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TMI Blog2006 (11) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... imited, Kolkata (West Bengal) for cast iron items. 4. On February 24, 2005, the petitioner sent one consignment of goods to a Pathankot dealer through Shiv Shakti Transport Company from its place of business, i.e., Mohali, to the place of the consignee at Pathankot. 5. At the check-post, set up under the provisions of the Act, the driver of the vehicle duly reported the transaction, but the concerned officer detained the goods on the ground that the goods were liable to be taxed at the first stage, while as per the bill accompanying the goods, tax had not been charged. After preliminary inquiry, notice was issued to the petitioner and the designated officer heard petitioner. The goods and the vehicle were released against bank guarantee on March 1, 2005, pending consideration of the matter. 6. According to the petitioner, the goods were general goods, liable to tax at last stage and though Schedule "D" read with section 5(3) of the Act, dealing with the declared goods mentioned one of the items as pipes, the goods in question being pipes manufactured from cast-iron, were not declared goods, as per judgment of the honourable Supreme Court in Vasantham Foundry v. Union of India [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed after passing of the order on February 28, 2005 and the order passed on February 28, 2005 was only a zimni order and subsequently, a detailed order was passed, wherein the date of March 1, 2005 was also incorporated. It is stated that the order was passed after March 1, 2005 but bears the date of February 28, 2005, by which, no prejudice was caused. 10. From the pleadings of the parties, following questions arise for consideration: (i) Whether the writ petition is liable to be dismissed on account of alternative remedy available to the petitioner? (ii) Whether the impugned order dated February 28, 2005, annexure P 6 is ultra vires the provisions of section 14B of the Act? (iii) Whether the impugned order dated February 28, 2005, annexure P 6, is ante-dated inasmuch as it refers to release of goods on March 1, 2005 and its effect? Re: Question No. (i) 11. Learned counsel for the State, while substantiating his plea of alternative remedy being available to the petitioner, relied upon judgments in Transport Corporation of India Ltd. v. State of Andhra Pradesh [1985] 60 STC 14 (AP), State of Goa v. Leukoplast (India) Ltd. [1997] 105 STC 318 (SC) and Titaghur Paper Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bar and in an appropriate case, inspite of availability of alternative remedy, this court is not debarred from entertaining writ petition where on undisputed facts, an authority is shown to have assumed jurisdiction which it does not possess. Article 226 of the Constitution of India, as such, does not debar entertainment of writ petitions but it is a self-imposed limitation put by the courts. 16. Reference may be made to the judgment of the honourable Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai AIR 1999 SC 22, where a writ petition was filed against cancellation of trade mark registration, which was dismissed. On appeal, the honourable Supreme Court observed: "15. Under article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this court not to operate as a bar in at least three contingencies, namely, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dry [1995] 99 STC 87, was cited, holding that cast iron was different from iron. Respondent No. 2 held that casting to produce things like pipes, etc., could not be treated as cast iron. On these facts, it was held that "cast iron pipes" were "iron" liable to tax at the first stage and tax having not been charged at the first stage, there was attempt to evade tax calling for penalty equal to 30 per cent of the value of the goods. 19. On March 22, 2005, this court passed the following order: "Let notice of motion be issued to the respondents. Mr. MS Joshi, Assistant Advocate-General, Punjab, accepts notice. Let a complete set of the paper book be supplied to him within 2 days. Written statement on behalf of the respondents shall be filed within 4 weeks. Replication, if necessary, be filed within 2 weeks thereafter. In the meanwhile, the bank guarantee in the sums of Rs. 26,750 and Rs. 80,250 stated to have been furnished by the petitioner on March 1, 2005 shall not be encashed. List for hearing on May 17, 2005." 20. On August 3, 2005, following order was passed "Rule DB.-List the matter for final disposal on November 7, 2005 at Sr. No. 1 in the category of regular matters. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inished and sold as different goods, e.g., bends, pipes, man-hole covers, motor parts, etc., will still be treated as cast iron. The test is whether the goods are being dealt with as cast iron or as different goods made out of cast iron in the market place. . . . Therefore, in our view, 'cast iron casting' in its basic or rough form must be held to be 'cast iron'. But, if thereafter any machining or polishing or any other process is done to the rough cast iron casting to produce things like pipes, man-hole covers or bends, these cannot be regarded as 'cast iron casting' in its primary or rough form, but products made out of cast iron castings. Such products cannot be regarded as 'cast iron' and cannot be treated as 'declared goods' under section 14(iv) of the Central Sales Tax Act. This view is not in conflict with the view taken in the case of Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 (SC); [1994] Suppl 1 SCC 310, but it is in consonance with the decision in that case." 25. Learned counsel for the petitioner submitted that if the goods are declared goods, the rate of tax would be four per cent and the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e information collection centre or the aforesaid Officer to check the contents in the vehicle by breaking open the packages, if necessary, and inspect all records relating to the goods carried which are in the possession of the driver or any other person as may be required by the aforesaid officer, and if considered