TMI Blog2004 (1) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of stock transfers. The cigarettes and tobacco products are all exempted from the levy of sales tax. The paper, paper board and other inputs required for making shells and slides/hinge lid type packets in flattened form at the said factory at Munger are entirely consumed by the company for packing of its various brands of cigarettes. The portion of the said shells and slides/hinge lids made at Munger factory are consumed for packing of cigarettes manufactured thereat and substantial quantity thereof are transferred to other cigarette factories of the company and that of its job-workers all located outside the State of Bihar by way of stock transfer. The company is not liable to pay sales tax on such stock transfer. The company however requires form XXVIII-B or exemption from use of such form under rule 42(7) of the Rules, 1983, for inter-State movement of the said packaging materials to and fro from its factory at Munger. The petitioner is liable to pay amount of sales tax only on sale of its waste products. 4.. Up to the assessment year 1993-94, the petitioner-company was assessed to sales tax only about rupees eight lacs to ten lacs per annum. However, with regard to ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief in the said writ application and limited interim relief was granted on July 11, 2001 by this Court and thereafter the petitioner filed a S.L.P. (Civil) No. 12634 of 2001 before the apex Court and the apex Court by order dated August 10, 2001 restrained the respondents from insisting upon the payment of disputed taxes and penalty as a condition for extension of the petitioner's transport permit/exemption. 9.. The case of the petitioner in C.W.J.C. No. 10744 of 2002 is that it is a public limited company and is engaged in manufacturing and selling tyres, tubes and flaps, etc., in the State of Bihar and other States of the country. It is registered under the Act as well as under the Central Sales Tax Act, 1956. While making the assessment for the last six years, the claim of the company on account of sales made to Government departments, export sales and sales return have been disallowed by the Assessing Officer and confirmed by the Joint Commissioner of Commercial Taxes and it has challenged the order before the Commercial Taxes Tribunal. It has paid the entire admitted tax and 65 per cent of the disputed tax. However, the Sales Tax Officers are not issuing form XXVIII-B for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of goods. The amended provision of rule 45(b) stopped grant of the permit of movement of goods or exemption as it requires, inter alia, for payment of disputed dues also before grant of permit or declaration form or exemption. Section 31(2a) of the Act does not authorise the authorities to exercise the power to grant of permit as a measure for recovery of taxes including disputed taxes. It is to be stated that no grievance has been made with regard to refusal to grant permit for non-deposit of admitted dues under clauses (a) and (b) or even under clause (c) of section 5(2) of the Act. His grievance is only with regard to disputed dues as per assessments as provided under clause (c) of section 25(2) of the Act. (ii) Rule 45(b) imposes restriction on the inter-State movement of goods and thus violative of article 301 of the Constitution. The same is not protected by article 304 as it is a rule and not the legislative enactment. In the alternatively it was submitted that the rule cannot be protected by article 304 of the Constitution as it is not reasonable and in public interest. (iii) Rule 45(b) is also arbitrary, unreasonable and oppressive as the provision authorises th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "(2a) A person transporting goods shall carry a declaration in such form as may be prescribed by the Commissioner supported by either a cash memo or bill, in case the movement is as a result of sale or a challan in case the movement is otherwise than as a result of sale, in respect of goods which is being transported on a goods carrier, vehicle or a vessel or is otherwise in transit storage and shall produce such challan, cash memo or bill, as the case may be, along with the aforesaid form of declaration on demand before the prescribed authority: Provided that the Commissioner, by notification in this respect, may prescribe a form of declaration or adopt a form of declaration or permit prescribed for the purpose of sections 34 and 35 of this part, and he may also prescribe in the said notification, the manner in which such declaration or permit shall be utilised for verification and assessment of tax payable under this part: Provided further that the Commissioner may exempt any person or dealer or class of registered dealers from the requirements of this sub-section." Under the aforesaid provision, the following notifications have been issued: December 28, 1985. "S.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or barrier, referred to in sub-section (1) and before crossing such check-post or barrier file before such authority or officer as may be authorised by the State Government in this behalf a correct and complete declaration in such form and in such manner as may be prescribed. (3) The authority or officer authorised by the State Government under sub-section (2) may for the purpose of satisfying himself that the provisions of sub-section (2) are not being contravened, and subject to such restrictions as may be prescribed, intercept, detain and search any road vehicle or river-craft which may be suspected of being used for contravening such provisions." 19.. Section 35 imposes restriction on movement of goods with a view to ensure that there is no evasion of tax which runs as follows: "35. Restrictions on movement.