TMI Blog2015 (9) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... trary or illegal. Constitutional validity of Section 60(4) and Notifications dated 4th July 2012 and 12th July 2012 – Held that:- Section 60 applies not only to goods in transit through State of Bihar, it applies to all goods which are brought in State of Bihar – Goods may have been brought for sale or use in State or goods may have been brought for passing through State – Evidently, Sections 60(3) and 60(4) Act, 2005 is invoked in case of goods which are believed to have been brought in State for sale or use in State, Article 304(b) of Constitution is not attracted – Therefore, challenge to constitutional validity of Section 60(4) rejected – Once statutory presumption of intention to sale or use of goods within State and of intention to avoid tax is raised, machinery prescribed for collection of tax is ancillary and incidental to "Taxes on sale or purchase of goods" under Entry 54 of List II of Schedule VII to Constitution – State Legislature is competent to raise legal presumption of intention to avoid tax and to legislate machinery to prevent tax evasion – Notifications have no bearing upon impugned actions of seizure of goods and vehicles/carriers and imposition of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/s and the consignee/s, and the places from where and to which the goods were carried. Such information is required to be filed in a statutory format. In the present time of electronic technology and digital records, the Government of Bihar has prescribed an electronically generated form called Suvidha‟. The driver of the vehicle/carrier or the person in charge of the goods is required to file Suvidha‟ at the point of entry in the state of Bihar. In all these cases it is not in dispute that at the relevant time the concerned driver had failed to produce the true and complete particulars as envisaged by Rule 40 of the Bihar Value Added Tax Rules, 2005 (hereinafter referred to as the Rules‟) and the Notifications issued thereunder. For the said failure the concerned officer - the Joint / Deputy / Assistant Commissioner of Commercial Taxes or the Commercial Taxes Officer present at the check post, in exercise of powers conferred by Section 60(4) read with Section 56(4) of the 2005 Act, seized the goods and the vehicle, lodged a criminal complaint against the owner of the goods and the vehicle and the driver of the concerned truck and imposed the penalty three tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the truck and the goods were seized by the authority at the check post on 26th November 2012. The F.I.R. was lodged for the alleged offence punishable under the 2005 Act and under Sections 415, 420, 406, 407, 409 and 120B IPC. The value added tax on the goods was assessed at ₹ 49,313.94 and the penalty of ₹ 1,47,942/-, three times the tax assessed, has been imposed by the Commercial Taxes Officer, Karamnasha Check Post. Pursuant to the said order, the Commercial Taxes Officer, Karamnasha Check Post, has on 1st December 2012 issued the demand notice for recovery of sum of ₹ 1,47,942/-. In CWJC No. 1804 of 2013, the vehicle involved is the truck bearing registration no. UP 23D-9632. The petitioner, the owner of the truck was transporting the goods of various consigners from its godown at Chikambarpur, U.P., to Ranchi in Jharkhand. On the way to Ranchi the truck had to pass through the State of Bihar. While entering the State of Bihar at Karamnasha Check Post on 26th November 2012, the truck driver was required to submit Suvidha‟, the computer generated declaration. The particulars entered in the Suvidha‟ submitted by the truck driver were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State of Gujarat. On the way, the truck had to pass through the State of Bihar. While entering the territory of the State of Bihar at Dobhi Check Post, Gaya, the driver of the truck was required to produce Suvidha‟, the computer generated declaration. The particulars entered into the Suvidha‟ produced by the driver were not true and complete. For incorrect/incomplete information provided to the authorities, on 20th February 2013 the truck and the goods were seized by the authority at the check post. The F.I.R. was lodged for the alleged offence punishable under the 2005 Act and under Sections 415, 420, 406, 407, 409 and 120B, IPC. Under order dated 22nd February 2013, the Commercial Taxes Officer, Integrated Check Post, Dobhi assessed the tax on the goods at ₹ 1,94,602/- and imposed the penalty of ₹ 5,83,808/-, three times the amount of tax assessed. In CWJC No. 13078 of 2013, the petitioner M/s Naviya Technologies, a partnership firm had agreed to send certain goods to a consignee in the State of Bihar. The consignment of the goods was transported from the State of Gujarat to the State of Bihar by the truck bearing registration no. GJ 08Z-8076. While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C