necessary, such officer may also search the goods vehicle and the driver or other person-incharge of the vehicle or of the goods. (4) The owner or person-in-charge of a goods vehicle entering the limits 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 person-in-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 thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods along with the vehicle for such period, as may reasonably be necessary. Such goods shall be released on furnishing a security or executing a bond with sureties in the prescribed form and manner by the consignor or consignee, if registered under the Act, to the satisfaction of the officer detaining the goods and in case the consignor or the consignee is not registered under the Act, then on furnishing a security in the form of cash or bank guarantee or crossed bank draft, which shall be thirty per cent of 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 sub-section (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 consignee of the goods or his representative or the driver or other person in-charge of the good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commencement of the enquiry proceedings; and (iv) The officer-in-charge of a check-post or information collection centre or any other officer referred to in sub-section (2), may receive the amount of cash security as referred to in 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) against a proper receipt in the prescribed manner. (8) In the event of the consignor or consignee of the goods not paying the penalty imposed under sub-section (7) within twenty days from the date of the order imposing the penalty, the goods detained shall be made liable to be sold by the officer, who imposed the penalty, for the realisation of the penalty by public auction in the manner prescribed. If the goods detained are of a perishable nature or subject to speedy or natural decay or when the expenses of keeping them in custody are likely to exceed their value, the officer-in-charge of the check-post or information collection centre or any other officer referred to in sub-section (2), as the case may be, shall immediately sell such goods or otherwise dispose them of. The sale proceeds shall be deposited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l dispute was involved. Raising of a bona fide legal argument could not be equate to the mens rea for evasion of tax. 28. On the other hand, learned counsel for the State submitted that power conferred on Check-post Officer could be exercised if the said officer was of the opinion that the assessee had given a declaration without any basis and such declaration had possibility of tax evasion. 29. In this connection, reference may be made to observations of the honourable Supreme Court in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197; AIR 1980 SC 346, (AIR para 5) (STC page 200), in the context of imposition of penalty when there was a bona fide legal dispute about exigibility of tax: "5. . . But where the assessee does not include a particular item in the taxable turnover under a bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a 'false' return inviting imposition of penalty. This view which is being taken by us is supported by the decision of this court in Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 (SC), where it has been held that 'even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer are, therefore, liable to be quashed and they are accordingly quashed." 31. In Orient Paper & Industries Ltd. v. State of Orissa [1995] 97 STC 490 (Orissa), it was observed: "10. Before parting, we propose to deal with the submission of Shri Mahanti that there is harassment of persons at the check-posts and we should intervene to see that honest tax-payers are spared the highhandedness of the persons manning the check-posts. Learned Standing Counsel, on the other hand, contends that evasion of tax being rampant and it being difficult to realise tax after the goods have slipped away, the State has to provide for check-posts to prevent or check evasion. It is urged by the learned counsel that where the officer-in-charge of a check-post has to deal with a large number of vehicles crossing the check-post, some amount of inconvenience is unavoidable. Shri Patnaik would, however, be happy if inconvenience to the parties can be lessened in any way by educating the officers-incharge of the check-posts about the scope and width of their power in intercepting goods while in transit. 11.. We have applied our minds to this aspect of the case. According to us, much of the inconven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritory, there is a further sale. The occasion for the same would be after the goods have entered the territory and not at the point of entry. So, there would be hardly any occasion to detain such goods at the check-posts. This apart, when in the way-bill the registration number of the buyer of the goods is reflected, there would be no justification for the check-post officers to entertain a belief that the payment of tax would get evaded by such a person on his selling the goods subsequently. So, goods of such a person are not to be ordered for unloading except where the goods be such which are not fully covered by the way-bill or the way-bill be defective or incomplete. We would reiterate that on these two conditions being absent, the incoming goods, specially those being brought by registered dealers, would not be detained at the check-posts. Any effort of the officers of the check-posts to do the contrary shall be deemed to be an unauthorised act which, it is the duty of the department to see, is not indulged by the concerned officers. Their education in law, as explained by us, should go a long way to meet the genuine grievance of the traders and the same would also protect th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer under whose jurisdiction the concerned purchaser is registered as a registered dealer. 