TMI Blog1996 (2) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... II of the Seventh Schedule to the Constitution. (iii) The provisions of sub-sections (2a) and (2b) of section 31 of the Act are violative of articles 301 and 304 of the Constitution. (iv) The provisions of sub-section (2a) and sub-section (3) of section 31 of the Act confer unbridled and unguided power on the prescribed authority without any guideline to seize, confiscate the goods transported within the State of Bihar and to impose penalty to the extent of three times of the amount of tax calculated on the value of the goods, for contravention of sub-section (2a) of section 31 of the Act and is therefore hit by article 14 of the Constitution of India. The other common grounds urged in these petitions are: (a) Sub-section (2b) and sub-section (3) of section 31 of the Act confers an arbitrary power without any guidelines on the prescribed authority under the provisions of the Act to seize, confiscate the goods with the carrier transported within the State of Bihar and to impose penalty to the extent of three times of the tax payable on the goods simply for contravention of the provisions of subsection (2a) of section 31 of the Act irrespective of the fact as to wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is part: Provided further that the Commissioner may exempt any person or dealer or class of registered dealers from the requirement of this sub-section. (2) In sub-section (3) for the full stop after the words whichever is greater a colon shall be substituted and the following proviso shall be inserted thereafter: Provided that notwithstanding anything contained in this sub-section where the circumstances of the case or checking of the goods carrier or vessel demand any action relating to inspection, search and seizure of the goods loaded on the goods carrier or vessel, by the prescribed authority, the provisions of sub-sections (3), (5), (6) and (7) of section 33, shall mutatis mutandis apply. By the Bihar Ordinance 14 of 1989 sub-section (2b) of section 31 of the Act was inserted which reads as follows: (2b) Prescribed authority may in order to verify that the transportation of goods is being made according to sub-section (2a) intercept, detain a carrier or vehicle and may search and if the said officer is satisfied on such verification that the transportation of goods is being made in contravention of the provisions of sub-section (2a) in a manner likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this part, seize the goods or the carrier or vehicle or vessel along with the goods and documents relating to the goods and the carrier, vehicle or vessel. 4.. For proper appreciation of the rival contentions, it is also necessary to have a look into the other provisions of sub-section (3) of section 31 of the Act which reads as follows: (3) If any clearing, booking or forwarding agent or dalal or person transporting goods contravenes the provisions of sub-section (1) or (2a) in a manner which is likely to lead to evasion of any tax payable under this part the prescribed authority may, without any prejudice to any action under section 49 of this part on the charge of abetment, after giving the person concerned an opportunity of being heard in the manner prescribed, direct him to pay by way of penalty, an amount which shall be equal to three times the amount of tax calculated on the value of goods in respect of which no particulars or information or incorrect particulars or information has been furnished under sub-section (1) or no cash memo or bill or challan and the prescribed declaration by the Commissioner under sub-section (2a) has been produced before the prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 42 of the Madras General Sales Tax Act, 1959, came for consideration before a Constitution Bench of the honourable Supreme Court. Section 42 of the Madras General Sales Tax Act, 1959, quoted in paragraph 3 of the said judgment is as follows: (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. (2) At every check-post or barrier mentioned in sub-section (1), or at any other place when so required by any officer empowered by the Government in this behalf, the driver or any other person in-charge of any vehicle or boat shall stop the vehicle or boat, as the case may be, and keep it stationary as long as may reasonably be necessary, and allow the officer in-charge of the check-post or barrier, or the officer empowered as aforesaid, to examine the contents in the vehicle or boat and inspect all records relating to the goods carried, which are in the possession of such driver, or other person in-charge who shall, if so requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Legislature to legislate for matters ancillary or incidental including provision 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 barrier, to seize and confiscate the goods and to give an option to the person affected to pay penalty in lieu of confiscation. A provision so enacted on the assumption that goods carried in a vehicle from one State to another must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joint Commercial Tax Officer v. Young Men's Indian Association, Madras [1970] 26 STC 241; AIR 1970 SC 1212. (3) in the case of New India Sugar Mills Ltd. v. Commissioner of Sales Tax [1963] 14 STC 316; AIR 1963 SC 1207. (4) in the case of Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 20 STC 453 (SC); AIR 1968 SC 59. 