TMI Blog1997 (7) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar. On checking, the driver produced transport receipt No. 955845 dated July 23, 1987 of Sodhi Transport Company, Jaipur (respondent) and bill No. 828 dated July 23, 1987 of M/s. Anand Steel Trading Company, Delhi in the name of M/s. Suresh Kumar Company, Station Road, Coimbatore. On suspicion of evasion of tax, show cause notice was issued. Penalty under section 22A(7) was imposed. The transporter filed appeal before the Deputy Commissioner (Appeals), Jaipur. He allowed it holding that no penalty could be imposed as the goods were in transit from one State to another through Rajasthan and the documents produced subsequently showed that the goods had crossed the boundaries of Rajasthan. The second appeal of the department was dismissed by the Rajasthan Tax Board, as said above. 3.. It has been contended by the learned counsel for the department that the learned Deputy Commissioner and the learned Member of the Rajasthan Sales Tax Tribunal, Ajmer have seriously erred to hold that no penalty was leviable under section 22A(7) of the Act as the goods had already crossed the boundary of Rajasthan. He further contended that the authorities of Rajasthan had jurisdiction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roadways v. Commercial Tax Officer [1996] 103 STC 106 (MP), Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC), St. Michael s Oil Mills v. State of Kerala [1988] 68 STC 360 (Ker) and G.R. Engineering Works (P.) Ltd. v. Additional Commercial Tax Officer [1976] 37 STC 516 (Kar). 6.. It cannot be disputed that evasion of tax has to be prevented and at the same time the movement of the goods is not to be paralysed. Sub-sections (1) and (2) of section 22A of the Act ran as under: 22A. Establishment of check-post or barrier and inspection of goods while in transit.-(1) If the State Government or the Commissioner considers it necessary that with a view to prevent or check evasion of tax under this Act in any place or places within the State it is necessary so to do, it may, by notification in the Official Gazette, direct the setting up of a check-post or the erection of a barrier or both at such places, as may be specified in the notification; (2) At every check-post or barrier set up or erected under sub-section (1) or at any other place when so required by any officer empowered by the State Government in this behalf, the driver or any other person in-charge of a vehicl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place in the course of inter-State trade or commerce. Section 4 contains provisions as to when a sale or purchase of goods is said to take place outside a State. In the case of movement of goods from one State to another State through Rajasthan no sale or purchase can be said to take place in Rajasthan. It has been held in Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4 (SC), that the power of the State Legislature is restricted to legislate in respect of intra-State transactions of sale and purchase and matters ancillary or incidental thereto and it has no power to legislate for levy of tax on sales and purchase in the course of inter-State transactions. Penalty is an additional tax. Reference of Commissioner of Incometax v. Bhikaji Dadabhai Co. [1961] 42 ITR 123 (SC) and Commissioner of Income-tax, West Bengal v. Anwar Ali [1970] 76 ITR 696 (SC); AIR 1970 SC 1782, para 4, may be made here. 8.. Article 301 of the Constitution of India provides that subject to the provisions of articles 302, 303 and 304, trade, commerce and intercourse throughout the territory of India shall be free. Section 22B was incorporated in the Act by Rajasthan Sales Tax (Amendment) Act, 1976 with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st whether the seals are in tact and if so they will not hinder free- movement of the goods outside the State. [quoted in II STO 201] (3) In an another case, quoted in Gill Sandhu Haryana Transport Company v. State (1991) 10 RTJS 335 at page 339: Issue rule nisi. Pending notice there shall be stay as under: So far as future consignments are concerned, the petitioners will allow package carried by them to be inventoried by the authorities at the entry checkpost and also the authorities will be at liberty to seal the packages by affixing their own seal. The authorities will carry out this operation with the best expedition and in any event not later than three hours from the time when the turn of the truck falls due for examination. The petitioners will also intimate to the authorities at the entry check-post the expected time of arrival at the exit check-post. The authorities at the exit check-post will be at liberty to check the seals which have been affixed at the entry check-post on the packages. A copy of the inventory which may be made by authorities at the entry check-post will be handed over forth to the petitioners at the entry check-post. 9.. Great reliance was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oach to the question to view such a statute not as an organic whole, but as a mere collection of sections, then disintegrate it into parts, examine under what heads of legislation those parts would severally fall and by that process determine what portions thereof are intra vires and what are not. 10.. Vires of section 22A(7) of the Act had been upheld in Gill Sandhu Haryana Transport v. State (1991) 10 RTJS 319 (RHC). In Commissioner of Sales Tax v. Suresh Chand Jain [1988] 70 STC 45 (SC), sales were inter-State. In Mahaveer Conductors v. A.C.T.O. (1994) II STO 300, it has been held that it was not obligatory to impose penalty under section 22A(7) of the Act in every case if the goods were not accompanied with the required documents and declaration. It has been observed in it at page 305 as follows: These provisions are indicative of the fact that the penalty is to be levied where the breach committed or the default for which penalty is levied, is related and have a rational nexus with the purpose for which the provisions of section 22A has been enacted, namely, the breach must be related to evasion or avoidance of tax. If that be so, in my opinion, mens rea or deliberate def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent