TMI Blog2008 (4) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... ANGULY A.K. C.J. AND MAHANTY I. , JJ. A.K. GANGULY C.J. This writ petition has been filed by several petitioners of which petitioner No. 1 claims to be a citizen of India and is carrying on business under the name and style of Assam Transport Service as its own proprietor. The case of petitioner No. 1 is that, it executes orders for inter-State carriage of goods. Petitioner No. 2 is a company incorporated under the Companies Act, 1956 and is engaged, inter alia, in the business of buying and selling of Purified Terephthalic Acid (PTA). Petitioner No. 3 is also a company incorporated under the Companies Act, and is a manufacturer of PTA in its unit at Haldia in West Bengal, and petitioner No. 4 is the company secretary and vice president of petitioner No. 3 and a citizen of India. This writ petition has been filed by the petitioners jointly as, according to them, there is a common cause of action and a common impugned order in this case. The case of the petitioners is that petitioner No. 3, which is a manufacturer of PTA at its Haldia Plant has various customers to whom the PTA is sold and in this case there was a sale agreement between petitioner No. 2 and petitioner No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation of the goods from the factory of petitioner No. 3 at Haldia to the destination point, i.e., Indorama Synthetics (I) Limited at Nagpur in Maharashtra. The goods so sold were covered by eight invoices in which petitioner No. 3 was described as the consignor, petitioner No. 2 as the purchaser and Indorama Synthetics (I) Limited as the consignee. The goods were transported by petitioner No. 1 in four different trucks/lorries being Vehicle Nos. MH-06AC 0282, MH06AC 0272, MH-06AC 0676 and MH-06AC 0609. It is stated that each of the consignments carried in a particular truck was covered by a lorry receipt and thus there were eight lorry receipts in respect of four trucks. The said trucks reached the unified check gate at Jamsolaghat on or about January 12, 2006 and drivers of the said four vehicles produced invoices and lorry receipts initially before the motor vehicles authority at the check gate. The petitioners' case is, initially gate passes were issued but on subsequent verification by the sales tax and entry tax authority at the check gate, it was alleged by the said authority that about 84 bags of PTA were not covered by any of the invoices disclosed by the dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evision applications and applications for stay before the Commissioner of Sales Tax, Orissa, Cuttack. However, by an order dated February 4, 2006 the Special Additional Commissioner of Sales Tax, Central Zone, Cuttack, rejected the revision applications confirming thereby the action of the Sales Tax Officer. Those orders, namely, the orders dated January 22, 2006 (annexures 7 and 8) and order dated February 4, 2006 (annexure 9) are impugned in this writ petition. In this matter a counter-affidavit has been filed by the revenue authority. In the said counter, it has been stated that the OVAT Act has come into force with effect from April 1, 2005 and in the instant case petitioner No. 3 is the consignor and petitioner No. 1 is transporter and by the impugned revisional order, tax and penalty has been levied in respect of 84 bags of PTA which was unaccounted. Since those 84 bags are not covered by any documents, the sale of those bags cannot be covered by the provisions of the CST Act. Each of those 84 bags of unaccounted PTA comprising 1,050 kgs., were loaded in four vehicles not supported by any documents and accordingly notices were issued under section 74(8) of the OVAT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty in respect of the said goods is unauthorised and contrary to the provisions of section 74(14) of the OVAT Act. For better appreciation of the aforesaid contentions, the provisions of section 74 of the OVAT Act are set out. 74. Establishment of check-posts and inspection of goods while in transit. (1) The Government may, with a view to preventing or checking avoidance or evasion of tax, by notification, direct the establishment of a check-post or barrier or both at such places as may be specified in the notification and specify any of the officers appointed under sub-section (2) of section 3 to be in-charge of every such check-post or barrier. (2) The driver or person-in-charge of every vehicle or carrier of goods in transit shall, (a) carry with him the records of the goods including 'challan' and 'bilties', bills of sale or dispatch memos and prescribed declaration form or way bill duly filled in and signed by the consignor of goods carried; (b) stop the vehicle or carrier at every check-post or barrier set up under sub-section (1) or at any other place when so required by an officer authorised by the Commissioner in this behalf; (c) pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorised officer referred to in that sub-section may, if satisfied, permit him to be so impleaded, and, thereafter, all the provisions of this section shall mutatis mutandis apply to him. (7) Subject to such rules as may be prescribed, the officer-in-charge of the check-post or barrier or the officer authorised under subsection (3) may release the goods to the owner of the goods or to any person duly authorised by such owner, on payment of the penalty imposed under sub-section (5) in addition to tax payable thereon. (8) Where the driver or person-in-charge of the vehicle or the carrier is found guilty of violation of the provisions of clause (b), (c), (d) or (e) of sub-section (2), subject to the provisions of clause (a) of sub-section (4), the officer-in-charge of the check-post or barrier or the officer authorised under sub-section (3) may detain such vehicle or carrier and after affording an opportunity of being heard to such driver or person-in-charge of the goods or the carrier, may impose a penalty on him as provided under sub-section (5). (9) Where a transporter, while transporting goods, is found to be in collusion or is likely to be in collusion with a dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vehicle or boat, as the case may be, fails, without reasonable cause, to produce or deliver the transit pass required under sub-section (10); or (c) he has reason to believe that the goods carried by the vehicle or boat, as the case may