State
of Rajasthan & Anr Vs. M/S D.P. Metals
[2001] Insc 526 (4
October 2001)
B.N.
Kirpal, N. Santosh Hegde & B.N. Agrawal Kirpal, J.
WITH
C.A. Nos. 5086, 5087, 5088, 5763, 5764 of 2000 and 1321, 1736, 1737, 1738,
1739, 1740, 1741, 1742, 1743, 1744, 1745, 1746, 1747, 1748, 1749, 1750, 1751,
1752, 1753, 1754, 1755, 1756, 1757, 1758, 1759, 2893, 2557, 3424, 3425, 3426,
3427, 3697, 4033 of 2001.
The
State of Rajasthan has filed these appeals against the
decision of the High Court which had, while allowing the Writ Petition of the
respondents, held that Section 78(5) of the Rajasthan Sales Tax Act, 1994 was
unconstitutional and ultra vires.
In
order to examine the issues arising in this case, we may briefly refer to the
facts of the case of M/s D.P. Metals. M/s D.P. Metals carries on the business
of manufacturing stainless steel sheets and had been registered under the
provisions of the Rajasthan Sales Tax Act and the Central Sales Tax Act. On 22nd January, 1997 a truck was seized by the Assistant
Commercial Taxes Officer, Jodhpur and as
the same was found not to be carrying the declaration Form ST 18A, a show cause notice was issued
to M/s D.P. Metals. After hearing, a penalty of Rs. 63,200/- was levied under
Section 78(5) of the 1994 Act.
M/s
D.P. Metals and other dealers, against whom similar action has been taken,
filed applications before the Rajasthan Taxation Tribunal, Jaipur, inter alia,
impugning the provisions of Section 78 (5) of the 1994 Act and claimed
consequential relief of the quashing of the penalty order.
Pursuant
to the abolition of the Taxation Tribunal, the applications were transferred to
the Rajasthan High Court and they were regarded as writ petitions. The
contentions on behalf of the respondents before the High Court were that
Section 78 (5) was ultra vires being beyond the legislative competence of the
State and also on the ground of being excessive, arbitrary and unreasonable
and, therefore, violative of Articles 14, 19(1)(g), 301 and 304 of the
Constitution. The Division Bench of the High Court in relation to the validity
of Section 78(5) came to the following conclusion:-
(i)
the parent provision of the Section 78 as far as it requires carrying the
documents mentioned under sub-section (2) by the transporter whose position
ordinarily does not go beyond a witness about goods carried through them, for
the purpose of divulging detailed information about the goods carried out by
the transporter and about the consignor and the consignee itself at the check
post or barrier to any authorised officer under sec. 78 as part of machinery
provision for collecting evidence about goods coming in or going out of or
moving within the State, can be considered as intended to prevent and check
evasion and avoidance of tax and in aid of making effective the levy which has
arisen or likely to arise within the State, are provisions incidental and
ancillary in aid of main subject levy and collection of sales tax.
(ii)
Provision as to notice before imposing penalty is not an empty formality for
imposing penalty, for non production of production of incomplete documents, but
is intended to give an effective opportunity of hearing to show that no penalty
is at all leviable. If it is reasonably established that such default is not
with any intention to evade or avoid tax, but is bonafide default, the breach
for which it is not compulsory to impose penalty. Such question has to be
determined in each case on its own facts and circumstances.
(iii)
No opinion is expressed on the validity of requirement to carry declarations in
form ST 18 A or ST 18 AA with goods, in view of no challenge made in the
petitions.
(iv)
The provisions for carrying declaration of the importer in the Form No. ST 18-A
and 18 AA by the transporter or carrier is not treated to be mandatorily
required and it is held that the production of such declaration later on during
the course of enquiry even by the importer is substantial compliance of the
provision.
(v)
Lastly, the penalty under section 78(5) linked with value of goods equal to 30%
thereof imposable on person incharge of the goods in transit who is not owner
of the goods and who is also not a dealer in the goods for breach of obligation
of divulging information and particulars relating to goods in his charge and
the consignor and the consignee is highly unreasonable having no reasonable and
proximate nexus with the obligation cast on transporter and the object of the
provision, the same, therefore, is unconstitutional, (Santlals case).
(vi)
However a reasonable penalty is imposable on transporter as a consequence for
breach of obligation to divulge such information truly and faithfully which is
in his possession and can reasonably be required of them to obtain from other
sources while booking goods for transport. Until any specific provision for levy
of tax is enacted by the legislature, he may be subjected to penalty as
envisaged under Section 68 of the Act.
The
High Court then held Section 78(5) of the Act to be unconstitutional and ultra vires.
In
these appeals, it was contended by learned counsel for the appellants that the
High Court erred in coming to the conclusion that Section 78 (5) was ultra vires.