No. 14167 of 2013, the petitioner M/s Shiva Transport Company claims to be the owner of the truck bearing registration no. PB 10 CZ-6584. In November 2012, the petitioner transported goods of a consigner in the State of West Bengal to a consignee in the State of Himachal Pradesh through the offending truck. On the way, the truck had to pass through the State of Bihar. The truck reached the State of Bihar at Dobhi Check Post in Gaya on 26th November 2012. At the Check Post, the truck driver was required to produce Suvidha‟, the computer generated declaration. The particulars entered in the Suvidha‟ produced by the driver were not true and complete. For incorrect/incomplete information provided to the authorities the truck and the goods were seized by the authority at the check post. The F.I.R. was lodged for the alleged offence punishable under the 2005 Act and under Sections 415, 420, 406, 407, 409 and 120B, IPC. Under his order dated 1st December 2012, the Commercial Taxes Officer, Dobhi Check Post assessed the value added tax on goods at ₹ 68,513/- and imposed penalty in the sum of ₹ 2,05,540/-, three times the amount of tax assessed. Pursuant to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment to set up check-posts and barriers at any place in the State. Sub-section (2) thereof enjoins every person transporting the goods to submit a correct and complete declaration in the form and manner prescribed. Sub- section (3) thereof empowers the concerned authority to intercept, detain and search any goods carrier. Clause (a) of sub-section (4) thereof empowers such authority to seize the goods and the vehicle or carrier. Clause (b) thereof empowers such authority, inter alia, to impose penalty and to confiscate the goods in the same manner as under Section 56 of the 2005 Act. The aforesaid Section 60 of the 2005 Act reads as under:- 60. Establishment of check-posts.- (1) The State Government may, by notification, set up and erect, in such manner as may be prescribed, check-posts and barriers at any place in the State with a view to preventing evasion of tax payable under this Act. (2) Every person transporting goods, other than those specified in Schedule I and subject to such conditions as may be prescribed shall, at any check-post or barrier, referred to in sub-section (1) and before crossing such check-post or barrier, file before such authority or officer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts.- (1) Where the State Government decides to set up a check-post, under section 60 at any place in this State, the location of such check- post shall be notified in the official Gazette. When a check-post is set up on a thoroughfare or road, barrier may be erected, across the road or thoroughfare, in the Form of a contrivance to enable traffic being intercepted, detained and searched. (2) No person shall transport across or beyond a check-post to any place outside the State of Bihar any goods notified under section 60 exceeding such quantity or value as may be specified in the notification, except after applying for grant of permission in Form D-VII in triplicate, before the officer incharge of the check post. (3) Upon receipt of such application, the said authority or officer, on being satisfied about the particulars furnished, shall grant his permission by countersigning the declarations and seal them with his official seal; two copies of the permission shall be returned to the person filing it after endorsing on one of these copies the particulars of the authority or officer to whom it shall be surrendered. (4) The driver of the vehicle carrying the goods or the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer exercising jurisdiction in respect of any of the Circles en route; or (iii) Any of the authorities exercising jurisdiction under section 86 in respect of any Bureau of Investigation en route. Explanation 2. - The electronic transaction identification number generated under this sub- rule shall be deemed to be declaration for the purposes of section 60 and section 62. (2) Sub-rule (3) and sub-rule (4) of rule 40 of the Bihar Value Added Tax Rules, 2005 shall be deleted. Learned Advocates Mr. R K Agrawal and Mr. Purnendu Singh have appeared for the writ petitioners. The challenge to the impugned action of seizure of the vehicles and the goods and the imposition of the penalty are common. According to the learned Advocates, the goods in question were carried from one State to the other amounting to inter-State transfer. The goods in question were, therefore, exigible to tax under the Central Sales Tax Act, 1956 and were not liable to tax in the State of Bihar. If the goods were not liable to tax in the State of Bihar, the State of Bihar cannot have the authority to seize the goods or the carriers or to impose penalty under the guise of the evasion of tax. The acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. vs. State of Assam (AIR 1961 SC 232); of Deputy Commercial Tax Officer, Madras vs. Sha Sukraj Peerajee (AIR 1968 SC 67); of Sodhi Transport Co. vs. State of U.P. [(1986) 2 SCC 486]; of State of Haryana v. Sant Lal [(1993) 4 SCC 380]; of Agricultural Market Committee vs. Shalimar Chemical Works Ltd.