TMI Blog2000 (12) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise and Taxation Department, Punjab, to detain their goods/vehicles. 2.. The respondents have controverted the petitioners' assertion that the State does not have the power to take the legislative measures like those contained in the notification dated September 29, 1999 by stating that the power conferred upon the State to legislate on the subject of levy and collection of sales tax includes the power to legislate on ancillary and incidental matters and the provisions made for plugging the evasion of tax by unscrupulous traders fall within the ambit of entry 54 of List II of the Seventh Schedule read with article 246(3) of the Constitution. 3.. According to the respondents, the amended provisions are meant for checking the evasion of sales tax by collecting information through electronic net work installed at Information Collection Centres established at major and strategic places on the inter-State borders with the neighbouring States. These centres collect data of goods transported in and out of the State of Punjab and such datas are verified from the account books of dealers of Punjab in order to establish their accountability at the time of assessment. The respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case within twenty-four hours of the detention of the goods by the officer detaining the goods to the Assistant Excise and Taxation Commissioner in-charge of the district seeking the latter's permission for the detention of goods for a period exceeding twenty-four hours as and when so required, and if no intimation to the contrary is received from the latter the former may assume that his proposal has been accepted. (7) The officer detaining the goods shall record the statement, if any, given by the owner of the goods or his representative or the driver or other person-in-charge of the goods vehicle or vessel and shall require him to produce proper and genuine documents as referred to in sub-section (2) or sub-section (4), as the case may be, before him in his office on a specified date on which date the officer shall submit the proceedings along with the connected records to such officer as may be authorised in that behalf by the State Government for conducting necessary enquiry in the matter. The said officer shall, before conducting the enquiry, serve a notice on the owner of the goods and give him an opportunity of being heard and if, after the enquiry, such officer finds tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits or leaving the limits of the State of Punjab, shall stop at the nearest check-post or information collection centre, as the case may be, and shall furnish in triplicate a declaration mentioned in sub-section (2) along with the documents in respect of the goods carried in such vehicle before the officer-in-charge of the check-post or information collection centre. The officer-in-charge shall return a copy of the declaration duly verified by him to the owner or personin-charge of the goods vehicle to enable him to produce the same at the time of subsequent checking, if any: Provided that where a goods vehicle bound for any place outside the State of Punjab passes through the State, the owner or the person-in-charge of such vehicle shall furnish, in duplicate, to the officer-in-charge of the check-post or information collection centre, a declaration in respect of his entry into the State of Punjab in the prescribed form and obtain from him a copy thereof duly verified. The owner or person-in-charge of the goods vehicle, shall deliver within forty-eight hours the aforesaid copy to the officer-in-charge of the check-post or information collection centre at the point of its exit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the goods, rounded up to the nearest hundred. (ii) If the owner or the person-in-charge of the goods has not submitted the documents as mentioned in sub-section (2) and subsection (4) at the nearest check-post or information collection centre, in the State of Punjab, as the case may be, on his entry into or exit from the State, such goods shall be detained and shall be released only after the matter is finally decided under clause (iii) of sub-section (7). (7) (i) The officer detaining the goods shall record the statement, if any, given by the consignor or the consignee of the goods or his representative or the driver or other person-in-charge of the goods vehicle and shall require him to prove the genuineness of the transaction before him in his office on a specified date on which date, the officer shall submit the proceedings along with the concerned records to such officer, as may be authorised in that behalf by the State Government for conducting necessary enquiry in the matter. (ii) The officer authorised by the State Government shall, before conducting the enquiry, serve a notice on the consignor or the consignee of the goods detained under clause (i) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the concerned authority. Learned counsel submitted that most of the transactions entered into by the petitioners involve interState transfer of goods and such transactions are exempt from tax in view of section 5(3) of the Central Sales Tax Act, 1956 (for short, "the 1956 Act"), but the officers of the Excise and Taxation Department, Punjab, are harassing them by detaining the goods and vehicles and not releasing the same despite the production of documents showing that transportation of the goods is a part of the transaction involving inter-State sale of goods or export out of India and no sales tax is payable in respect of such transaction. Another submission of the learned counsel is that the impugned amendment should be declared unconstitutional because it has been enforced without seeking Presidential sanction in terms of article 304(b) of the Constitution. In support of their arguments, learned counsel relied on the decisions of the Supreme Court and various High Courts in Check Post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC), Dunlop India Limited v. State of Punjab [1972] 30 STC 597 (P H), State of Punjab v. Dunlop India Limited [1974] 33 STC 168 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent cannot be made a ground for its invalidation. In support of his arguments, Shri Khosla relied on the decisions in Mool Chand Chuni Lal v. Shri Manmohan Singh, Assistant Excise and Taxation Officer, Octroi in-charge, Shambhu Barrier, District Patiala [1977] 40 STC 238 (P H), State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC), State of Tamil Nadu v. Sitalakshmi Mills Ltd. [1974] 33 STC 200 (SC), Syed Ahmed Aga v. State of Mysore AIR 1975 SC 1443, Punjab Traders v. State of Punjab AIR 1990 SC 2300, Subodhaya Chit Fund (P) Ltd. v. Director of Chits, Madras AIR 1991 SC 998. 