8. Learned Advocate-General, on the other hand, submitted that subsections (2a) and (2b) of section 31 of the Act and the rules framed thereunder are not unconstitutional and that enactment of the provisions of sub-sections (2a) and (2b) of section 31 of the Act are within the legislative competence of the State Legislature. Learned Advocate-General submitted that it is well-settled that a legislative entry does merely enunciate powers, but 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 ancillary or incidental including provision for preventing evasion of tax. The provisions are nothing but regulatory and does not in any way interfere with the inter-State trade. The enactment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idity of sub-section (2a) of section 31 of the Act substituted by Bihar Act 7 of 1984 and forms 28A and 28B adopted by the notification dated December 28, 1985 issued by the Commissioner of Taxes, was challenged in a writ petition in this Court by one Madan Mohan Tiwary contending that subsection (2a) of section 31 of the Act was beyond the ambit of the power of State Legislature under entry 54 of List II of the Seventh Schedule inasmuch as the provisions of sub-section were tantamount to interference with the inter-State trade. A Division Bench of this Court by the judgment passed on May 14, 1986 reported in [1987] 66 STC 172 (Madan Mohan Tiwary v. State of Bihar) held that subsection (2a) and sub-section (3) of section 31 of the Act and the Notification No. S.O. 1432 dated December 28, 1985, requiring transporters of goods to apply for and obtain a permit for the transport of consignment of goods through the State of Bihar and empowering an officer to verify the documents and impose a penalty if there was an attempt to evade sales tax, embraced only such provisions which are enacted to prevent the evasion of sales tax, ensured bona fide transactions and stop clandestine trade a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m should be carried on goods carrier or vessel for transporting of goods through the State of Bihar was a measure in the exercise of power incidental to levy sales tax and not ultra vires of articles 301 and 304. In paragraphs 18 and 19 of the said judgment (at pages 366-368 of STC) the honourable Supreme Court held as follows: 18. Coming to the impugned notification and the two adopted forms namely, forms XXVIII-A and XXVIII-B, we find that there is no imposition of any tax by them. It is, therefore, pertinent to ask what this measure actually does. Does it directly and immediately restrain inter-State trade, commerce and intercourse? Does it place the intra-State carrier in a superior or advantageous position to that occupied by inter-State carrier? Does it restrict inter-State trade, commerce and intercourse? What are the direct and indirect effects of this measure and whether it amounts to a prohibition or a mere regulation? If it is a mere regulation then only the motive, purpose or policy of the State Government would be relevant. However, if it amounts to a prohibition that would not be relevant. If it has any effect on inter-State trade, we have to ascertain the essenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s case [1971] 27 STC 4 (SC); [1971] 2 SCR 412 . The commonness between the two is in insistence of despatch certificate in Bagrecha [1971] 27 STC 4 (SC) and a permit in the instant case. But there the similarity ends. While there was no ex facie purpose disclosed in Bagrecha [1971] 27 STC 4 (SC) prohibitory notification, in the instant case the notification ex facie shows the purpose, namely, to prevent evasion and facilitate assessment of sales tax. The insistence on a permit in respect of goods entering the State in course of inter-State trade could also be necessary to distinguish the goods that would be transported across the territory of State and those which would reach the consumption point within the State, and to ascertain whether tax would be payable in the latter category. We are, therefore, of the view that the ratio decidendi of the Bagrecha case [1971] 27 STC 4 (SC) would not be applicable to the facts of the instant case. We are also of the view that the facts in Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381 (SC); AIR 1986 SC 1099 would be nearer to the facts of the instant case. In this case section 28 of the Uttar Pradesh Sales Tax Act, 1948, auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said case squarely applies to the facts to the present case. Learned counsel for the petitioners further submitted that from a bare reading of sub-sections (2a) and (2b) of section 31 of the Act, it becomes apparent that the provisions are neither incidental nor ancillary to the powers conferred by entry 54 of List II of the Seventh Schedule inasmuch as the State Legislature has no power to legislate to impose tax or penalty on goods unless intra-State sales transactions thereof takes place. However, the provisions of sub-sections (2a) and (2b) of section 31 of the Act embrace not only the intra-State sale transaction but also inter-State sale transaction. 