being a transporter is not a dealer within the meaning of section 2 of the 1954 Act and as such he cannot be made liable to pay penalty for the infraction of any of the provisions of the 1954 Act. (ii) That no penalty can be imposed under section 22A(7) of the 1954 Act unless it is shown that there was an evasion/avoidance of tax to be levied under the Act. (iii) That the penalty to be imposed under section 22A(7) is not automatic. (iv) That no proper enquiry has been held by the petitioner, assessing authority, before imposing the penalty on the respondent. (v) That this Tribunal is not to disturb the concurrent finding of fact arrived at by the Deputy Commissioner (Appeals) and the Tax Board. (vi) That the provisions enabling the taxation authorities to check trucks which are coming from a place and going to another place, both outside the State of Rajasthan, and merely passing through the State are unconstitutional as being violative of the provisions contained in article 301 of the Constitution. (vii) That a directive may be issued to the State Government to issue the transit pass at the entry check-post of the State, which may be collected at the exit che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 38 the clearing and forwarding agents who were engaged in the business of booking and taking delivery of consignments at the railway stations were obligated to furnish information in respect of such consignments to the department, and by virtue of sub-section (2) they were debarred from carrying on their business unless they obtained a licence for the purpose from the assessing authority under the 1973 Act. Sub-section (3) made them liable to the imposition of a penalty in an amount equivalent to 20 per cent of the value of the goods in respect of which particulars and information had not been furnished. It transpired that the clearing and forwarding agents did not get all the informations which they were required to furnish and for breach of which obligation they were exposed to a very heavy penalty. Thus the question before the honourable Supreme Court was whether the State Legislature had the competence to make such a provision as section 38 of the 1973 Act. It was laid down that no such legislative power could be exercised by the State Legislature under entry No. 54 of List II of Schedule VII to the Constitution which empowers the State Legislature to legislate with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for despatch to other places or gives delivery of any consignment of such goods to the consignee. 17.. Thus the term person transporting goods was defined in such a way as to include therein besides the owner, manager, agent, driver, employee of the owner or person in-charge of a place of loading, unloading of goods or of a railway out-agency, etc. It did not include a person who was a goods carrier in his independent capacity or a person who accepted consignment of such goods for despatch to other place or gives delivery of any consignment of such goods to the consignee. It goes to show that a person like the respondent was not a person transporting goods as defined in explanation (ii) of section 38 of the said Act. Their Lordships of the Supreme Court have held that a firm or company allots the work to one or other employee and in that situation each manager, agent, driver and the employee of the owner cannot be considered to be a person transporting goods and thus be held liable under the said Act to a penalty or cancellation of the licence. It was in these circumstances that section 38 was held unconstitutional. We read a particular precedent to know the position of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consignments handled by them on behalf of a dealer. Such a power is not covered even by the ancillary or subsidiary power which is relatable to the main legislative power given under the foregoing entry. These decisions are distinguishable on facts from the case in hand where the respondent is held liable for his failure to possess (carry) and produce the requisite documents at the time of checking. If we hold that no such power is vested in the taxation authorities under section 22A of the Act then such transporters would be free to violate the provisions concerned on behalf of the dealers. This point is decided against the respondent. 18.. Point No. (ii): Shri Sharma contends before us that the provisions of section 22A of the Act are attracted into application only where there is an evasion/avoidance of tax which is leviable under the Act. The position he takes up is that when the goods are being taken from one place to another, both outside the State of Rajasthan, through the territory of the State there is no evasion of tax to be leviable under the Act. He fires point blank when he contends that the State of Rajasthan is not at all concerned with the evasion of tax levia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n back to Bombay and as such it could not be said that any checking was done at Mount Abu check-post was turned down and the penalty imposed by the assessing authority was held valid. Here the vehicles went out of Rajasthan, but still the penalty was imposed. 20.. A similar point of law was dealt with by this Tribunal in its judgment dated October 29, 1996 in application No. 344 of 1996 titled Ved Prakash v. Assistant Commissioner, Anti-Evasion, Commercial Taxes, Alwar [1997] 107 STC 34 (RTT) and it was held in para 18 of the judgment as hereunder: The learned counsel for the department, Shri N.K. Baid, has placed his reliance on the decision in Gill Sandhu Haryana Transport Co. v. State (1991) 10 RTJS 335, wherein the penalty was imposed upon the transporter who failed to give correct particulars about the consignor and the consignee. It was further held that such a transporter cannot be allowed to claim any relief from the court in the exercise of its extraordinary jurisdiction. Law is not meant for the benefit of tax-evaders. He has also placed reliance upon Rajdhani Express and Transport Co. v. State of Rajasthan (1995) 18 RTJS 17, wherein it has been held by his Lords ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 26, 1987 no relevant documents with regard to genuineness of the consignor and the consignee were produced. The assessing authority was left with no alternative but to impose the penalty. It had transpired that no such company as M/s. Anand Steel Trading Co., Delhi which was alleged to have issued the bill existed in Delhi. It was a bogus firm which had existence only on paper. The existence of consignee-firm was also not proved. 