7.. We have thoughtfully considered the respective submissions. The ambit and scope of various entries included in the three Lists of the Seventh Schedule has been considered by the courts in various cases. In one of the earliest decisions in United Provinces v. Mst. Atiqa Begum AIR 1941 FC 16, the Federal Court of India examined the scope of the Lists under the Government of India Act, 1935. Gwyer, C.J., speaking for the court, observed that, "none of the items in the Lists is to be read in a narrow or restricted sense, and that each general word should be held to extend to all ancillary or subsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods Act would have to be considered to be a sale for the purpose of the Sale of Goods Act. There is nothing in entry 48 which restricts the power of the Legislature in the matter of the imposition of the sales tax to the levy of such tax on the owner of the goods on whose behalf they are sold or the purchaser only. Where the transaction is one of sale of goods as known to law, the power of the Legislature to impose a tax thereon, in our view, is plenary and unrestricted subject only to any limitation which might have been imposed by the Government of India Act or the Constitution.............In view of the wide amplitude of the power of the State or Provincial Legislature to impose tax on transactions of sale of goods, it would, in our opinion, be impermissible to read a restriction in entry 48 on the power of the State Legislature as would prevent the said Legislature from imposing tax on an auctioneer who carries on the business of selling goods and who has, in the customary course of business, authority to sell goods belonging to the principal. What is sought to be taxed is the transaction of sale of goods. If there is a close and direct connection between the transaction of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 41(2) and (3) of the Madras General Sales Tax Act, 1959, are reasonable restrictions on the fundamental right to hold property and to carry on trade under article 19(1)(f) and (g) of the Constitution and are protected by clauses (5) and (6) of article 19. Though sub-section (2) of section 41 of the Madras General Sales Tax Act, 1959, does not in terms provide for search, the power of search is implicit in the sub-section with reference both to the accounts, etc., maintained by the dealer and the goods in the possession of the dealer. But the main part of sub-section (2) does not give to the officer any power of inspecting the residential premises of the dealer and it cannot therefore be read as giving the power of search of the residential house of the dealer. By the fact that section 41(2) gives power to the Government to empower any officer to make a search, it cannot be considered as conferring an arbitrary power, for the Government will see that officers of proper status are empowered. It cannot be said that an Assistant Commercial Tax Officer or an Inspector of the Revenue Department or a Sub-Inspector of the Police Department, empowered by the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable restriction." 10.. In Check Post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1, a Constitution Bench of the Supreme Court considered the challenge to the vires of section 42(3) of the Madras General Sales Tax Act, 1959, under which the Check Post Officer was empowered to confiscate the goods and levy penalty in lieu of confiscation if the driver did not carry with him the documents specified in the section. Some of the observations made in that case, which have been heavily relied upon by the learned counsel for the petitioners are 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court reversed the judgment of the High Court and held that the two provisions were not ultra vires to the powers of the State Legislature inasmuch as the same fell within the range of ancillary or incidental power of the State Legislature under entry 54 read with entry 64 of List II of the Seventh Schedule to the Constitution of India. Their Lordships further held that it is permissible for the State Legislature to enact that sums collected by the dealers by way of sales tax, but are not exigible under the State law and prohibited by, should be forfeited to the public exchequer punitively. 12.. In Dunlop India Limited v. State of Punjab [1972] 30 STC 597 (P H), a learned single Judge declared that section 14-B(8) of the Punjab General Sales Tax Act, 1948 (as it then stood), under which the sales tax authorities were given power to seize the goods carried in a goods vehicle was ultra vires to the State Legislature. The learned single Judge relied on the observations made by the Supreme Court in Check Post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1, and held that if no tax is payable in respect of the goods carried, the question of evasion of tax does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribes a condition precedent to the levy of penalty. The condition precedent is that the authorised officer should record a finding that there has been an attempt to evade the tax due under the Act. It cannot possibly be disputed that the prevention of evasion of sales tax is a power incidental or ancillary to the levy of sales