-(1) No person shall transport from any railway station, steamer station, airport, post office or any other place, whether of similar nature or otherwise, notified in this behalf by the State Government, any consignment of such goods, exceeding such quantity, as may be specified in the notification, except in accordance with such conditions as may be prescribed and suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, in the opinion of State Government, necessary for giving effect to the purposes of this Part. (2) In making any rules the State Government may direct that for a breach thereof, the prescribed authority may in the prescribed manner, impose a penalty not exceeding one thousand rupees and when the breach is continuing one, a penalty not exceeding twentyfive rupees per day during the continuance of the offence." 21.. In exercise of power under the said provision, the Governor of Bihar has framed Rules on January 2, 1984. Rule 42 contains a detailed provision with regard to restriction on movement of goods. It requires that for movement of goods permit has to be granted in form XXVIII-A in case of unregistered dealer and form XXVIII-B in case of registered dealer. Rule 42(7) provides that public sector undertaking or a public limited company or such private limited company or firms whose annual gross turnover exceeds rupees one crore and is a registered dealer on its application being made, may be exempted from the use of permits in form XXVIII-B for movement of consignment of goods by the order of the Commissioner. 22.. Rule 45 of the Rules prior to its amendment by Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: "25. Payment and recovery of tax.-(1) The tax payable under this Part shall be paid in the manner hereinafter provided. (2) The amount of- (a) tax estimated in advance under sub-section (10) of section 3, or (b) tax due according to the return filed by a dealer where full payment of such amount has not been made, or (c) tax assessed or reassessed under section 17 or 18 or 19 or in pursuance of or as a result of an order on appeal, revision, reference or review, less the sum, if any, already paid by the dealer, or (d) penalty, if any, imposed under any of the provisions of this Part, shall be paid by the dealer or the person concerned into a Government treasury, or in such other manner, as may be prescribed by such date as may be specified in a notice issued by the prescribed authority for this purpose and the date to be so specified shall, ordinarily, be not less than forty-five days from the date of service of such notice: Provided that the prescribed authority may, in respect of any particular dealer or person, and for reasons to be recorded in writing, extend the date of such payment, or allow such dealer to pay the tax due and the penalty, if any, by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not prohibit transportation of the goods and a declaration may also serve the public purpose by finding out unauthorised trade or business to which freedom of trade, commerce and inter-course would not apply. It will not affect the freedom of movement of goods carried, on the other hand it would facilitate transportation across and throughout the State of Bihar by showing the permit wherever required and thus instead of hindering it will promote the free movement of goods. 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 the State and those which would reach the consumption point within the State. The impugned notification has to be held to be a measure in exercise of a power incidental to the levy of sales tax and the same is reasonable measure adopted by the State Legislature to prevent evasion and facilitate assessment of sales tax. In this connection, it is relevant to quote paragraphs 19 and 24 of the judgment (pages 366 and 369 of STC) which runs as follows: "The notification only prescribed the declaration forms to be car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Bagrecha [1971] 27 STC 4 (SC) and a permit in the instant case. But there the similarity ends. While there was an 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 the 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) would be nearer to the facts of the instant case. In this case section 28 of the Uttar Pradesh Sales Tax Act, 1948, authorised the State Government to establish check-posts and barriers with a view to preventing evasion of tax or other dues payable under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no direct and immediate restriction of inter-State trade, commerce or inter-course as a result of the requirement to fill up and carry the forms. In other words, the continuity of the transport will not be obstructed or interrupted. Stoppage of the transporting vehicle for the purpose of obtaining and filling in the appropriate form would, in our opinion, not amount to interruption but only a stoppage. A mere stoppage of the movement of the vehicle will not have any direct or immediate effect on the trade. The checking of documents or the filling in and submission of forms and returns, detour to a public weigh-bridge and the like may be an inconvenience, and unless they are shown to be unreasonable and not in public interest the court may apply the maxim 'de minimis non curat lex'. A stoppage of the vehicle for roadside repair, for taking petrol, for allowing the driver to take rest or his meals would not naturally amount to interruptions of trade, commerce and inter-course. Public interest also will not allow transit regulations and allied measures to be violated, thwarted or evaded through the channel of inter-State trade, commerce and inter-course, unless of course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in favour of similar goods produced within the State. Article 304(b) empowers the State Legislature to put reasonable restriction on the freedom of trade, commerce or inter-course with or within that State which is required in the public interest. The Bill or amendment for the purposes of clause (b) shall not be introduced or moved in the Legislature of a State without the previous sanction of the President. 