TMI Blog2002 (5) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... er the KGST Act, 1963 and under the Central Sales Tax Act, 1956. 3.. The turnover of rubber is taxable at the point of last purchase in the State by a dealer who is liable to tax under section 5, Schedule I of the KGST Act. The first petitioner's sales being to local dealers within the State, no tax is payable by the first petitioner on the purchase turnover of rubber. On December 27, 1995, the first petitioner purchased 9 tonnes of rubber sheets from cultivators and growers situated at Kandanje, Karimbala, Kadapana near Ethadkka, as per purchase bill Nos. 4434 to 4485 dated December 27, 1995 and was transporting the same to the first petitioner's business place in Kanhagad. The transportation was supported by delivery note in form No. 26 bearing serial No. AB 885105 dated December 27, 1995. The goods were being transported in lorry No. KL.14-5304 belonging to H. Anantha Kamath. A similar quantity of 9 tonnes, which was purchased as per purchase bill Nos. 4486 to 4537 dated December 27, 1995 from Chalakkode, Madathadkka, Bykunje in the Ethadkka area was also being transported as per delivery note No. AB 885106 dated July 22, 1995 and the copies of purchase bills referred to abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unsalable. In the grounds taken, the constitutional validity of section 30-C of the KGST Act is attacked. 6.. According to the petitioners, entry 54 in List II of the Seventh Schedule to the Constitution of India gives power to the State Legislature to levy tax on the sale of goods. But the provision for confiscation of the goods and the vehicles transporting the goods cannot be characterised as an ancillary and/or incidental provision. It is further stated that section 29A of the KGST Act provides for sufficient safeguards for checking evasion of tax and for protecting the interests of the revenue. The provisions in section 30-C of the KGST Act inserted by the Finance Act, 1994 are unconstitutional and arbitrary. Section 30-C of the KGST Act provides for confiscation of the vehicles and the goods only in the case of transport of certain goods, viz., coffee, rubber, cardamom, ginger, pepper, arecanut, cashewnut or iron and steel. There is no rhyme or reason for such discrimination with reference to these types of goods only. The dealers in these types of goods are chosen for discriminatory treatment compared to the dealers in other types of goods. Even the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and steel into or out of the State, he may seize such coffee, rubber, cardamom, ginger, pepper, arecanut, cashewnut or iron and steel together with the vehicle or vessel used in committing the offence of smuggling and produce it, without any unreasonable delay, before such officer authorised by the Government, by notification in the Gazette, not being below the rank of an Inspecting Assistant Commissioner (hereinafter referred to as the authorised officer). (2) Where the authorised officer is satisfied that an offence under sub-section (1) has been committed in respect of the goods produced before him under that sub-section, he may order confiscation of the goods so seized together with the vehicle or vessel used in committing such offence: Provided that the authorised officer may release the goods and the vehicle or vessel confiscated under this sub-section to the person from whom it was confiscated if the owner of the goods or the vehicle or the vessel or the person in-charge of the goods or the vessel or the vehicle furnishes to the satisfaction of such officer cash security or bank guarantee from a Nationalised Bank or a Scheduled Bank for the value of the goods and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the State to check the use of vehicle and goods and release them only with sufficient security to the satisfaction of the authorities. The Act does not say what are the offences, which lay within the ambit of section 30-C of the KGST Act and how this can be compromised with the rest of the provisions. Learned Government Pleader submitted that there is no ambiguity in using the word "smuggling". 9A. In this connection, it is pertinent to note that the introduction of section 29(4) and (5) of the KGST Act enabled the authorities to detain, seize or confiscate the goods, which are being transported by a vehicle or vessel and not covered by a bill of sale or delivery note or way bill or certificate of ownership and where the vehicle or vessel enters or leaves the State limits without the declaration referred to in clause (b) of sub-section (2) also. Section 29, clauses (3) to (5) of the KGST Act and sub-rules (3) to (12) of rule 35 of the KGST Rules were challenged before this Court and the judgment of this Court was reported in Yogesh Trading Company v. Intelligence Officer of Sales Tax, Cannanore [1970] 26 STC 45 [FB]. Dealing with the question of its validity, the Full Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . R.S. Jhaver [1967] 20 STC 453, held as follows: "We do not propose in the present case to decide the general question whether a power to confiscate goods which are found on search and which are not entered in the account books of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. Assuming that is so, we have still to see whether sub-section (4) of section 41 of the Act can be upheld read along with the second proviso thereof". It was then found that there was repugnancy between the provisions and therefore clause (a) of the second proviso repugnant to the entire scheme of the Act was struck down. The