be, has been unloaded, delivered or sold inside the State in contravention of the declaration furnished under sub-section (10), and, thereafter, he may direct the driver or the other person-in-charge of the vehicle or boat, as the case may be, to pay within a specified period, by way of penalty, a sum equivalent to twenty per centum of the value of the goods under transport by such vehicle or boat, as the case may be, or rupees twenty thousand, whichever is higher, in addition to tax as otherwise payable under this Act, failing which, the said officer may seize and confiscate the goods under transport or seize the vehicle or boat carrying such goods in the prescribed manner to recover such tax an penalty: Provided that, (i) before taking any action for confiscation of the goods, the officer shall give the driver or the person-in-charge of the vehicle or boat, as the case may be, an opportunity of being heard and, if necessary, may make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rectify the breach of statute under section 74(2)(c). The opportunity of hearing was given to them and the explanation which was offered by the petitioner also does not show that the documents were available at the time of entry. Therefore, there is a violation of provision under clause (c) of sub-section (2) of section 74 of the OVAT Act and therefore, the imposition of tax and penalty, is automatic. It is also urged that the interpretation, which is given to section 74(14) of the OVAT Act by the petitioner is not correct. If the goods are not liable to payment of taxation under the OVAT Act, it is only then penalty cannot be imposed on those goods under section 74(14) of the OVAT Act. The learned counsel for the Revenue submitted that it is nobody's case that the goods in question are tax-free goods or are exempted from tax under the OVAT Act. The learned counsel for the petitioner has relied on a few judgments in support of his contention, which are to be considered now. The learned counsel relied on a decision of the Supreme Court in the case of State of Madhya Pradesh v. Chhotabhai Jethabhai Patel and Co. reported in AIR 1972 SC 971 and referred to rules of interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court were construing the provision of section 10(29) of the Income-tax Act, 1961. In paragraph 36, at page 1397 (page 604 of ITR) of the Report the learned judges of the Supreme Court quoted with approval the observation of Justice Rowlatt in the case of Cape Brandy Syndicate v. Inland Revenue Commissioners reported in [1921] 1 KB 64. The principles laid down in the said judgment also make it clear that there is no equity about a tax and there is no intendment or presumption. In the interpretation of taxing statute nothing is to be read in nothing is to be implied, one can only look fairly on the language used. This court is in respectful agreement with the aforesaid principles. The learned counsel also referred to a Constitution Bench judgment of the Supreme Court in the case of Tolaram Relumal v. State of Bombay reported in AIR 1954 SC 496. In that judgment the learned judges were considering the distinction between a lease and an agreement to grant lease. In that context section 18(1) of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 came up for consideration. While considering the said section, the learned Judges found that the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, reported in [2001] 124 STC 611; [2002] 1 SCC 279 and also on a recent decision of the Supreme Court in the case of Guljag Industries v. Commercial Taxes Officer reported in [2007] 9 VST 1. This court finds that all the issues argued in this case can be answered on a proper interpretation of the ratio of the honourable Supreme Court in the aforesaid two judgments, namely, in the case of D.P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279 and Guljag Industries [2007] 9 VST 1. In D.P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279, it has been held that the provisions to check evasion of tax are within the legislative competence of the States under entry 54 of List II. It cannot be disputed that provisions of section 74 of the OVAT Act have been framed by the State Legislature in order to prevent and check avoidance or evasion of tax and for the said purpose the State Government may, by notification, direct the establishment of a check-post. This is clear from section 74(1) of the said Act. The argument advanced by the learned counsel for the petitioner that tax cannot be imposed for violation of the provisions of section 74 and sub-sections thereof as the same is beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the genuineness of those documents has not been questioned even in the course of argument before us. That being the position, the question is whether in the facts of this case any discretion is left with the authorities in the matter of imposition of penalty. To decide this issue, a comparison between section 74(5) of the OVAT Act and section 78(5) of the Rajasthan Act should be made. Section 74(5) of the OVAT Act has already been quoted hereinabove. Section 78(5) of the Rajasthan Act which was considered both in D. P. Metals [2001] 124 STC 611 (SC); [2002] 1 SCC 279 and Guljag Industries [2007] 9 VST 1 (SC) runs as follows: 78(5). The in-charge of the check-post or the officer empowered under sub-section (3), after having given the person-in-charge of the goods a reasonable opportunity of being heard and after having held such enquiry as he may deem fit, shall impose on him for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to thirty per cent of the value of such goods. On a close comparison of the aforesaid pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are totally different from Guljag Industries case [2007] 9 VST 1 (SC). In Guljag Industries case [2007] 9 VST 1 (SC) another group of cases was also discussed, namely, Civil Appeal No. 5240 of 2005. In Civil Appeal No. 5240 of 2005, the facts were that on verification of the vehicle, it was found that the goods were more than the quantity shown in the bill and according to the assessee, this was the mistake of the driver of the vehicle in not producing the documents which were with him at the time of checking and therefore, the assessee was not liable to be penalised. However, the said explanation was not accepted by the Revenue. (See: para 7, page 5 of the Report). The facts in Civil