28.. Law is well-settled that tax laws are not outside the purview of Part XIII of the Constitution of India but only such taxes which directly and immediately impede or restrict the free-flow of trade attracts the provision of article 301 of the Constitution of India. However, if the taxes remotely restricts the same then the same do not fall within the purview of article 301. It is also equally well-settled that regulatory measures promote trade facilities and compensatory measures imposing taxes for use of tax facilities do not amount to infringement of freedom guaranteed under article 301 of the Constitution of India. Learned counsel appearing for the petitioner in support of his submission relied upon the decisions of the Supreme Court in two cases, namely, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfies the requirements of article 302 or article 304 of Part XIII. At this stage we think it is necessary to repeat that when it is said that the freedom of the movement of trade cannot be subject to any restrictions in the form of taxes imposed on the carriage of goods or their movement all that is meant is that the said restrictions can be imposed by the State Legislatures only after satisfying the requirements of article 304(b). It is not as if no restrictions at all can be imposed on the free movement of trade". 29.. Thereafter, the provision of the aforesaid Act was considered and it was found that the very purpose and object of the Act was to collect taxes on goods solely on the ground that they are carried by road or by inland waterways within the area of the State and accordingly the same was held to be infringing the freedom of trade and commerce under article 301 of the Constitution. 30.. Article 301 of the Constitution of India was again considered by Seven Judges of the Supreme Court in Automobile Transport (Rajasthan) Ltd. case AIR 1962 SC 1406. There the judgment given in Atiabari Tea Co. Ltd.'s case AIR 1961 SC 232 was considered and explained and the Bench agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioner has not challenged the unamended provision of rule 45(b) as according to him, the rejection of application to grant permit and declaration form under form XXVIII-B on non-payment of admitted dues or other grounds as mentioned therein is regulatory provision and the same has been made in the exercise of power incidental to the power of levy of sales tax. His grievance as stated above is only with regard to that amended provision which requires even payment of disputed amount as a condition precedent for grant of forms, etc. The said provision has also been made in exercise of power incidental to the power of levy of sales tax. If the tax liability has been determined by the authority, then the insistence for payment of the same before grant of permit with a view to prevent evasion of tax cannot be said to be a restriction or impediment in the movement of trade, commerce and intercourse and accordingly, the amended provision cannot be struck down on the ground of being violative of article 301 of the Constitution of India as the amended provision does not contravene article 301 of the Constitution of India. In view of the aforesaid conclusion it is not necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich specific provision has been made under the Act. In support of the aforesaid submission, learned counsel appearing for the petitioner relied upon a judgment of the Supreme Court in the case of Dabur India Ltd. v. State of Uttar Pradesh reported in (1990) 49 ELT 3, wherein it has been held that citizen cannot be coerced to make payment of dues which according to him is not legally payable. In the aforesaid case, in paragraph 30 it was held as follows: "Before we part with this case, two aspects have to be adverted to: one was regarding the allegation of the petitioner that in order to compel the petitioners to pay which the petitioners contended that they were not liable, the licence was not being renewed for a period and the petitioners were constantly kept under threat of closing down business in order to coerce them to make the payment. This is unfortunate. We would not like to hear from a litigant in this country that the Government is coercing citizens of this country to make payment which the litigant is contending not to be leviable. Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 39.. In my view, the insistence for payment of disputed amount cannot be justified in law and accordingly the authorities cannot refuse to grant declaration form/permit/exemption for non-payment of disputed dues. In case an order of assessment or reassessment has been passed and that amount is admitted by the applicant-assessee, then without payment of the same, the authority may refuse to grant declaration form/exemption. If the same is disputed by filing appeal/ revision, etc., and in case interim order is passed by the authority, then in that case the assessee has to pay the amount as per interim order for obtaining declaration form/permit, etc. But in a case where the demand is disputed by adopting lawful means (appeal, etc.) then in that case asking the assessee to deposit the disputed amount for grant of declaration form, etc., will be unjust, unreasonable and a device to recover the disputed tax by adopting extra legal steps. In my view, the provision of rule 45(b) cannot be declared, ultra vires but the same has to be read down to maintain its validity and accordingly, restricted meaning has to be given as stated above and it has to be held that for non-deposit of admi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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