tax and falls within entry 54 of List II of Schedule VII of the Constitution. Section 14-B(7), which provides for detention of goods and levy of penalty if there has been an attempt to evade the tax due under the Act, cannot, therefore, be held to be without constitutional sanction. It is further to be noticed that the goods which are to be detained are also specified in section 14-B(6) as the goods meant for trade and not covered by proper and genuine documents. .............................................. "While section 14-B(8), as it stood originally, provided for the payment of the tax recoverable and a penalty, present section 14-B(7) does not provide for recovery of the tax but provides for the imposition of penalty which is calculated not on the basis of the tax payable but on the basis of the value of the goods. The present provision is cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the following observations: "Section 28B as inserted in 1973 in U.P. Sales Tax Act and rule 87 as inserted in 1974 in U.P. Sales Tax Rules are introduced to check evasion of tax and to provide a machinery for levying tax from persons (transporters) who dispose of goods inside the State and avoid tax which they are otherwise liable to pay. The law provides enough protection to them and makes provision to enable them to show that they are in fact not liable to pay any tax. Thus the said provisions are not unconstitutional. The provisions are not unreasonable and the State Legislature is competent to legislate them. A statutory provision which creates a rebuttable presumption as regards the proof of a set of circumstances which would make a transaction liable to tax with the object of preventing evasion of the tax cannot be considered as conferring on the authority concerned the power to levy a tax which the Legislature cannot otherwise levy. A rebuttable presumption which is clearly a rule of evidence has the effect of shifting the burden of proof and it is hard to see how it is unconstitutional when the person concerned has the opportunity to displace the presumption by le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution and also in respect of all matters ancillary, incidental or subsidiary thereto, but it cannot legislate on matters which do not have reasonable or proximate connection with the levy of tax. Their Lordships further held that clearing or forwarding agent, dalal, or person transporting the goods, does not carry on the business of selling goods and does not have, in the customary course of his business, authority to sell goods belonging to the dealer and, therefore, section 38 of the said Act, which makes it mandatory for them to take licence, cannot be regarded as ancillary or subsidiary to the legislative entry, which entitles the State Legislature to impose a tax on the sale of goods. 16.. In Prakash Roadlines (P) Ltd. v. Commissioner of Commercial Taxes in Karnataka [1991] 83 STC 49, a division Bench of the Karnataka High Court held that penalty cannot be imposed simply because the driver had failed to produce the prescribed documents immediately on demand. From the above survey of the judicial precedents, the following propositions can be deduced: (i) While construing entries of Lists I, II and III of the Seventh Schedule to the Constitution, the widest possible co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a rebuttable presumption as regards the proof of a set of circumstances, which would make a transaction liable to tax with the object of preventing evasion of tax, cannot be considered as conferring on the authority concerned the power to levy tax, which the Legislature cannot otherwise levySodhi Transport Co. v. State of U.P. [1986] 62 STC 381 (SC). 17.. In the light of the above, we shall now determine whether sub-sections (6)(ii) and (7)(iii) of section 14-B of the 1948 Act are beyond the legislative competence of the State or the same are violative of the petitioners' fundamental right to trade and business guaranteed under article 19(1)(g) or their freedom of trade, commerce and inter-course guaranteed under article 301 of the Constitution. 18.. The primary object of section 14-B is to prevent the evasion of sales tax. This is clearly borne out from a reading of the plain language of its various sub-sections. Sub-section (1) of section 14-B empowers the State Government to issue notification for establishment of check post or I.C.C. or both at such place or places as may be specified in such notification. Sub-section (2) lays down that the owner or in-charge of a goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerning the goods carried, transported, loaded, unloaded, consigned or receipt for transport at every station of transport of goods. The Commissioner or the person appointed under subsection (1) of section 3 is empowered to break open any package or packages of such goods. Clause (i) of sub-section (6) empowers the officer-in-charge of the check post or I.C.C. or any other officer mentioned in sub-section (2) to order detention of the goods along with the vehicle for such period, as may reasonably be necessary, if the officer concerned has reason to suspect that the goods under transport are meant for trade and are not covered by proper and genuine documents specified in sub-section (2) or (4) or the driver has not stopped the vehicle as required under sub-section (3) or that the person transporting the goods is attempting to evade payment of tax. This power can be exercised subject to the condition that the officer must hear the person concerned and record reasons in writing for doing so. After detention, the goods are to be released on furnishing of security or executing a bond with sureties in the prescribed form by the consignor or consignee, if he is registered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r I.C.C., then he has to pass order imposing penalty, which shall be 50 per cent of the value of the goods, on the consignor or consignee. Clause (iv) of subsection (7) provides for acceptance of the amount of cash security under clause (i) of sub-section (6) and the amount of penalty imposed under sub-section (4) and clauses (ii) and (iii) of sub-section (7). 