It was submitted that the power contained in Section 78 (5) was incidental to
the power of levy of sales tax and was within the legislative competence of the
State under Entry 54 of List II of the Constitution. It was submitted that
Rajasthan as well as other States had enacted provisions in the Sales Tax Acts
with a view to check evasion of taxes by transporters who were found carrying
goods with fake bilties, incomplete documents and under suspicious names.
Similar provisions had been upheld by this Court and, therefore, the decision
of the High Court is not correct.
Mr.
Manish Singhvi, counsel appearing for the respondents, submitted that the penalty
sought to be imposed under Section 78 (5) had no nexus with the tax evaded. The
effect of this provision, it was contended, was that even when there was total
absence of mens rea and the breach is unintentional and completely bona fide
still an innocent transporter can be subjected to penalty under Section 78 (5)
of the 1994 Act. It was submitted that Section 78 (5) was analogous to Section
38 of the Haryana General Sales Tax Act, 1973 which had been held to be ultra vires
by this Court in State of Haryana and
Others vs. Sant Lal and Another . It was urged that the breach of obligation of
carrying the documents over which the transporter may have no control cannot be
attributed to him and levy of penalty @ 30% merely on account of such breach is
harsh and oppressive.
Penalty
under Section 78 (5) could not be regarded as being linked with evasion of tax.
It was further contended that the only way in which the validity of Section
78(5) can be upheld is to read into it the element of mens rea as a precondition
for imposition of penalty and mere technical breach without any mens rea should
not by itself invite penalty under Section 78 (5). While referring to a
decision in the case of The Check Post Officer and Others vs. K.P. Abdulla and
Bros. it was submitted even in cases like carrying personal goods for
consumption penalty under Section 78 (5) would be leviable because of alleged
breach of Section 78 (2) even though sale of goods is not involved. Section 78
(5), it was submitted, contained no guidelines saving such bonafide cases from
the vice of Section 78 (5) and, therefore, was violative of Article 14 of the
Constitution.
The
Rajasthan Sales Tax Act, 1954 was a precursor to the 1994 Act. In the 1954 Act,
Section 22A(7) was the provision which enabled the appellant to impose penalty
in the event of the person in charge of the goods not possessing or producing
mandatory documents or if a false declaration was made. Section 22A (7) of the
1954 Act reads as follows:
(7)(a)
The Officer incharge of the check-post or barrier or any other officer not
below the rank of an Assistant Commercial Taxes Officer, empowered in this
behalf may, after giving the owner or person incharge of the goods a reasonable
opportunity of being heard and after holding such further enquiry as he may
deem fit, impose on him for possession of goods not covered by goods vehicle
record, and other documents prescribed under sub-section (3) or for submission
of false declaration or documents a penalty (equal to five times of the rate of
tax notified under section 5 of the Act, for such goods or) (30%) of the value
of such goods, as may be determined by such officer (whichever is less)
(Provided that where the goods are being carried without proper documents as
required by sub-section (3) or with any false declaration or statements and the
owner or the incharge or the driver of the vehicle, boat, or animal carrying
such goods is found in collusion for such carrying of goods, the vehicle, boat
or animal shall also be seized by the officer empowered under sub-section (7),
and such officer, after affording an opportunity of being heard to such owner, incharge
or driver may impose a penalty not exceeding 30% of the value of the goods
carried and shall release the vehicle, boat or animal on the payment of the
said penalty or on furnishing such security in such form as prescribed under
clause (b) of sub-section (7):
Provided
further that when an owner, incharge or driver of a vehicle, boat or animal is
found guilty second time of the offence mentioned in the preceding proviso, he
shall be liable to a maximum penalty as mentioned in the preceding proviso and
the vehicle, boat or animal carrying the goods may be kept seized and detained
for a period not exceeding 30 days after the date of the payment of the penalty
or furnishing of the security.
(Provided
also that where a transporter is found to be in collusion with a trader to
avoid or evade tax during the course of movement of the goods through his
vehicle, such vehicle may, after an opportunity of being heard has been
afforded, be confiscated by the Commercial Taxes Officer of the area in whose
jurisdiction the case was detected with the prior approval in writing of the
Deputy Commissioner (Administration) having jurisdiction and in case of
confiscation of the vehicle no penalty shall be imposed in the preceding first
proviso)
(b)
Such officer may release any of the goods seized under sub- section (5) or
sub-section (6) on payment of the penalty under clause (a) or on furnishing
such security in such form as may be prescribed for the payment thereof, as he
may consider necessary.
