TMI Blog2005 (6) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., on stock transfer basis. According to the petitioner, the goods in question were imported by the consignors into the country from abroad and formed part of their stock at Mangalore after clearance from the Mangalore Port. To reach the consignors head office, the transport vehicle has to pass through the State of Karnataka. If the vehicle has to move from Mangalore, in the normal course, it has to pass through check-post at Kannur, Mangalore, which is the entry or inward check-post in Karnataka and either the sales tax check-post at Hosur Road, Attibele or N. Vaddarahalli check-post, Mulbagal Taluk, Kolar District, which are known as exit or outward checkposts. The driver-in-charge of the aforesaid vehicle, in order to obtain a transit pass, to pass through the State while carrying imported naphtha and kerosene oil, as required under section 28AA of the Act, had submitted an application in triplicate in form 39AA to the officer-in-charge of the checkpost at Kannur, Mangalore, which is the entry check-post in Karnataka. The check-post officer, after making necessary inquiries had issued a pass on the duplicate and triplicate copies of the application to the driver-incharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted offences. 4.. The owner of vehicles/drivers have failed to surrender the transit passes at the Attibele check-post within the stipulated date as prescribed under section 28AA(2) of the KST Act and rule 23F(3) of KST Rules. But, it is found that fictitious documents were created for having surrendered at the N. Vaddarahalli check-post and sent to this check-post. The goods transported in the transit passes were not transported to the place Pondicherry mentioned in the document but were unloaded in the Karnataka State and thereafter were sold unauthorisedly defrauding (evading) the taxes to be paid to the State. This has been proved and hence, the goods sold in the State have to be brought to assessment and assessed to tax for the goods involved in the transit passes as per section 28AA(4) of the KST Act, 1957. After receipt of the show cause notice, the owner of the goods vehicle had raised all possible objections to the proposal made in the show cause notice. The check-post officer after affording a reasonable opportunity of hearing to the owner of the vehicle and after considering several objections raised in the reply to the show cause notice had passed an order lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the check-post and by forging the signature of the officer, thereby it is proved that huge tax due to the Government is evaded. It is a pre-planned tax evasion case and it is a fit and deserving case to levy penalty. The driver of the vehicle has contravened the directions in section 28AA(2) of the Act. Keeping in view the facts of the case and as the tax has already been levied under section 28AA(4), the penalty under section 28AA(5) is levied equal to the tax and ordered accordingly: Sl. No. Transport Permit No. and date Goods Quantity Value Tax Penalty levied 1. 0240301/15-5-2002 Naptha 8.150 MT 1,40,180 16,822 16,822 2. 0240844/31-5-2002 Naptha 8.070 MT 1,33,155 15,979 15,979 3. 0185013/15-6-2003 Naptha 8.090 MT 1,39,148 16,698 16,698 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 23 of the Act against the orders passed by the Appellate Tribunal, on the ground, that, the Tribunal has either failed to decide or decided erroneously any question of law. This settled principle of law, in our view, does not require elaboration. In this revision petition proceeding, the petitioner has raised the following questions of law for our consideration and decision and they are: (i) Whether, in the facts and circumstances of the case, the Karnataka Appellate Tribunal is justified in holding that the State Representative has got authority to file the appeal before it inspite of the fact that he had not been authorised by the State Government to file the appeal as required under section 22(1) of the Karnataka Sales Tax Act, 1957 as per which only an officer empowered by the State Government in that behalf can file appeal before the Tribunal? (ii) In the facts and circumstances of the case, whether the Karnataka Appellate Tribunal is right in holding that the words, State and Government used in section 22(1) of the Karnataka Sales Tax Act, 1957 have a broader meaning and include all officers and authorities under the said Act and therefore, the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l justice in not summoning the books of account of the consignor of the goods and the concerned officials of the consignors for cross-examination to enable the petitioner to rebut the presumption contemplated under section 28AA(4) of the KST Act as per which the owner of the goods vehicle is presumed to have sold the goods inside the State if he fails to surrender the transit pass at the exit check-post before leaving the State? The first two questions of law are interrelated and therefore, they are taken together for consideration. These questions were also raised before the Tribunal by the petitioner. The Tribunal while answering this specific legal issue, after referring to the provisions of section 22 and section 3(2) of the Act, has observed, that, the provisions are wide enough to permit filing of appeal either by the State Representative himself or when any other officer requests him to do so. According to them, this has been the understanding in all these