13.. On perusal of the judgment passed by the honourable Supreme Court in the case of State of Bihar v. Harihar Prasad Debuka [1989] 73 STC 353; AIR 1989 SC 1119 , I find that although the vires of sub-section (2a) of section 31 or sub-section (2b) of section 31 of the Act and the Rules framed thereunder were not challenged either in the High Court or in the Supreme Court, the observation made in the said judgment indicates that impliedly the validity of sub-section (2a) of section 31 of the Act has been sustained. In that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Taxes by a notification and that in the absence of any such notification prescribing or adopting the form of declaration person transporting goods through the State of Bihar without carrying forms 28A and 28B, adopted by the notification dated December 28, 1985, in the exercise of power under the old provision of sub-section (2a) of section 31 of the Act before substitution thereof by the Ordinance 20 of 1993, cannot be said to have violated the provision of sub-section (2a) of section 31 of the Act. 16.. To appreciate the rival contentions, it is appropriate to quote section 27 of the Bihar and Orissa General Clauses Act, 1917 (Act 1 of 1917) which is hereunder: 27. Continuation of orders, etc., issued under enactments repealed and re-enacted.-Where any is repealed and re-enacted by a Bihar and Orissa Act (or Bihar Act), with or without modification, then, unless it is otherwise expressly provided, any appointment, notification, order, scheme, rule, by-law or form, made or issued under the repealed enactment, shall so far as it is not inconsistent with the provisions re-enacted, continue in force and be deemed to have been made or issued under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act (Act No. 1 of 1917), I am unable to accept the submission of the learned Advocate-General that as per provisions of section 27 of the Act, forms 28A and 28B, prescribed under the old provisions of sub-section (2a) continue to hold the field in the absence of issuance of any notification by the Commissioner of Taxes, after the old provisions of the Act was substituted by the Ordinance 20 of 1993. I find force in the submission of the learned counsel for the petitioners that substituted sub-section (2a) of section 31 of the Act having specifically provided that a person transporting goods shall carry form of declaration in such form as may be prescribed by the Commissioner by a notification, while transporting the goods through the State of Bihar, for giving effect to the provision of sub-section (2a) of section 31 of the Act after the old provisions of sub-section (2a) was substituted, it was essential to prescribe or adopt the form of declaration by the Commissioner by a notification. As such, in the absence of any notification issued by the Commissioner prescribing or adopting form of declaration there is no scope for the prescribed authority to exercise power under sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act provides that if any clearing, booking or forwarding agent or dalal or person transporting goods contravenes the provision of sub-section (1) or (2a) in a manner which is likely to lead to evasion of any tax payable under this part, the prescribed authority may, without any prejudice to any action under section 49 of this part on the charge of abetment, after giving the person concerned an opportunity of being heard in the manner prescribed, impose penalty. As such the condition precedent for seizing the goods or the carrier, vehicle or vessel along with the goods and documents relating to the goods and the carrier, vehicle or vessel in the exercise of power under sub-section (2b) of section 31 of the Act and imposing penalty in the exercise of power under sub-section (3) of section 31 of the Act is that the prescribed authority must be satisfied that the goods in question transported through the State of Bihar were sold or purchased in the State of Bihar and were clandestinely transported by evading payment of taxes due to the State. Such satisfaction must be arrived at on some positive materials and not on mere suspicion and the prescribed authority before proceeding to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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