[(c)
Such officer may, for sufficient reasons, release any of the goods seized as
aforesaid even before proceeding under clause (a) or during the course of
proceeding under that clause, on furnishing of security of an amount equal to
the estimated value of the goods to be released if he considers it necessary so
to release the goods.] With the repeal of the 1954 Act, a provision similar to
Section 22A (7) of the old Act was incorporated as Section 78(5). It will,
however, be appropriate to refer to Section 78. Section 78 provides for
establishment of check-post and inspection of goods while in movement. The said
section, along with incorporation of sub-sections (11) and (12) in 1999 reads
as follows:
78.
Establishment of check-post and inspection of goods while in movement.- (1) The
Commissioner may, with a view to prevent or check avoidance or evasion of tax,
by notification in the Official Gazette, direct the setting up of a check-post
at such place and for such period as may be specified in the notification, and
every officer or official who exercises his powers and discharges his duties at
such check-post by way of inspection of documents produced and goods being
moved, shall be its Incharge.
(2)
The driver or the person incharge of a vehicle or carrier or of goods in
movement shall-
(a) carry
with him a goods vehicle record including challans and bilties, bills of sale
or despatch memos and prescribed declaration forms;
(b) stop
the vehicle or carrier at every check-post set up under sub-section (1);
(c) produce
all the documents including prescribed declaration forms relating to the goods
before the Incharge of the check- post;
(d) give
all the information in his possession relating to the goods; and
(e) allow
the inspection of the goods by the Incharge of the check- post or any other
person authorised by such Incharge.
Explanation-For the purposes of this Chapter-
(i) vehicle
or carrier shall include any means of transportation including an animal to
carry goods from one point to another point;
(ii) goods
shall include animals also, and
(iii) goods
in movement shall means-
(a) the
goods which are in the possession or control of a transporting agency or person
or other such bailee;
(b) the
goods which are being carried in a vehicle or carrier belonging to the owner of
such goods; and
(c) the
goods which are being carried by a person.
(3)
Where any goods are in movement within the territory of the State of Rajasthan, an officer empowered by the State
Government in this behalf may stop the vehicle or the carrier or the person
carrying such goods, for inspection, at any place within his jurisdiction and
the provisions of sub-section (2) shall mutatis mutandis apply.
(4)
Where any goods in movement, other than exempted goods, are without documents,
or are not supported by documents as referred to in sub-section (2), or
documents produced appear false or forged, the Incharge of the check-post or
the officer empowered under sub-section (3), may
(a) direct
the driver or the person incharge of the vehicle or carrier or of the goods not
to part with the goods in any manner including by retransporting or rebooking,
till a verification is done or an enquiry is made, which shall not take more than
seven days;
(b) seize
the goods for reasons to be recorded in writing and shall give a receipt of the
goods to the person from whose possession or control they are seized;
(c) release
the goods seized in clause (b) to the owner of the good or to anybody else duly
authorised by such owner, during the course of the proceeding if the adequate
security of the amount equal to the estimated value of the goods is furnished.
(5)
The Incharge of the check-post or the officer empowered under sub-section (3),
after having given the person incharge 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 percent of the
value of such goods.
(6)
During the pendency of the proceeding under sub-section (5), if anybody appears
before the Incharge of the check-post or the officer empowered under
sub-section (3) and prays for being impleaded as a party to the case on the
ground of involvement of his interest therein, the said incharge or the officer
on being satisfied may permit him to be impleaded as a party to the case; and
thereafter, all the provisions of this section shall mutatis mutandis apply to
him.
(7)
The incharge of the check-post or the officer empowered under sub-section (3)
may release the goods to the owner of the goods or to anybody else duly authorised
by such owner, if seized and not already released under clause (c) of
sub-section (4), on payment of the penalty imposed under sub-section (5) or on
furnishing such security for the payment thereof, as such incharge or officer
may consider necessary.
(8)
Where the driver or the person incharge of the vehicle or the carrier is found
guilty for violation of the provisions of sub-section (2), subject to the
provisions of sub-section (10), the incharge of the check-post or the officer empowered
under sub-section (3) may detain such vehicle or carrier and after affording an
opportunity of being heard to such driver or person incharge of the vehicle or
the carrier, may impose a penalty on him as provided in sub-section (5).
(9)
The incharge of the check-post or the officer empowered under sub-section (3)
may release the vehicle or the carrier on the payment of the amount of penalty
imposed under sub-section (8) or on furnishing such security as may be directed
by such Incharge or Officer.
(10)
Where a transporter, while transporting goods, is found to be in collusion with
a trader to avoid or evade tax, the Incharge of the check-post or the officer
empowered under sub-section (3) shall detain the vehicle or carrier of such
transporter and after affording him an opportunity of being heard and with the
prior approval in writing of the Deputy Commissioner (Administration) having
jurisdiction, may confiscate such vehicle or carrier.