[(1997) 5 SCC 516]; of Pramod K Pankaj vs. State of Bihar [(2004) 3 SCC 723]; of Rajendra Agricultural University vs. Ashok Kumar Prasad [(2010) 1 SCC 730]; of Surinder Singh Brar vs. Union of India [(2013) 1 SCC 403]; of The Check Post Officer, Coimbatore vs. K P Abdulla Bros.[(1971) 27 STC-1 (SC)]; of M/s Sree Bahariji Mills Lrd. vs. State of Bihar Others [AIR 1983 (Patna) 311]; and of Ram Naresh Singh vs. Chairman, Bihar State Agriculture Produce Market Board [1985 BRLJ-92]. In support of his submissions, Mr. Purnendu Singh has relied upon the judgments of the Hon‟ble Supreme Court in the matters of Commissioner of Commercial Taxes, Board of Revenue, Madras vs. R S Jhaver (AIR 1968 SC 59); of The Check Post Officer, Coimbatore vs. K P Abdulla Brothers (AIR 1971 SC 792); of M/s Sodhi Transport Co. vs. State of U.P. (AIR 1986 SC 1099); of T Narasimhulu vs. State of And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y remedy of appeal before the higher forum. It is the appellate authority alone which could have meticulously examined the facts of the case and made the order keeping in view the emerging facts. This Court exercising power of judicial review under Article 226 of the Constitution will not enter into the niceties of the factual matrix to find out whether or not the disclosure made by the truck driver was true and complete, whether there was any material discrepancy and, whether or not on facts, the impugned order of seizure and penalty are justified. It is not in dispute in any of the writ petitions that the disclosure made by the driver was not true / complete. Section 60 of the 2005 Act, inter alia, empowers the State Government to establish the check posts and barriers with a view to preventing evasion of tax payable under the 2005 Act. Sub-section (2) of Section 60 enjoins the person transporting the goods (subject to exception) to submit the particulars in the required form and manner before he crosses the barrier. The submission made by Mr. Purnendu Singh that the truck concerned had not entered the territory of the Bihar State and that it was waiting outside the check post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion imposes bar upon the legislative power of the Union and the States from making any legislation with regard to trade and commerce. Thus the goods carried by the writ petitioners from one State to the other are not exigible to a tax or charges at the hands of the States through which the goods are carried. Nevertheless, the State of Bihar has enacted Section 60(4) of the 2005 Act so as to levy tax on such goods in the guise of imposition of penalty. Mr. Purnendu Singh has submitted that in case such a law were required to be made in public interest, the State could not have made such law without the previous sanction of the President. Admittedly, before enacting Section 60(4) of the 2005 Act sanction of the President is not obtained. Section 60(4) of the 2005 Act is violative of Article 304(b) of the Constitution. We are afraid we are unable to agree with the learned Advocates. It is evident that it is not the goods which are carried through the State of Bihar which are subjected to the penal action under Section 60(4) of the 2005 Act. Section 60 of the 2005 Act applies not only to the goods in transit through the State of Bihar, it applies to all goods which are brought in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny was, deemed to have been distributed as dividend amongst the shareholders as at the date of the general meeting , being the meeting at which the accounts for the year concerned were passed, and thereupon, the proportionate share of each shareholder shall be included in the total income of such shareholder for the purposes of assessing his total income. The Constitution Bench of the Hon‟ble Supreme Court headed by Hon‟ble Chief Justice B P Sinha held that Section 23A was enacted for preventing evasion of tax and that the Section was within Entry 54. This judgment was followed in the matter of Gursahai Saigal (AIR 1963 SC 1062). The matter of Gursahai Saigal arose from an order of assessment under the Indian Income-Tax Act, 1922. A similar challenge to Section 18A of the 1922 Act was the subject matter of consideration by the Hon‟ble Supreme Court. The Hon‟ble Court distinguished the provisions of a taxing statute those which are charging provisions, those which are procedural or which provide machinery and those which are enacted with a view to making substantive provisions workable. The Hon‟ble Court upheld the validity. In the matter of Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption and that the dealer or the person in-charge of the goods may rebut the said presumption by producing the evidence. The Hon‟ble Court held that the law made to prevent evasion of tax was ancillary or incidental within the purview of Entry 54 of List II of Schedule VII to the Constitution and that the said provisions were within the competence of State Legislature. The Hon‟ble Court further held, The levy of sales tax on goods which are held to have been sold inside the State cannot be considered as contravening Art. 301 of the Constitution. The restrictions imposed are not also shown to be unreasonable. They do not unduly hamper trade. On the other hand they are imposed in the public interest. The contentions based on Art. 301 and Art. 19(1)(g) of the Constitution are, therefore, without substance. In the matter of Harihar Prasad Debuka (AIR 1989 SC 1119) the challenge was against the prescription of forms under the Bihar Finance Act for declaration of particulars of goods carried on goods carrier for transporting of goods through the State of Bihar as violative of Articles 301, 304(b) and 19(1)(g) of the Constitution. The Patna High Court held that the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of The Check Post Officer, Coimbatore (AIR 1971 SC 792) the Constitution Bench of the Hon‟ble Court was called upon to examine the constitutional validity of power to seize and confiscate the goods and to levy penalty conferred by Section 42(3) of the Madras General Sales Tax Act (1 of 1959). The Hon‟ble Court upheld the view of the Madras High Court and held that such power was not incidental or ancillary to Entry 54 of List II of the Seventh Schedule to the Constitution. The State Legislature was, therefore, not competent to make such rules. In the matter of Sant Lal [1993(4) SCC 380] the subject matter of challenge was the power to impose penalty. The Haryana General Sales Tax Act, 1973 and the Rules made thereunder, enjoined the clearing or forwarding agent of the dealers to disclose certain information in respect of the goods and the consigner and the consignee and empowered the authorities to impose penalty in case of failure. The Hon‟ble Court set aside the concerned provisions and held that the clearing or forwarding agents were not the dealers. They were not liable to pay sales tax nor were they responsible for the evasion nor was there any reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree subject of course to the limitations and exceptions provided by the other Articles of Part XIII. That we think is the result of Article 301 read with the other Articles in Part XIII. The Hon‟ble Court further analyzed the requirements under Articles 302 and 304(b) of the Constitution. The Hon‟ble Court held that Article 304(b) requires not only that the law should be in the public interest and should have received previous sanction of the President but that the restrictions imposed by it should also be reasonable. The relevant provision was held to be a restriction in the form of taxation on the carriage or movement of goods, and we hold that such a restriction can be imposed by the State Legislature only if the relevant Act is passed in the manner prescribed by Article 304(b). The relevant provision was declared void as having been made in contravention of Article 304(b) of the Constitution. It is indeed a view expressed by the Constitutional Bench. We may however note that in the said judgment the Hon‟ble Supreme Court did not take notice of the judgment of the Constitutional Bench in the matter of Baldeo Singh (AIR 1961 SC 736) and in the matter of Gursa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this judgment has not noticed the earlier judgment in the matter of Atiabari Tea Company Limited (AIR 1961 SC 232), the judgment is, therefore, per incurium. In the matter of Bajaj Electricals Ltd. [(2009) 1 SCC 308], a somewhat similar matter of imposition of penalty for violation of the requirements under Section 78 of the Rajasthan Sales Tax Act, 1994 came up for consideration before the Hon‟ble Supreme Court. The High Court had held the action of imposition of penalty under Section 78(5) of the Rajasthan Act to be bad on the grounds that the presumption of intention to evade tax arising under Section 78(2) of the Rajasthan Act was rebuttable and any disclosure in the required form the authorities below were duty bound to examine the other materials to ascertain the intention to evade tax or the absence of such intention. In absence of mens rea no penalty under Section 78(5) of the Act could be imposed. The Hon‟ble Supreme Court did not approve the said judgment. The Court held that mens rea is not an essential ingredient for offence under Section 78(2) of the Rajasthan Act; the fact that the required form was duly signed without entering the particulars in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is an