matter again came before the Supreme Court in Check Post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1. In that decision, the Supreme Court held as follows: "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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in R.P. Jhavar's case [1967] 20 STC 453 (SC). That decision has no direct bearing in the present case. The section which came for consideration before the Supreme Court is section 42 of the Madras General Sales Tax Act, 1959, which 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 incharge 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified documents were produced at the check-post or the barrier. A provision so enacted on the assumption that goods carried in a vehicle from one State to another must be presumed to have been transported after sale within the State was held to be unwarranted and, therefore, the power to seize and confiscate was struck down and was held not to be ancillary or incidental with the power to legislate for levy of sales tax." 12.. Learned Government Pleader brought to our notice the decision in State of Mysore v. K. Mohamed Ismail [1958] 9 STC 714 (Mys); AIR 1958 Mys 143, wherein it was held as follows: "When the Legislature of a State has the competence to make a law pertaining to taxes on sales or purchases, it has also the competence to provide punishments, in that law, for the noncompliance or contravention of the provisions of that law, and may also for the purposes of the enforcement of that law vest jurisdiction in Courts". Another decision brought to our notice is K.S. Papanna v. Deputy Commercial Tax Officer, Guntakal [1967] 19 STC 506. The Andhra Pradesh High Court in that decision held that the power to seize and confiscate goods is only by way of punishment or penalty wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als therefrom. In the meantime, section 29A was inserted by the Legislature of the State of Kerala. It was, in effect, in terms of the High Court judgment in that it provided for detention of goods at check point but without investing in the officer concerned the power of confiscating the same. It seems to us, in these circumstances, unnecessary to go into the question whether section 29(3), (4) and (5) as originally enacted, was not violative of the aforementioned articles. The High Court had struck down rule 35, which followed upon section 29. That rule has been replaced by rule 35-A, which follows upon section 29-A. We note the contention of learned counsel for the State that section 29 was valid because its validity is covered by two decisions of this Court but it is not a question that need detain us, having regard to the circumstances aforementioned." Thus, we find that because of the introduction of section 29-A, the Supreme Court did not go into the merits of the case. It also noted that the power of confiscation was not included in the amendment. We extracted the above judgment because one of the arguments of the counsel for the petitioners is that the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the KGST Act. An activity of "smuggling" does not pre-suppose a sale/purchase but only a movement of "goods". Mere movement of goods from one place to another or into or out of the State cannot and does not attract sales tax liability so as to be brought under such a drastic penal provision, where the goods as well as the vehicle/vessel is liable for confiscation. What documents are relevant and necessary to be maintained and produced in an enquiry under section 30-C is nowhere stated in the section. The section also does not say the absence of what all documents accompanying the goods, would make the transportation of goods an activity of smuggling. 15.. On the other hand, in paragraph 8 of the counter-affidavit filed by the State what is stated is as follows: "It is true that the word smuggling is not defined in the Act. It is settled principle of law that if a word is not defined in a statute it's ordinary dictionary meaning shall be applied. Meaning assigned to the word in common parlance or commercial parlance also can be applied if situation so warrants. The Lexicon Webstor's Dictionary of the English language gives the meaning of the word smuggle as follows: "to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in the KGST Act, it will lead to arbitrary exercise of power. If we go by the counter-affidavit filed by the State, any attempt to transport without paying tax will amount to "smuggling ". If the goods are transported in excess of what is stated in the bill, then the vehicle can be confiscated. Even for trivial matters, if the authorised officer feels that offence has been committed, confiscation can be made. Going by the decision in Check Post Officer v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC), we are of the view that section 30-C of the KGST Act is arbitrary and unconstitutional and liable to be struck down. 17.. In K.P. Abdulla's case [1971] 27 STC 1, the Supreme Court has clearly stated that the power of confiscation is not incidental or ancillary. Even though that was given on an interpretation of section 42 of the Madras General Sales Tax Act, according to us, section 30-C of the KGST Act gives very wide and arbitrary power by not defining the word "smuggling". It is left to the subjective satisfaction of the authorised officer to find out whether an offence of smuggling has been committed. Even if the quantity is small or even if the liability for tax is minimu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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