(11)
If a transporter fails to give information as required from him under clause
(d) of sub-section (2) about the consignor, consignee or the goods within such
time as may be specified or transports the goods with forged documents, besides
imposing the penalty under sub-section (5), it shall be presumed that the goods
so transported have been sold in the State of Rajasthan by him and he shall be
deemed to be a dealer for those goods under this Act.
(12)
The provisions of this Act shall, for the purpose of levy, collection and
assessment of tax, determination of interest, payment and recovery of tax and
interest, appeal, review or revision, apply to the transporter deemed to be a
dealer under sub-section (11).
The
scheme of Section 78 is that sub-section (1) authorises the Commissioner to set
up check-posts with a view to prevent or check avoidance or evasion of tax.
These check-posts are to be set up by issuance of a notification in that behalf
and every officer appointed at the check-post shall be the in charge of the
check-post.
Sub-section
(2) of Section 78 imposes an obligation on
(a) driver;
or
(b) person
in charge of a vehicle or carrier (compendiously referred to as the person in
charge of the vehicle) and
(c) person
in charge of the goods in movement. Persons so named in sub-section (2) then
have an obligation to comply with sub-clauses (a) to (e) of Section 78(2). Such
a person under Section 78(2)(a) is required to carry with him (a) goods vehicle
record including challans and bilties;
(b) bills
of sale or despatch memos and (c) prescribed declaration forms.
Sub-section
(3) of Section 78 permits an officer empowered by the State Government to stop
the vehicle or the carrier or the person for inspection of the goods in
movement within the territory of the State of Rajasthan. In case of goods, other than exempted goods, which are in
movement are found to be without documents or are not supported by documents
referred to in Sub-section (2) or the documents produced are false or forged,
then under Section 78(4) the in charge of the check-post or the empowered officer
may direct non- parting of the goods till the verification is done or an
enquiry made or seize the goods after recording reasons for doing so or release
the seized goods to the owner or anybody authorised by him if adequate security
of the amount equal to the estimated value of the goods is furnished.
Sub-section
(5) enables the levy of penalty equal to 30% of the value of the goods being
imposed for possession or movement of goods only if there is violation of
clause (a) of sub-section (2) or for submission of false or forged documents or
declaration. Such penalty is to be levied only after giving a reasonable
opportunity of being heard and holding such enquiry as the in charge officer
empowered may deem fit. During the pendency of the enquiry a person having
interest therein can get himself impleaded under sub-section (6). On payment of
penalty imposed under sub-section (5) or on furnishing security for payment
thereof, goods can be released under sub-section (7). As sub-section (5)
expressly contemplates giving a hearing to the person incharge of the goods
before imposing penalty this means that action under Section 78(5) can only be
taken on the person incharge of the goods. He may, in a given case, be the
driver or any other person, if any, accompanying the goods as the incharge
thereof.
Whereas
movement of goods in violation of sub-section (2) (a) attract the provisions of
sub-section 5 in respect of vehicle or carrier which is found guilty or
violating the provisions of sub-section (2) of Section 78, Sub-section (8)
allows the detention of such vehicle or carrier. Penalty as provided under
sub-section (5) can be imposed after hearing the driver or the person in charge
of the vehicle.
Release
of the vehicle is provided for by sub-section (9) and if the transporter is
found to be guilty of collusion with the trader to avoid or evade tax, power is
given under sub-section (10) for confiscation of such vehicle or carrier.
In
K.P. Abdullas case (supra) this Court considered the validity of Section 42 (3)
of the Madras General Sales Tax Act, 1959 which gave the power to the officer
in charge of the check-post or barrier or any other duly authorised officer to
seize and confiscate the goods which were not covered by the documents
specified therein. It was held that the power to confiscate the goods carried
in a vehicle cannot be said to be fairly and reasonably comprehended in the
power to legislate under Entry 54 of List II in respect of taxes on sale or
purchase of goods. The reason for this conclusion was that sub- section (3)
assumed all goods carried in the vehicle as been those which had been sold
within the State and authorised the check-post officer to seize them unless the
specified documents were produced at the check-post or the barrier. A provision
so enacted on the assumption that goods carried in a vehicle from one State to
another must be presumed to have been transported after sale within the State
was held to be unwarranted and, therefore, the power to seize and confiscate
was struck down and was held not to be ancillary or incidental with the power
to legislate for levy of sales tax.
The
aforesaid decision can be of little assistance because the provisions of
Section 78(5) are radically different from Section 42(3) of the Madras Act with
which this Court was concerned in K.P. Abdullas case (supra). Section 78(5)
does not contain any power of confiscation of goods and the levy of penalty is
for carrying the goods or for submitting false or forged documents or
declaration. The Madras Act, on the other hand contemplated seizure and
confiscation of goods if they were transported without proper documentation.