Appeal No. 5240 of 2005 have therefore some similarity with the facts of this case. The decision of the Supreme Court in the Guljag Industries case [2007] 9 VST 1 was made applicable only to those cases where blank/incomplete form 18A/18C had accompanied the goods in movement. This appears clearly from paragraph 27 at page 34 of the Report. In fact, the honourable Supreme Court made it very clear by making the following observation at page 34 of the Report and which I quote: . . . We make it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 SC 496 at page 498/499). Similar principle has been laid down by Lord Esher, Master of Rolls in formulating the rule of construction of penal sections and observed as follows: If there is a reasonable interpretation which will avoid the penalty in any particular case we must adopt that construction. If there are two reasonable constructions we must give the more lenient one. (see Tuck and Sons v. Priester reported in [1887] 19 QBD 629 at 638) These principles have been followed by the House of Lords in L. N.E. Rly. Co. v. Berriman [1946] 1 All ER 255 at page 270 of the Report). In the context of taxation law also, the honourable Supreme Court has accepted the same principle. In the case of Hindustan Steels Ltd. v. State of Orissa [1970] 25 STC 211 at page 214, the honourable Supreme Court held: . . . Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose penalty w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of imposing VAT tax is either the sale or purchase of goods. The said provision does not contemplate any presumptive sale for the purpose of levy of OVAT tax. In the impugned orders under annexures 7 and 9, the Revenue have asserted that there has been violation of section 74(2)(c) which forms the basis of their apprehension that necessary documentation were not submitted by the petitioner with the objective of a possible sale of the excess stock inside the State of Orissa, in order to evade payment of tax. Section 74(2)(c) requires the driver or person-in-charge of every vehicle or carrier of goods in transit to produce all the documents, including the prescribed way-bill relating to the goods before the officer-in-charge of the check-post or barrier or the authorised officer. The mere absence of such documents cannot in law give rise to any presumption unless such presumption/assumption has any statutory basis. Unless the statute empowers the authority to draw such a presumption of sale, no levy under section 9 of the OVAT Act can be imposed on the basis of an assumption/ presumption made by the Revenue authority on a likelihood of sale or evasion of tax . Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er duly is authorised by the Commissioner, has powers similar to sub-section (3) and may also direct the detention of the vehicle and upon examination of the contents of the vehicle and the records relating to the goods under transport. Upon such inspection if it is found that the vehicle is carrying less goods than originally declared at the point of entry, only then it is available to be presumed that . . . the goods carried in the vehicle has been sold inside the State . It is only thereafter that the said officer is empowered to not only demand penalty equivalent to 20 per centum of the value of the goods under transport or Rs. 20,000, whichever is higher, but most importantly, in addition to the demand of penalty is also authorised to demand tax as otherwise payable under the Act. The aforesaid detailed analysis of section 74, clearly gives out two distinct category of transactions. The first category being goods which are in transit within the territory of the State and in the event the authorised officer finds that the goods are not covered with necessary documentation, the officer has the authority to impose penalty alone. On the other hand, when a vehicle comes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge of the last check-post or barrier before exit from the State. The vehicles in question were stopped at the entry point into the State and at the entry point into the State, the check-gate officer reached the conclusion that he had reason to believe that the excess bags of PTA would have been sold inside the State of Orissa to evade payment of tax. Such a presumption is not available under the statute. The only presumption that is available under sub-section (11) of section 74 and the necessary circumstances do not arise in the present case. In other words, what powers have been vested in a check gate officer of the exit barrier cannot be utilised by the officer-in-charge of the entry gate. The tax demand has been raised at the point of entry into the State of Orissa and, therefore, is wholly unauthorised in law. Reliance has been placed by the Revenue on a judgment of the honourable Allahabad High Court in the case of Gopal Agency v. State of Uttar Pradesh [1987] 65 STC 323. The facts in the said case is that the petitioner engaged trucks for carrying coal from the State of Bihar and Bengal to the State of Madhya Pradesh and its trucks travel through the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, and accepted by the Revenue, that pursuant to the interim orders, the amounts directed were deposited and bank guarantees were furnished. Thereafter, the necessary transit passes covering the entire consignment were issued and the vehicles were released. Thereafter, the vehicles exit from Orissa along with the entire consignment and delivered the same to consignees in Maharashtra. All the necessary documents have been appended to the rejoinder affidavit. These clearly establish that the petitioners have complied with the interim directions by depositing Rs. 5,00,000 and offering bank guarantee of Rs. 25,000,000. It is more important to note that the documents clearly establish that the goods in question transited through Orissa and were delivered to the consignee at Nagpur in the State of Maharashtra. This fact conclusively establishes that, in so far as the goods are concerned, there has been no taxable event as contemplated under section 9 of the OVAT Act, 2004, i.e., there has been no sale or purchase of the goods in question within the State of Orissa in order to attract the levy of tax under the OVAT Act. Furthermore, the goods in question having come from outside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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