7.. Judged in the aforesaid background, action of the check-post officer in directing payment of tax cannot be maintained, and is vacated. Petitioner shall file details of the purchase of excavator before the Sales Tax Officer, Cuttack-I, West Circle, who is its assessing officer, and shall file an undertaking to abide by the result of assessment so far as that article is concerned, as would be finally determined. The undertaking shall be filed within ten days from today. The check-post officer would do well to send all relevant materials to the assessing officer to facilitate a proper adjudication." 33. Learned counsel for the State relied upon judgment of the honourable Supreme Court in Shahnas Trading Co. v. State of Kerala [2002] 127 STC 1, which is a short order, relevant part of which is as under: "We see no reason to interfere with the judgment and order under appeal which, in turn, has followed an earlier decision of the High Court in E.K. Hajee Mohammed Meera Sahib & Sons v. Sales Tax Officer, II Circle, Trivandrum [1992] 86 STC 99 (Ker). We find no merit in the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory provisions, but it can be so done only on the basis of some material.' The court also held as under: 'Without anything more, if the delivery note contained only a specification of the value of the goods and the bill amount, it cannot be stated that the check-post authorities have no powers to search, inspect and detain the goods if they have material to suspect, that the goods under transport do not possess the required documents, or there is an attempt at evasion of tax.' So, the power to detain the goods in transit can be exercised by the check-post authority only when he has reason to believe that there was an attempt to evade the tax. If such inference can be drawn from under-valuation of the goods, then the power to detain the goods can be exercised by the check-post authorities. Simply because valuation of the goods can be determined by a best judgment assessment under section 19-B of the Act, it cannot be said that power to detain the goods in transit cannot be exercised under section 29-A(2) of the Act on the ground of under-valuation. Section 19-B and section 29-A(2) are mutually exclusive and they operate in two different fields. The matter being al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly set aside." 36. In United Polymer Industries v. State of Punjab [2006] 146 STC 571, a division bench of this court observed as under: "Under the above provision, if there is any reasonable suspicion of evasion of tax, the detaining authority is justified in detaining the goods and holding an enquiry into the matter. Though, this power is necessary to safeguard the interest of Revenue and to check evasion of tax, this provision is not intended to confer any arbitrary power on the detaining officer to detain goods without any rhyme or reason under the colourable exercise of such power. Such abuse of power is required to be checked lest it should become a source of abuse of authority or violation of legitimate rights of citizens." 37. In Commissioner of Sales Tax v. P.T. Enterprises [2000] 117 STC 315 (SC), it was held that a transporter could be required to carry documents in respect of specified goods liable to tax. 38. Vires of provision relating to checking of goods in transit: In The Check-Post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC); AIR 1971 SC 792, the question before the honourable Supreme Court was whether power to seize and confiscate an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was considered with reference to section 28B of the U.P. Sales Tax Act, 1948. It was held that the provisions being machinery provisions enacted to ensure that there was no evasion of tax, were incidental to entry 54, List II of the Seventh Schedule to the Constitution and presumption contained in section 28B of the Act not being conclusive, merely laid down a rule of evidence, shifting burden of proof on the persons not carrying the documents to show that goods were not sold inside the State. In para 19 (STC page 392), it was observed as under: "19. The foregoing discussion disposes of the contentions regarding legislative competence or unreasonable character of the provisions contained in section 28-B of the Act and rule 87 of the Rules. They are introduced, as stated earlier, to check evasion and to provide a machinery for levying tax from persons 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. The decision of the High Court upholding the constitutionality of section 28-B of the Act and rule 87 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adways [2004] 135 STC 1 (SC); [2004] 3 SCC 640, provisions of sections 57 and 58 of the Madhya Pradesh Commercial Tax Act, 1994 requiring furnishing of information by clearing and forwarding agents regarding details of consignors, consignees, quantity of goods carried and value thereof were upheld on the ground that the same were intended to prevent/check evasion. 47. In A.B.C. (India) Ltd. v. State of Assam [2005] 142 STC 88 (SC); [2005] 6 SCC 424, provisions of sections 42 and 44 of the Assam General Sales Tax Act, 1993 were upheld following judgment in Tripura Goods Transport Association's case [1999] 112 STC 609 (SC); AIR 1999 SC 719 and distinguishing judgment in Sant Lal's case [1993] 91 STC 321 (SC); [1993] 4 SCC 380. 48. The above judgments relate to validity of statutory provisions requiring a transporter or owner to carry relevant documents and to give information at the check-post and in absence thereof, inference of evasion could be raised in which case, the transporter or owner of the goods was required to show that there was no attempt at evasion. 