In Sodhi
Transport Co. and Others vs. State of U.P. and Others this Court was required
to adjudicate upon the validity of Section 28-B of the U.P. Sales Tax Act, 1948
and U.P. Sales Tax Rules, 1948. Section 28 of the U.P. Act contemplated
establishment of check-posts and barriers while Section 28-B made a provision
for the procedure to be followed by persons who intend to transport goods by
road into the State of U.P. from places outside the State but for the purpose
of transporting them to places situated outside that State. A vehicle at the
time of entry was required under Rule 87 to obtain transit pass which was to be
delivered to the officer in charge of the check-post or barrier before the exit
from the State. If the driver or the person in charge failed to do so Section
28-B presumed that the goods carried thereby had been sold within the State by
the owner or the person in charge of the vehicle and all the liabilities under
the Act regarding the levy of sales tax etc. were to arise. While analysing the
provisions this Court held that the presumption under Section 28-B was a rebuttable
one and if it was not rebutted it was to be presumed that the goods had been
sold in the State of U.P. While upholding the validity of Section 28-B and Rule
87 it was held that these were machinery provisions, which did not levy any
charge by themselves, but were enacted to ensure that there was no evasion of
tax. It was noticed that these provisions are enacted to make the law workable
and to prevent evasion. Such provisions fall within the ambit and scope of the
power to levy the tax itself. Thus it was by reference to Entry 54 of List II
that the validity of the impugned provisions were upheld.
In Delite
Carriers (Regd.) vs. State of Haryana and Others validity of Section 37 of the Haryana
General Sales Tax Act, 1973 was challenged on the ground of lack of legislative
competence. The said Section 37 reads as follows:
37.
Establishment of check-post or barriers and inspection of goods in transit.-
(1) If with a view to preventing or checking evasion of tax under this Act in
any place or places in the State, the State Government, considers it necessary
so to do, it may, by notification direct the establishment of a check-post or
the erection of a barrier or both, at such place or places as may be notified.
(2)
The owner or person in charge of the goods and, when the goods are carried by a
goods carrier, the driver or any other person in charge of the goods carrier,
shall carry with him a goods carrier record, a trip sheet or log-book, as the
case may be, along with a bill of sale in respect of the goods meant for the
purpose of trade and are carried by him or in the goods carrier and produce the
same before an officer-in-charge of a check-post or barrier or any officer of
the department not below the rank of an Assistant Excise and Taxation Officer
or such other officer, as the State Government may, by notification, appoint,
for checking the goods carrier at any place.
(3) At
every check-post or barrier or at any other place, when so required by any
officer referred to in sub-section (2) in this behalf, the owner or person in
charge of the goods shall stop and the driver or any other person in charge of
the goods carrier, entering or leaving the limits of the State, shall stop the
goods carrier and keep it stationary, as long as may reasonably be necessary,
and allow the officer-in-charge of the check-post or barrier, or the officer as
aforesaid to examine the goods carried by him or in the goods carrier, by
breaking open the package or packages, if necessary, and inspect all records
relating to the goods carried which are in the possession of such owner or
person in charge of the goods or the driver or other person in charge of the
goods carrier, who shall also furnish such other information, as may be
required by the aforesaid officer, who, if considered necessary, may also
search the goods carrier and the driver or other person in charge of the goods
carrier or of the goods.
(4)
The owner or person in charge of the goods or goods carrier, entering or
leaving the limits of the State, shall furnish in duplicate a declaration
containing such particulars, as may be prescribed, of the goods carried by him
or in such carrier, as the case may be, before the officer-in-charge of the
check-post or barrier and shall produce the copy of the said declaration duly
verified and returned to him by the officer-in-charge of the check-post or barrier
before any other officer as mentioned in sub-section (2).
