made irrespective of the question whether there was any attempt to evade tax. The basic but unwarranted assumption underlying both the provisions for seizure, as in the case before the Supreme Court, was that the goods were transported after sale within the State. Again, as in the case before the Supreme Court, no attempt was made to specify what goods might be seized. The provisions were considered by Bal Raj Tuli, J., and the Division Bench to fall within the principles laid down in K.P. Abdulla's case [1971] 27 STC 1 (SC). But the position is quite different now. The new provision for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e owner or with the inspection of the documents, and proceed to levy penalty not exceeding double the amount of tax leviable in respect of the goods under transport. Such a power could be exercised by any officer authorised even while the goods are in a godown, shop, office, vessel, etc., kept therein before transmission as provided by sub-section (3A) of section 28A. Under the proviso to sub-section (5) the owner or the person in-charge of the goods vehicle or boat, may produce proof to show that the goods in question have already suffered the single point tax, in order to satisfy the checking officer that the goods have already suffered tax. Further, under the amended provisions of sub-section (6), the checking officer has power to seize the goods sufficient to meet the amount of penalty and retain the same for 10 days until released by the owner on payment of the penalty. An appeal is provided by sub-section (7) against the order levying penalty to the Deputy Commissioner or the Assistant Commissioner, as the case may be. The appellate authority may confirm, reduce or annul the penalty. A further appeal is also provided against the order made under section 20 to the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substituted provisions and they do not suffer from the same vice for which the Supreme Court declared similar provisions of the Madras Act as unconstitutional. The substituted provisions provide for opportunity to the person aggrieved to show cause or to produce the documents, and the power to levy penalty is purported to be exercised only in cases where the person concerned fails to furnish sufficient cause for the contravention or non-compliance with the provisions of sub-section (2) or (3) or (3A) of section 28A. They also provide for sufficient safeguards to the person concerned, to appeal against the order levying penalty to the higher authorities as provided under the Act. But this power has to be exercised strictly in cases where the goods leviable to tax under the KST Act are involved and in respect of which there is suspected evasion of tax. We are, therefore, of the view that the impugned provisions are not beyond the legislative competence of the State. 39.. But we are of the view that the petitioners should be permitted to challenge the respective orders made against them in an appeal before the concerned appellate authority under the Act. We, therefore, refrain to e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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