fifty (50) years of sales tax law and therefore, they do not find any ample reason to hold any other view. They have further observed, that both the provisions should be read, not only harmoniously, but also in such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, authorises the State Representative to perform certain functions in proceedings before the Appellate Tribunal. He is authorised, to prepare and sign applications, appeals and other documents; to appear, represent, act and plead; to receive notices and other processes; and to do all other acts connected with such proceedings on behalf of the State Government. These functions can also be performed by any other officer appointed under this Act by the Commissioner in exercise of his powers under sub-section (1A) of section 3 of the Act. Section 22 of the Act provides for filing of an appeal before the Appellate Tribunal. Section 22 of the Act is extracted by omitting what is not necessary for the purpose of this case. Section 22. Appeal to the Appellate Tribunal. Any Officer empowered by the State Government in this behalf or any other person objecting to an order passed under section 12D or an order passed by the Deputy Commissioner or the Joint Commissioner under section 20 or section 21 may appeal to the Appellate Tribunal within a period of sixty days from the date on which the order was communicated to him. An appeal is an application by a party to an appellate co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Mela Ram and Sons v. Commissioner of Income-tax, Punjab [1956] 29 ITR 607 (SC), Caltex Oil Refining (India) Ltd. v. Commissioner of Income-tax [1993] 202 ITR 375 (Bom) and Commissioner of Income-tax v. Ashoka Engineering Co. [1992] 194 ITR 645 (SC), the courts have observed that the judges should be slow to adopt a construction which deprives parties of valuable rights of appeal. The substantive law defines the remedy and the right, while law of procedure defines the modes and conditions of application of the one to the other. Likewise, the distinction between the right to remedy and mere procedure to be followed in prosecuting that remedy must also be kept in view. The law of procedure deals with the process by which a remedy for the enforcement of a right is prosecuted. Therefore, the forum of appeal as also the limitation are matters of procedural law and that no person has a vested right in the course of procedure. He has only the right of appeal in the manner prescribed for the time being in force. The Act provides for filing of an appeal to the Appellate Tribunal both by the Revenue as well as by an assessee under the Act, if they are aggrieved by an order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal preferred after sixty (60) days, if sufficient cause is shown, for not preferring the appeal within the time prescribed only for a further period of one hundred and eighty (180) days. Since the right of appeal is a creature of the statute, it has to be exercised strictly in conformity with the statutory provisions which creates it. The power given to the Revenue to prefer an appeal to the Appellate Tribunal can be traced only to section 22 of the Act. If the statute limits the power of filing an appeal to an officer empowered by the State Government, this power cannot be exercised by any other officer. However, the Appellate Tribunal relying on section 3(2) of the Act, has negatived the issue canvassed by the learned counsel for the petitioner solely on the ground, that the said provision is wide enough to permit the State Representative to prefer an appeal to the Appellate Tribunal either on his own or when a request is made by any other officer. Further, relying on the language used in section 22 of the Act, the Tribunal observes, that the words 'State' and 'Government' used in section 22 of the Act have a broader meaning to include all officers and auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the system will fail and the hierarchy of the officers will have no meaning. If the reasoning of the Tribunal is accepted, and if it is held that the State Representative can prefer an appeal either on his own or on a request made by an officer of the department, the State Representative, can either choose or not choose to prefer an appeal before the Appellate Tribunal depending on his own notions and at his whims and fancies, and this would be giving him unbridled and unguided power to the State Representative and the Legislature rightly has not chosen to create this sort of chaotic situation. Take yet another situation, which may lead to an absurd result, if the conclusion reached by the Tribunal is accepted. Under sub-section (1A) of section 3 of the Act, the Commissioner is empowered to appoint an officer not below the rank of the Assistant Commissioner of Commercial Taxes to perform the functions of a State Representative. In the hierarchy of officers in the department, the Joint Commissioner and the Deputy Commissioner are his senior officers. If the Revenue is aggrieved by the orders passed by the Joint Commissioner in exercise of his powers under section 21 of the Act or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the appeals before the Appellate Tribunal against the orders passed by the first appellate authority, files a memo dated June 2, 2005 before this court, enclosing a copy of the order of the State Government dated May 31, 2005, according post facto permission to the State Representative in the Karnataka Appellate Tribunal, to prefer