Where
it is contended by the owner of the goods that the goods were not sold within
the State after their import and were either consumed or exported by him or
were sold in the course of inter- State trade or commerce or in the course of
export out of the territory of India, the Assessing Authority may call for such
other information and documents as he thinks fit:
Provided
that where the owner or person in charge of the goods or the driver or the
person in charge of the goods carrier bound for any place outside the State
passes through the State, such owner or person in charge of the goods or the
driver or other person in charge of such carrier shall furnish, in duplicate,
to the officer-in- charge of the check-post or barrier of his entry into the
State, a declaration in the prescribed form and obtain from him a copy thereof
duly verified. The owner or person in charge of the goods carrier or the driver
or other person in charge of the goods carrier shall deliver within twenty-four
hours the said copy to the officer- in-charge of the check-post or barrier at
the point of his exit from the State, failing which he shall be liable to pay a
penalty, to be imposed by the officer-in-charge of the check-post or barrier of
the entry, not exceeding two thousand rupees or twenty per centum of the value
of the goods, whichever is greater:
Provided
further that no penalty shall be imposed unless the person concerned has been
given a reasonable opportunity of being heard:
Provided
further that where the owner or person in charge of the goods or the driver or
other person in charge of the goods or carrier bound for any place inside the
State has to pass through another State, such owner or person or the driver or
other person shall furnish, in duplicate, to the officer-in-charge of the
check-post or barrier of his exit from the State, a declaration in the
prescribed form and obtain from him a copy thereof duly verified and shall
deliver the same to the officer-in-charge of the check-post or barrier of his
entry into the State, within four hours of his exit from the previous barrier
or check-post in the State, failing which he shall be liable to pay a penalty
to be imposed by the officer-in- charge of the check-post or barrier of his
entry, not exceeding two thousand rupees or twenty per centum of the value of
the goods, whichever is greater, unless he explains the time taken in excess to
the satisfaction of the officer-in-charge of the entry barrier or check-post.
(5) If
the officer-in-charge of the check-post or barrier or other officer as
mentioned in sub-section (2) has reasons to suspect that the goods under
transport are not covered by proper and genuine documents as mentioned in
sub-section (2) or sub-section (4), as the case may be or that the person
transporting the goods is attempting to evade payment of the tax due under this
Act, he may, for reasons to be recorded in writing, and after hearing the said
person, order the unloading and detention of the goods and shall allow the same
to be transported only on the owner of the goods, or his representative or the
driver or other person in charge of the goods carrier on behalf of the owner of
the goods, furnishing to his satisfaction a security, in the prescribed form
and manner, for an amount not less than ten per centum and not more than
twenty-five per centum of the value of the goods:
Provided
that such officer may, if he deems fit, having regard to the nature of the
carrier or the goods and other relevant matters, allow such goods to be
transported, on the owner of the goods or his representative or the driver or
other person in charge of the goods carrier, executing, in a prescribed manner,
a bond with or without sureties for securing the amount due as security:
Provided
further that where any goods are detained, a report shall be made immediately
and in any case within twenty-four hours of the detention of the goods by the
officer detaining the goods to the officer-in-charge of the district seeking
the latters permission for the detention of the goods for a period exceeding
twenty-four hours as and when so required and if no intimation to the contrary
is received from the latter, the former may assume that his proposal has been
accepted.
(6)
The officer detaining the goods shall record the statement, if any, given by
the owner of the goods or his representative or the driver or other person in
charge of the goods carrier and shall require him to produce proper and genuine
documents as referred to in sub-section (2) or sub-section (4), as the case may
be. If, after the enquiry, such officer finds that there has been an attempt to
evade the tax due under this Act, he shall, by order, impose on the owner of
the goods and in case the owner is not forthcoming or his identity is not
disclosed by the person in charge of the goods or the driver or person in
charge of the goods carrier, in which goods are being carried, on the person in
charge of the goods or the goods carrier or the driver, a penalty of not less
than ten per cent and not more than twenty-five per cent of the value of the
goods, and in case he finds otherwise, he shall order the release of the goods:
Provided
that no penalty shall be imposed unless the owner of the goods or his
representative or person in charge of the goods or the goods carrier or the
driver has been given a reasonable opportunity of being heard.
(7) If
the owner of the goods or his representative or the driver or other person in
charge of the goods carrier does not furnish security or execute the bond as
required by sub-section (5) within ten days from the date of detaining the
goods or goods carrier, the officer referred to in that sub-section may order
further detention of the goods, and in the event of the owner of the goods not
paying the penalty imposed under sub-section (6) within twenty days from the
date of the order imposing the penalty, the goods detained shall be liable to
be sold for the realisation of the penalty in the manner provided in
sub-section (9).
(8)
When any goods are detained under sub-section (7), the officer detaining the
goods shall issue to the owner of the goods, if present or, if the owner of the
goods is not present, to his representative or the driver or other person in
charge of the goods carrier, a receipt specifying the description and quantity
of the goods so detained and obtain an acknowledgement from such person or, if
such person refuses to give an acknowledgement, record the fact of refusal in
the presence of two witnesses.
(9)
The goods detained under sub-section (7) shall be sold, by the officer who
imposed the penalty, by public auction in the manner prescribed, and the sale
proceeds shall be deposited in the Government treasury.
(10)
If the goods detained are of a perishable nature, or subject to speedy and
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 barrier or any
other officer empowered under sub- section (2), as the case may be, shall
immediately sell such goods or otherwise dispose them of and deposit the sale
proceeds of such goods, or the amount obtained by the disposal of such goods
otherwise than by way of sale, in the Government treasury.