ancillary power necessary for the purpose of stopping evasion of tax open. We may note that apart from the aforesaid two judgments all along prior to 1971 and after 1971 till the date the judgment in the matter of Baldeo Singh has been followed by the various Benches of the Hon‟ble Supreme Court. The said judgment has, with aforesaid exception, ruled the country for more than fifty years. We will prefer to follow suit. In a nutshell, once a statutory presumption of intention to sale or use of goods within the State and of intention to avoid tax is raised, the machinery prescribed for collection of tax is ancillary and incidental to the Taxes on the sale or purchase of goods under Entry 54 of List II of Schedule VII to the Constitution. Considering the above judgments we have no doubt that the State Legislature is competent to raise legal presumption of intention to avoid tax and to legislate a machinery to prevent tax evasion. Section 93 of the 2005 Act empowers the State Government to make rules to carry out the purposes of the Act. It is true that the said Section does not empower the State Government to delegate its rule making power to the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the value of the goods that can be transported across a check post without the Transaction, Identification Number (TIN). The Commissioner of Commercial Taxes has been empowered to notify the particulars which would be required to be entered into the system, etc. In exercise of power conferred by Rule 40(2) of the Rules, the Commissioner of Commercial Taxes has issued notification dated 11th July 2012 to make the said Sub-rule (2) of Rule 40 effective from 16th July 2012. We see no substance in the challenge to the said Rule 40 or the Notification dated 11th July 2012. The powers conferred upon the Commissioner or the other authorities appointed under the 2005 Act cannot be said to be the delegation of power without the authority, nor does it amount to excessive delegation. The contention that sub-rule (2) of Rule 40 of the Rules offends Section 93(zzo) is not tenable. Clause (zzo) of Sub- section (2) thereof provides for the manner of obtaining transit permission under Sub-section (11) of Section 62. The power conferred upon the Commissioner of Commercial Taxes is not that of rule making power of the State Government under Section 93(2) (zzo) of the 2005 Act. In the matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s notifying rule or notification, it necessarily means notification in the Official Gazette. Even in absence of a specific provision in the Act or the Rules, the aforesaid Section 28 requires publication of the notification in the Official Gazette. We, therefore, hold that the Notification issued by the Commissioner of Commercial Taxes in exercise of power conferred by sub-rule (2) of Rule 40 of the Rules is required to be compulsorily published in the Official Gazette. Such Notification cannot be made effective unless and until it is published in the Official Gazette. The said Notifications read as under: A close perusal of the aforesaid Notifications would disclose that the said Notifications are really the instructions in respect of generation of Suvidha‟. In other words, they are operational instructions and are not substantive or procedural provisions. In all cases before us, the drivers/person in charge did generate Suvidha‟ and filed before the authorities at the check- post. The question of effectiveness of the said Notifications, therefore, pales into insignificance. The said Notifications have no bearing upon the impugned actions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shocks his conscience. In the absence therefore of any law, rule, regulation or custom, we hold that a law cannot come into being in this way. Promulgation or publication of some reasonable sort is essential. In the matter of Bangalore Woollen, Cotton Silk Mills Co. (AIR 1962 SC 562) the matter at issue was the levy of octroi under the Bangalore Municipal Corporation Act. Admittedly, the resolution of intention to impose tax (octroi) was published in the local newspapers but not in the Official Gazette. The Hon‟ble Court relied on a saving clause under Section 38 of the Act which provided : S. 38(1). No act done, or proceeding taken under this Act shall be questioned merely on the ground - (a) ........ ............. (b) of any defect or irregularity in such act or proceeding, not affecting the merits of the case. The Court held that the language of Section 38(1)(b) was clear and unambiguous. It validated any defect in any act or proceeding and made it immune if it did not affect the merits of the case. The resolution in question having been given wide publicity in the newspapers and having been communicated to those who are affected, the Court held that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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