appeals under section 22(1) of the Act in respect of sixty two (62) appeals which are disposed of by the Tribunal by its common order dated October 21, 2004 and copy of the same is also furnished to the learned counsel Sri G.K.V. Murthy for the petitioner. The order passed by the State Government dated May 31, 2005 ratifying the action of the State Representative is as under: Government order No. LAW 509 LSM 2005, Bangalore, dated May 31, 2005. In the circumstances explained above, post facto permission is accorded in respect of 62 appeals, vide, Nos. STA 215, 288, 289, 290, 291, 292, 867, 868, 869, 870, 871, 936, 937, 938, 939, 940, 941, 942, 943, 944, 945, 946, 1065, 1066, 1067, 1068, 1069, 1071, 1073, 1082, 1152, 1154, 1156, 1158, 1160, 1161, 1162, 1217, 1218, 1219 of 2004, STA Nos. 183, 1064, 1070, 1072, 1151, 1153, 1155, 1157, 1159, 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on December 16, 1953 to terminate his services, it would not follow that the action of the Chairman could not be ratified in a regularly convened meeting of the Board of Directors. The point is that even assuming that the Chairman was not legally authorised to terminate the services of the appellant, he was acting on behalf of the company in doing so, because, he purported to act in pursuance of the invalid resolution. Therefore, it was open to a regularly constituted meeting of the Board of Directors to ratify that action which, though unauthorised, was done on behalf of the company. Ratification would always relate back to the date of the act ratified and so it must be held that the services of the appellant were validly terminated on December 17, 1993 by the Chairman. The apex court in the case of High Court of Judicature for Rajasthan v. P.P. Singh [2003] 4 SCC 239; AIR 2003 SC 1029 , has observed that even in a case where the initial action is illegal, the same can be ratified by a competent authority therefor . The Supreme Court in the case of Devender Pal Singh v. State of N.C.T. of Delhi [2002] 5 SCC 234; AIR 2002 SC 1661, has observed (page 1668 of AIR): . . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Balwant Rao Chavan AIR 1989 SC 1582 has observed: 24. By this resolution, we are told that the Executive Council has ratified the action taken by the Vice-Chancellor. Ratification is generally an act of principal with regard to a contract or an act done by his agent. In Friedman's Law of Agency (Fifth Edition) Chapter 5 at page 73, the principle of ratification has been explained: 'What the agent does on behalf of the principal is done at a time when the relation of principal and agent does not exist: (hence the use in this sentence, but not in subsequent ones, of inverted commas). The agent, in fact, has no authority to do what he does at the time he does it. Subsequently, however, the principal, on whose behalf, though without whose authority, the agent has acted, accepts the agent's act, and adopts it, just as if there had been a prior authorisation by the principal to do exactly what the agent has done. The interesting point, which has given rise to considerable difficulty and dispute, is that ratification by the principal does not merely give validity to the agent's unauthorised act as from the date of the ratification: it is antedated so as to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the State Representative. This ratification by the State Government relates back to the date, when the State Representative had filed appeals before the Appellate Tribunal. In view of this conclusion of ours, the first two questions of law raised and canvassed before us require to be answered in the affirmative and against the petitioner, for the reasons stated by us. In order to appreciate the other legal issues raised and canvassed by the learned counsel for the petitioner, it is necessary to keep in view two aspects. Firstly, the provisions of section 28AA of the Act and the Rules framed thereunder, and secondly, some pertinent observations made by Justice V.R. Krishna Iyer (as he then was). While writing a foreword to the book Interpretation of Fiscal Statutes in India , he has said that the lawabiding class obeys the biblical mandate: 'Render therefore unto Caesar the things, which are Caesars'. But the question arises what is truly due to him (the State) under the law? This turns on an interpretation of the relevant fiscal statute, not as a judge fancies nor as taxing department desiderates but as read and decoded according to rules of reason and justice sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed to tax by the officer empowered in this behalf in the manner prescribed, notwithstanding anything contained in sub-section (5) of section 5 of the Act. The Legislature by using the expression shall be presumed in the subsection, assumes that the goods must have been sold inside the State by the owner of the vehicle, if the driver or any person-in-charge of the vehicle has failed to deliver the transit pass to the officer at the check-post or the barrier near the place of exit from the State. This presumption is a rebuttal presumption as observed by the apex court in the case of Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381. The court in the said decision, while explaining the concept of rules of presumption and in particular, rebuttable presumption has observed (page 391): In our opinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion once again provides a deeming provision. The Legislature deems for the purposes of this