TMI Blog1989 (7) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... its factory situated in Naharkatia, Assam, and for that purpose it imports woodlogs from Malaysia and other places outside India. Plywood is manufactured at Assam and thereafter either sold in Assam or sent to its various offices in different States including West Bengal for sale. Sometimes woodlogs are also sold from Calcutta. The applicant mainly sells plywood from Calcutta on receipt of the same from its factory in Assam by way of stock transfer. The woodlogs are imported by ship at Calcutta port and after clearance of the said goods from the port the company transports by road such of the goods which are not for sale in Calcutta to Assam for the purpose of manufacturing plywood. As woodlogs are notified goods under section 4A of the Act, the applicant is required to obtain permits in form XXX under rule 89 of the Bengal Sales Tax Rules, 1941 (hereinafter referred to as "the Rules") for clearance of goods from the port. Such permits were issued to the applicant by the Commercial Tax Officer, Colootola Charge, respondent No. 1 till August, 1987. But in the month of September, 1987, at the time of importation of certain woodlogs from outside India the applicant had to furnish a ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evasion of tax imposed by the Act and falls legitimately within the ancillary and incidental provisions of a relevant item in the State List and such action was neither violative of the fundamental rights nor of article 301 of the Constitution. 5.. Shri A.K. Chakraborty, learned counsel for the applicant, tried to make out a case that sub-section (4a) of section 7 of the Act demanding security from it has no manner of application to its case. Sub-clause (i) of the said sub-section provides for demand of security from a registered dealer or a person, who has applied for registration, for the proper payment of tax by him. The applicant is a registered dealer and claimed that since it has been submitting its returns and paying its taxes properly and regularly, the question of demanding security from it does not arise. Admittedly subclause (ii) had no application to its case. As regards sub-clause (iii), the learned counsel interpreted it to mean that it provided for demand of security from an unregistered dealer and as the applicant was a registered dealer it did not apply to its case. 6.. The relevant portions of the sub-sections are reproduced below: (4a) The Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a permit if he complies with certain requirements. But the respondents have alleged that the applicant was in the habit of giving false declaration to the effect that the goods would be transported to its factory in Assam for manufacture of plywood but actually sold a part of it in West Bengal. It has been alleged that two permits were issued to the applicant on two different dates in September, 1987, on the categorical undertaking that the entire material, on clearance, would be despatched to its factory in Assam but on examination of relevant papers and evidence it was found that a substantial part of the consignment was sold in West Bengal violating the undertaking. In respect of eight permits issued between the period March 30, 1988 to May 17, 1989, the applicant has not yet filed any documents and/or evidence to substantiate that all these consignments have been actually despatched to Assam and no part of any such consignments has been sold out in West Bengal. 10.. In the writ petition the applicant has admitted that sometimes woodlogs are also sold from Calcutta. In the affidavit-in-reply the applicant in order to explain away the allegation, has stated that "sometimes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has arisen. A provision so enacted on the assumption that goods carried in vehicle from one State to another must be presumed to be transported after sale within the State is unwarranted. Power conferred by section 42(3) to seize and confiscate and levy penalty was held to be not incidental and ancillary to the power to levy sales tax and, therefore, was outside the legislative competence of the State. 14.. The relevant observation of the Supreme Court is reproduced below: "Entry 54 of List II of the Seventh Schedule to the Constitution authorises the State Legislature to legislate in respect of taxes on the sale or purchase of goods. A legislative entry does not merely enunciate powers: it specifies a field of legislation and the widest import and significance should be attached to it. Power to legislate on a specified topic includes power to legislate in respect of matters which may fairly and reasonably be said to be comprehended therein............ A taxing entry, therefore, confers power upon the Legislature to legislate for matters ancillary or incidental including provisions for preventing evasion of tax." 15.. A well-settled principle of law has been laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ari case AIR 1961 SC 232 to judge if free flow or movement of trade is hampered. This is distinct from creating some indirect or inconsequential impediment, which may be regarded as remote. In this case the demand for security could at best fall in the latter category, which does not count. 17.. The question whether security should or should not be demanded depends upon various factors including the past conduct of the dealer. It is difficult to accept the contention that security can never be demanded from a registered dealer importing notified goods into West Bengal. For the reasons aforesaid such a broad proposition does not appear to be supported by the law as it is. In the ultimate analysis therefore, it follows that in appropriate cases, though such cases may be rare, reasonable security may be demanded from dealers who do not have a clean record or from persons against whom there are sufficient reasons to believe that the goods may be dealt with otherwise than in the manner declared. 18.. In view of the reasons given above, we do not find any illegality in the action of the commercial tax authorities demanding security. 19.. The main prayer of the applicant is that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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