43. Reference may also be made to the judgement of the honourable Supreme Court in Krishna Bus Service Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of article 19(1)(f) is involved in this case in respect of the warrant in question which purport to be under the first alternative of section 96(1) of the Criminal Procedure Code.' The said view has been reiterated in several decisions of the honourable Supreme Court. At the same time, power of search and seizure affects not only right of possession and enjoyment of property but also privacy of a citizen. It also affects right of personal liberty under article 21 of the Constitution. Procedure for affecting such a right itself has to be fair and reasonable, as held by the honourable Supreme Court in Maneka Gandhi v. Union of India AIR 1978 SC 597. Referring to this aspect, in a recent decision in District Registrar and Collector, Hyderabad v. Canara Bank AIR 2005 SC 186, it was observed in para 55: '55. In Smt. Maneka Gandhi v. Union of India [1978] 1 SCC 248- a 7-Judge Bench decision, P. N. Bhagwati, J. (as His Lordship then was) held that the expression "personal liberty" in article 21 is of the widest amplitude and it covers a variety of rights which go to constitute the personal liberty of man and some of them have been raised to the status distinguishing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) supplied). Judicial review: 51. It is well-settled that wherever exercise of power by any public authority is arbitrary, the same will be open to judicial review and will be liable to be quashed. Reference may be made to judgment of the honourable Supreme (1)Here italicised. Court in Comptroller and Auditor General of India, Gian Prakash, New Delhi v. K.S. Jagannathan AIR 1987 SC 537, wherein it was observed: "20. There is thus no doubt that the High Courts in India exercising their jurisdiction under article 226 have the power to issue a writ of mandamus or a writ in the nature of mandamus or to pass orders and give necessary directions where the Government or a public authority has failed to exercise or has wrongly exercised the discretion conferred upon it by a statute or a rule or a policy decision of the Government or has exercised such discretion mala fide or on irrelevant considerations or by ignoring the relevant considerations and materials or in such a manner as to frustrate the object of conferring such discretion or the policy for implementing which such discretion has been conferred. In all such cases and in any other fit and proper case a High Court can, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven social obligations are regulated by grant of statutory powers. The test of permissive form of grant are over. It is now imperative and implicit in the exercise of power that it should be for the sake of society. When the court directs payment of damages or compensation against the State the ultimate sufferer is the common man. It is the tax-payers, money which is paid for inaction of those who are entrusted under the Act to discharge their duties in accordance with law. It is therefore, necessary that the Commission when it is satisfied that a complainant is entitled to compensation for harassment or mental agony or oppression, which finding of course should be recorded carefully on material and convincing circumstances and not lightly, then it should further direct the department concerned to pay the amount to the complainant from the public fund immediately but to recover the same from those who are found responsible for such unpardonable behaviour by dividing it proportionately where there are more than one functionaries." 53. The above observations were also relied upon by the honourable Supreme Court in its judgment in Union of India v. S.B. Vohra AIR 2004 SC 1402, para 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken as a whole could not logically warrant the conclusion of the decisionmaker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of the State of Environment [1980] 41 P & CVR 255, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion. (2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R v. Barnet London Borough Council, ex p Johnson [1989] 88 LGR 73, the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority's parks was struck down. . . . 101.. A modern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, its decision will be set aside. See Sydney Municipal Council v. Campbell 1925 AC 338. In exercising these powers, the courts will take into account any reasons which the body may give for its decisions. If it gives no reasons - in a case when it may reasonably be expected to do so, the courts may infer that it has no good reason for reaching its conclusion, and act accordingly. See Padfield's (1968 AC 997, 1007 & 1061)'." 55. Reference may also be made to judgment of the honourable Supreme Court in Common Casue, A Registered Society v. Union of India AIR 1999 SC 2979, wherein, it was observed: "39. Essentially, under public law, it is the dispute between the citizen or a group of citizens on the one hand and the State or other public bodies on the other, which is resolved. This is done to maintain the rule of law and to prevent the State or the public bodies from acting in an arbitrary manner or in violation of that rule. The exercise of constitutional powers by the High Court and the Supreme Court under articles 226 and 32 has been categorised as power of 'judicial review'. Every executive or administrative action of the State or other statutory or pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the above case law, there are instances of interference by the writ court with the exercise of power where there was no nexus with the attempt at evasion, such as in Utkal Galvanisers Limited [1997] 104 STC 222 (Orissa), Automobile Products of India [1991] 81 STC 414 (Karn), Parry and Company Ltd. [2004] 138 STC 437 (All), Orient Paper & Industries Ltd. [1995] 97 STC 490 (Orissa) and United Polymer Industries [2006] 146 STC 571 (P&H). Similarly, the writ court refused to interfere and rejected contention that exercise of power by check-post authority was not called for or was overlapping with the power of assessment, in cases such as Shahnas Trading Co. [2002] 127 STC 1 and Transport Corporation of India Ltd. [1985] 60 STC 14 (AP). 59. Observations in the decisions referred to above are on individual facts and can be read as neither restricting the exercise of power for checking attempt at evasion wherever necessary nor can be read as extending exercise of power to an area where there is no attempt at evasion. We are of the view that straight-jacket approach is not called for in the matter. Sometimes, new means are required to be adopted to check evasion by the evaders w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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