(11)
If the order of imposition of penalty under sub-section (6) or of detention of
goods under sub-section (7) is in the meantime set aside or modified in appeal
or other proceedings, the officer detaining the goods and imposing the penalty,
as the case may be, shall also pass consequential orders for giving effect to
the order in such appeal or other proceedings, as the case may be.
(12)
Where the detained goods are sold or otherwise disposed of under this section,
the owner thereof shall be liable to pay the expenses and other incidental
charges incurred in detaining and disposing of the same.
(13)
If the sale proceeds of any goods sold or the amount obtained on the disposal
of any goods otherwise than by way of sale under the provisions hereinbefore
contained exceeds the penalty imposed in respect of such goods, such excess
amount after deducting the expenses, and incidental charges referred to in
sub-section (12) shall be returned by the officer who conducted the sale or
otherwise disposed of the goods, to the owner of the goods.
(14)
At every station of transport of goods, bus stand or any other station or place
of loading or unloading of goods, other than a post office, when so required by
the Commissioner or any other person appointed to assist him under sub-section
(1) of section 3, the owner or person in charge of the goods or the driver or
other person in charge of the goods carrier shall produce for examination
transport receipts and all other documents and account books concerning the
goods carried, transported, loaded, unloaded, consigned or received for transport,
to be maintained by him in the prescribed manner and the Commissioner or the
person so appointed shall have, for the purpose of examining that such
transport receipts and other documents and account books are in respect of the
goods carried, transported, loaded, unloaded or consigned or received for
transport, the power to break open any package or packages of such goods. If
the Commissioner or the person so appointed is satisfied that it is necessary
for the purposes of investigation or verification, he may seize the transport
receipts, documents or account books so produced for examination or found lying
at such a station of transport of goods, bus stand or any other station or
place of loading or unloading of goods. The Officer seizing the transport
receipts, documents or account books shall forthwith grant a receipt for the
same and shall return to the person from whose custody these were seized after
examination or completion of investigation or verification within a period of
sixty days. Where the transport receipts, documents or account books so seized
are required to be retained beyond the aforesaid period of sixty days, the
authority so retaining them shall record the reasons in writing and shall
obtain the approval of the Commissioner for so doing.
(15)
Except in accordance with such conditions, as may be prescribed, with a view to
ensuring that there is no evasion of tax imposed by or under this Act,- (a) no
driver or person in charge of a goods carrier or any person in charge of a
place of loading or unloading of goods, other than a post office, shall accept
any consignment of such goods for transport or give delivery of any consignment
of such goods, other than personal luggage of goods for personal consumption;
(b) no
dealer or any person including a carrier of goods acting on behalf of a dealer,
shall take delivery of, or transport from any station of transport of goods,
bus stand or any other station or place, of loading or unloading of goods,
airport or any other place, whether of similar nature or otherwise other than a
post office, any consignment of goods referred to above.
Emphasis
added Following the decision in Sodhi Transport Companys case (supra) this
Court in Delite Carriers case held as follows:
We
have explained in Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381,
decided on March 20, 1986, the object of establishing check-posts and
introducing provisions in the sales tax law of a State which would facilitate
inspection of goods which are carried from one State to another through a third
State. In the above-mentioned decision we have upheld the provisions of section
28-B of the U.P. Sales Tax Act, 1948 and the rules made thereunder. For the
same reasons we uphold the provisions of section 37 of the Haryana General
Sales Tax Act, 1973, rule 45 and form Nos. 38 and 39 of the Haryana General
Sales Tax Rules, 1975. These writ petitions are disposed of accordingly. There
will be no order as to costs.
From
the aforesaid decision in Delite Carriers case (supra) it is evident that the
Court regarded Section 37 of the Haryana General Sales Tax as being nothing
more than a provision which had been enacted in the sales tax law of a State
which would facilitate inspection of goods carried from one State to another
and would fall within the legislative ambit of Entry 54 of List II. The said
Section 37 of the Haryana Act is in pari materia with Section 78 of the
Rajasthan Act.
The
provisions of Sections 22-A and 22-B of the Rajasthan Sales Tax Act, 1954 were
the precursor to the present Section 78 of the 1994 Act. The validity of
Section 22-A and other connected provisions were impugned in Writ Petition Nos.
1555-56 of 1983 in M/s Indian Roadways Corporation and Another vs. State of
Rajasthan and Others. By a short order dated 23rd April, 1986 the validity of
these provisions were upheld in the following words:
We
have explained in M/s Sodhi Transport Co. & Anr. vs. State of U.P. & Anr.
decided on March 20, 1986 the object of establishing check posts and
introducing provisions in the sales tax law of a State which would facilitate
inspection of goods which are carried from one State to another through a third
State. In the above-mentioned decision we have upheld the provision of section
28-B of the Uttar Pradesh Sales Tax Act, 1948 and the rules made thereunder.