22.. I hold that the provisions of section 22A(3) and (7) of the Act are applicable with equal force even with regard to the goods which had their origin as well as their destination at places outside the State of Rajasthan and which are being carried through the territory of the State. Such goods can be checked while in transit in the State. The owner or person in-charge of the goods is under obligation to possess (carry) and produce on demand the relevant documents which must accompany the goods. Failure to do so would entail the consequences with regard to the imposition of penalty under section 22A(7) of the Act. 23. Shri Sharma has brought to our notice certain authorities in support of his contention that the imposition of penalty is not aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Kashmir [1997] 104 STC 148 (SC) and State of Uttar Pradesh v. Laxmi Paper Mart [1997] 105 STC 1 (SC); AIR 1997 SC 950. 26.. I hold that the provisions contained in section 22A of the Act do not put such a restriction upon the free-flow of trade, commerce and intercourse as may offend the provisions of article 301 of the Constitution. They do constitute a regulatory measure which facilitates rather than hinders such free-flow of trade. This point is decided against the respondent. 27.. Point No. (vii): Shri Sharma contends before us that section 22B of the Act obligates the State Government to issue transit passes at the entry check-post to the vehicles which are entering the State. Such vehicles can hand over these transit passes at the exit check-post. This provision of law has not been carried out and no transit pass been issued. Such a provision is also made in section 80 of the 1994 Act. Further he wants us to issue a directive to the State Government to issue the transit passes. Such a directive cannot be issued by this Tribunal. This principle of law was laid down by their Lordships of the Supreme Court in the case of A.K. Roy v. Union of India AIR 1982 SC 710, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as failed to do what it ought to have done, it would be equally permissible to the court to prevent the Government from acting, on some such ground as that, the time was not yet ripe for issuing the notification for bringing the amendment into force. We quite see that it is difficult to appreciate what practical difficulty can possibly prevent the Government from bringing into force the provisions of section 3 of the 44th Amendment, after the passage of two and half years. But the remedy, according to us, is not the writ of mandamus. If the Parliament had laid down an objective standard or test governing the decision of the Central Government in the matter of enforcement of the amendment, it may have been possible to assess the situation judicially by examining the causes of the inaction of the Government in order to see how far they bear upon the standard or test prescribed by the Parliament. But, the Parliament has left the matter to the judgment of the Central Government without prescribing any objective norms. That makes it difficult for us to substitute our own judgment for that of the Government on the question whether section 3 of the Amendment Act should be brought into f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the contention of the learned counsel Mr. J.N. Sharma and Mr. Alkesh Sharma, amicus curiae-the case was heard ex parte-that the transporter was not the dealer must be seen. It was not the counsel s contention that only a dealer could be punished under section 22A(7), RST Act. The contention instead was whether in the facts and circumstances of this case if the provisions of section 22A were at all attracted, penalty if any, should have been imposed on the consignor-dealer or the transporter? That is to say can it be legitimately or reasonably be expected that a transporter is answerable for the identity or antecedents of a consignor? It is in this context that the bona fides of the transporter and mens rea become relevant. 34. In my view failure to produce documents does not automatically entail penalty. Honourable Chairman has cited and quoted with telling effect the ruling of the Rajasthan High Court in Mahaveer Conductors v. A.C.T.O. (1994) I STO 300, to settle this point. 35.. In the instant case admittedly the goods came from outside Rajasthan i.e., Delhi and prima facie were destined for a place outside Rajasthan, viz., Coimbatore in Tamil Nadu. The person in-char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions (1) and (2), shall come into force from such dates and at such check-posts as notified by the Commissioner from time to time. 37.. It is a fact that the system of transit passes has never been put in place and section 22B has for all practical purposes been still born. It is also true that this Tribunal cannot compel the State Government to put the system of transit passes in place. Be that as it may, for our present purposes the significance of section 22B lies in that it clearly indicates that the Legislature did not intend section 22A to cover cases of goods in transit by road through the State and therefore in the absence of transit passes recourse cannot be had to section 22A. Recourse must necessarily be had instead to improvisation approximating to the intent of section 22B so as not to fall foul of article 301 of the Constitution on the lines indicated by the Supreme Court and detailed at para 8 (supra) by the honourable Chairman. In order to achieve this end, in the absence of check-posts and transit passes, the documents of the municipalities enroute both within the State as well as of those in adjacent States are proof of the vehicle and goods having transited t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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