19.. The above analysis of the various sub-sections of section 14-B shows that for the purpose of achieving the object of prevention of evasion of tax leviable under the 1948 Act, the Legislature has introduced stringent provisions requiring the owner, driver or person-in-charge of the transport vehicle to carry with him documents evidencing the genuineness of the transactions and payment of tax. These provisions also deal with the cases in which the person concerned fails to produce documents and/or to prove genuineness of the transaction. Sub-section (6)(i) of section 14-B empowers the officer-in-charge of the check post or I.C.C. to detain the goods along with the vehicle, if he has reason to suspect that the goods are meant for trade and are not covered by proper and genuine documents. In such a case, the officer conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses (i) and (ii) of subsection (6) of section 14-B is that while in the first case there is a presumption that the driver or the person-in-charge of the goods has got the relevant documents, as mentioned in sub-sections (2) and (4), and the same have been produced, but the officer-in-charge of the check post or I.C.C. has reason to suspect that the goods under transport are not covered by proper and genuine documents or the driver has not stopped the vehicle as required under sub-section (3) or that the person transporting the goods is attempting to evade payment of tax, in the second case the owner or the in-charge of the goods does not possess the relevant documents as mentioned in subsections (2) and (4), giving rise to a presumption that he is transporting the goods without paying the tax. The other difference between the two provisions is that while goods detained under clause (i) are required to be released on furnishing of security or executing bond with sureties or furnishing of a cash security or bank guarantee, the goods detained under clause (ii) can be released after the matter is finally decided under clause (iii) of sub-section (7). The necessity of enacting these st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC 381 (SC). 23.. We shall now consider the question as to whether subsection (7)(iii) of section 14-B, which provides for imposition of penalty equivalent to 50 per cent of the value of the goods in the cases covered by section 14-B(6)(ii), is violative of the petitioners' fundamental right to equality or their right to carry on trade or business. For this purpose, it will be useful to notice the difference between the language of clauses (ii) and (iii) of section 14-B(7). A bare reading of clause (ii) of section 14-B(7) shows that the provision contained therein is pari materia with section 14-B(7) (unamended), which contemplated holding of an inquiry by the competent authority and giving of an opportunity of hearing to the owner before imposing penalty. The only difference between the two provisions is that while under the old provision penalty ranging from 15 to 30 per cent of the value of the goods could be imposed, under the new provision the quantum of penalty can vary from 20 to 30 per cent of the value of the goods. This shows that the competent authority had wide range of discretion in the matter of imposition of penalty under section 14-B(7) (unamended) and this cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er necessary to refer to the decisions of the Supreme Court in State of Karnataka v. B.M. Ashraf Co. [1997] 107 STC 571, Steel Authority of India Ltd. v. State of Orissa [2000] 118 STC 297; (2000) 2 JT 402 and Nathpa Jhakri Jt. Venture v. State of Himachal Pradesh [2000] 118 STC 306; (2000) 3 JT 189 and of this Court in Nipha Exports Pvt. Ltd. v. State of Haryana [1998] 108 STC 337, which are otherwise also not having any bearing on the decision of these petitions. However, we shall deal with the argument of the learned counsel for the petitioners that the notification dated September 29, 1999 should be quashed because before amending section 14-B, previous sanction of the President had not been obtained. According to the learned counsel the parent statute had become effective after Presidential assent and, therefore, the amendment could not have been enforced without the prior sanction of the President, as contemplated by proviso to article 304(b) of the Constitution. Learned Deputy Advocate-General controverted this argument and submitted that Presidential sanction was not needed because the impugned amendments do not impose any restriction on the petitioners' freedom of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re AIR 1975 SC 1443, the Supreme Court held that the amendment introduced by the Mysore Silkworm Seed and Cocoon (Regulation of Production, Supply and Distribution) (Amendment) Act (29 of 1969), was not bad for want of Presidential sanction. Some of the observations made in that decision are extracted below: "The principal Act had the sanction of the President and enables orders to be passed which had the force of law enabling restrictions to be imposed by rules covered by the purposes of the Act. The amendment only varied the form of restrictiveness without appreciably adding to its content. The amendments did not go beyond a regulation which was fully authorised by the language of the provisions of the principal Act. Even any additional licensing involved did not go beyond the purview of the provisions of the principal Act and the rules framed thereunder. The mere change in form, from statutory rules to statutory provisions, could hardly constitute even additional regulation......................." There has not been a real increase in restrictions upon commerce in silkworms and cocoons by the provisions of the amending Act which mostly cover what was already laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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