section, that, in a case where a vehicle owned by a person is hired for transportation of goods by some other person, the hirer of the vehicle be deemed to be the owner of the vehicle. Keeping in view these provisions, we turn to consider the third question of law raised for our consideration: The learned counsel for the petitioner would contend that check-post officer was not justified in imposing tax and penalty on the petitioner, who is only a transporter by presuming that the goods carried in the petitioner's vehicle are sold in Karnataka, even though the assessing authorities of the consignor of the goods in their assessment orders have levied tax on the consignor of the very same goods covered by the transit passes in question by holding that they have sold the goods inside the State. Therefore, the order passed by the check-post officer in levying penalty on the transporter of the goods, on mere assumption, that the goods carried in the vehicle have been sold in the State of Karnataka is contrary to the fact-situation and therefore, without any authority of law. This lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter has sold the goods inside the State. It is his further case that the presumption under section 28AA(4) of the Act would arise only when there is no other material available with the department as to who has sold the goods inside the State and the department after thorough investigation has found that the consignor of the goods is responsible and therefore, the question of drawing any presumption under section 28AA(4) of the Act does not arise. Further, by referring to the law laid down by the apex court in Sodhi Transport Co's case [1986] 62 STC 381, has informed the check-post officer that if anybody has sold the goods which is being transported in his vehicle inside the State, it is the consignor and therefore, the presumption drawn that they (transporter of the goods) have sold the goods inside the State is not based on any material whatsoever. In our view, the assertion made in this regard by the transporter is relevant to answer the specific issue, which the learned counsel for the petitioner has posed for our consideration and therefore, the same is extracted and it is as under: Without prejudice to what is stated above, it is submitted that the goods transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sodhi Transport Co. [1986] 62 STC 381, wherein the apex court while considering the constitutional validity or otherwise of section 28B of the Uttar Pradesh Sales Tax Act, 1948, which is in pari materia with section 28AA of the Karnataka Sales Tax Act, 1957, has observed that the provisions contained in section 28B of the Act only require the authorities to raise a rebuttable presumption that the goods must have been sold in the State, if the transit pass is not handed over to the officer at the check-post near the place of exit from the State. This presumption can be rebutted by the transporter by producing reliable evidence that the goods have not been actually sold inside the State. It is only where the presumption is not successfully rebutted, the authorities concerned are required to rely upon the rule of presumption under the Act. In the reply filed to the show cause notice, the transporter, firstly, has brought to the notice of the check-post officer that he is only a transporter and he cannot be fastened with any liability under section 28AA(4) of the Act and further, the consignor of the goods has been provisionally assessed by the Assistant Commissioner of Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have considered the objections filed by the transporter in a proper perspective and it is only after recording a positive finding that the goods have been sold inside the State, though with the help of presumption which is rebuttable one, then only he could be assessed to tax under section 28AA(4) of the Act. In the present case, such an exercise has not been done by the check-post officer. At the cost of repetition, the checkpost officer proceeds to levy tax on the transporter of the vehicle mainly on the ground that the driver-in-charge of the vehicle had not surrendered the transit pass at the exit check-post. Whether a sale has taken place inside the State or not as contended by the transporter, some factual enquiry requires to be made by the check-post officer and it is only then the presumption could be applied, for the reason, section 28AA(4) of the Act provides a rebuttable presumption and not irrebuttable conclusive presumption. The learned counsel for the petitioner would submit that in view of the Explanation appended to section 28AA of the Act, the initiation of the proceedings to levy tax and penalty on the transporter of the vehicle is without jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the owner of the vehicle having obtained the transit pass fails to surrender the same as provided under sub-section (2), he is liable to pay penalty under sub-section (5) of section 28AA of the Act. The Legislature always uses appropriate language to manifest its intention. When the language is clear and unambiguous, there is no case for reading down the provision, so as to read the section as providing rebuttable presumption. Section 28AA(5) of the Act requires the delivery of transit pass to the officer-in-charge of the check-post or the barrier, before the exit of the goods vehicle from the State. If there is a failure to surrender the transit pass, then the consequences provided in sub-section (5) would follow. The failure contemplated under sub-section (5) of section 28AA of the Act is a failure to deliver the transit pass by the owner of the vehicle at a point of time before the vehicle crosses the border of the State. Thus exit of the goods vehicle from the State without surrendering the transit pass at the last check-post is the basis to invoke the provisions of sub-section (5) of section 28AA of the Act. This section is not concerned with the owner of the goods. It op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d through N. Vaddarahalli check-post at Mulbagal Taluk, Kolar District, and the duplicate copy which should have been surrendered at the last exit checkpost was received by the check-post officer, who had issued the transit pass by ordinary post with duplicate or forged seal of the exit check-post. With this material available on record, the check-post officer after a detailed verification and lot of correspondence with the check-post officer at the exit check-post, has given a finding on facts that the driver-in-charge of the goods vehicle, who had applied and received the transit pass has not surrendered the transit pass to any of the check-post officer at the last exit check-post. In view of this factual finding, the check-post officer has levied penalty under section 28AA(5) of the Act on the owner of the vehicle. This, in our view, is perfectly in accordance with the penal provision provided under the Act and therefore, we do not find any good reasons to interfere with the order so passed by the check-post officer. Now coming to the fourth issue, in our view, the same should not detain us for long. In this regard, the contention of the learned counsel for the petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the first appellate authority. Therefore, in our view, even if there is a minor procedural irregularity in not disposing of the cross-objections filed by the petitioner, it cannot be so fatal, which would warrant for setting aside the impugned order passed by the Appellate Tribunal. The learned counsel Sri G.K.V. Murthy, to sustain the fifth legal issue raised in the memorandum of appeal would submit, that it is the consignor, who had imported the goods into the State from a place outside the country and having taken delivery of the same and further having accounted in its books of account, had entrusted the same for transportation to its office at Pondicherry/Chennai on stock transfer basis to the petitioner and therefore, the ingredients which would warrant either to assess the transporter to tax under section 28AA(4) of the Act and to levy penalty under section 28AA(5) of the Act is absent and therefore, the order passed by the check-post officer which has been confirmed by the Karnataka Appellate Tribunal is void ab initio. The submission made in this regard, in our view, has no merit whatsoever. We say so, for the reason, it is the driver, who was in-charge of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals (Pvt.) Ltd., Mangalore. The representative of the consignor accompanied the goods vehicle. He only obtained the transit pass and it is his duty to surrender the transit pass at the transit check-post. This factual assertion is taken note of by the check-post officer and also by the Appellate Tribunal, which is the last fact-finding authority, while considering whether or not to impose penalty on the owner of the vehicle. On verification of the records, they have given a positive finding that it is not the representative of the consignor, who had made an application for issuance of transit pass, but it is the driver-in-charge of the vehicle, who had sought for issuance of transit pass and it was he who was statutorily obliged to have surrendered the transit pass at the exit check-post. Since that was not done, the vicarious liability is on the owner to pay penalty under sub-section (5) of section 28AA of the Act for contravention of the provisions of sub-section (2) of section 28AA of the Act. Before the checkpost officer, the petitioner could have firstly produced the documentary evidence by securing the same from the consignor to show that the goods that were transport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. It is for that person to produce the evidence by obtaining copies of the provisional assessment orders passed against the consignors or the consignees that the goods for which transit passes have been issued are actually taken outside the State. It is not expected of the check-post officer to collect evidence from various other authorities to sustain the show cause notice issued by him. The cardinal rule in this regard is, service of notice is a condition precedent for making an order either to assess or to levy penalty or interest, etc. The person against whom the show cause notice is issued is in law entitled to rebut the allegations made against him, if he so chooses, by producing any evidence which is in his possession. This would satisfy the requirement of notice and fair hearing. In view of this, in our view, the contention canvassed by the learned counsel for the petitioner that fair opportunity of hearing was not afforded to the petitioner before levying penalty cannot be accepted. In view of the above, the following: ORDER I. Revision petition is allowed in part. II. The impugned order passed by the check-post officer under section 28AA(4) of the Act date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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