For the same reasons we uphold the provisions of section 22-A and 22B of the
Rajasthan Sales Tax Act, 1954 and Rules 61, 62, 62A, 62B and 63 and Forms 18-A
and 18B of the Rajasthan Sales Tax Rules, 1955. These writ petitions are disposed
of accordingly. There will be no order as to costs.
Yet
another challenge to the vires of Sections 22-A and 22-B of the Rajasthan Sales
Tax Act was made but was repelled in Civil Appeal No. 152 of 1990 in Sarna
Transport Corporation vs. The State of Rajasthan & Others by an order dated
23rd July, 1996 which reads as follows:
The
Writ Petition that the appellants filed in the Rajasthan High Court sought to
challenge the vires of Sections 22-A and 22-B of the Rajasthan Sales Tax Act,
1954. The Writ Petition was rejected.
The
challenge to these Sections has been repelled by this Court by its Order dated
23rd April, 1986 in Writ Petition Nos. 1555-56 of Rajasthan & Ors.
Mr. Puri,
learned counsel for the appellants, submitted that, nonetheless, an order
should be made in terms of an interim order made by this Court in some matters.
There is no prayer for such relief in the Writ Petition that was filed before
the High Court.
Secondly,
that was an order pending the disposal of the Civil Appeals that were then before
this Court. Such an order cannot, therefore, be passed in this matter.
The
appeal is dismissed. No order as to costs.
From
the aforesaid decisions, it would be clear that the consistent view of this
Court since the case of Sodhi Transport Companys case (supra) has been that
provisions similar to Section 78(5) have been held to be within the legislative
competence of the State. In fact, validity of Sections 22-A and 22-B of the
Rajasthan Sales Tax Act which was specifically challenged in M/s Indian Roadways
case (supra) and Sarna Transport case (supra) were upheld by this Court and the
said provisions are in pari materia with the new Section 78 of the 1994 Act.
Mr. Singhvi
learned counsel for the respondents, however, relied upon a Division Bench
decision of this Court in the case of Sant Lals case (supra). It is primarily
because of this decision that the High Court in the present case has come to
the conclusion that Section 78(5) was ultra vires. In Sant Lals case (supra)
the challenge before the High Court, which succeeded, was to the validity of
Section 38 of the Haryana General Sales Tax Act, 1973 and Rule 53 of the Haryana
General Sales Tax Rules, 1975 framed thereunder. Section 38 required the
clearing or forwarding agents etc. to furnish information and to get a license.
The same reads as follows:
38.
Furnishing of information by clearing and forwarding agents, etc.-
(1)
Every clearing or forwarding agent, Dalal or any other person transporting
goods, within the State, who, during the course of his business, handles
documents of title to goods for or on behalf of any dealer, shall furnish to
the assessing authority the particulars and information in respect of the
transactions of the goods in such form and manner, as may be prescribed.
(2) No
clearing or forwarding agent, Dalal or any other person transporting goods
within the State shall carry on his business unless he obtains from the
assessing authority, on payment of a fee not exceeding fifty rupees, a license
in the form and manner and subject to such conditions as may be prescribed.
(3) If
any clearing or forwarding agent or Dalal or person transporting goods within
the State contravenes the provisions of sub-section (1) or sub-section (2), the
Commissioner or any person appointed to assist him under sub-section (1) of
Section 3 may, after giving the person concerned a reasonable opportunity of
being heard, direct him to pay by way of penalty, an amount equivalent to
twenty per centum of the value of goods in respect of which no particulars and information
has been furnished under sub-section (1).
Explanation.- For the purpose of this section-
(i) Dalal
shall include a person who renders his services for booking of, or taking
delivery of, consignments of goods at a Railway Station, booking agency, goods
transport company office, or any place of loading or unloading of goods or
contrives, makes and concludes bargains and contracts for or on behalf of any
dealer for a fee, reward, commission, remuneration or other valuable
consideration or otherwise;
(ii)
person transporting goods shall, besides the owner, include the manager, agent,
driver, employee of the owner or person incharge of a place of loading or
unloading of goods or of a Railway out-agency, city booking office or city
booking agency, when run by a private person under a contract with the Railways
but excluding a rail head or a post office, or of a goods carrier carrying such
goods, or a person who accepts consignments of such goods for despatch to other
places or gives delivery of any consignment of such goods to the consignee.
After
referring to the definition of dealer in Section 2(c) and taking note of the
fact that Section 37 provided for the establishment of check-post or barrier
and the inspection of the goods in transit, this Court analysed Section 38(1)
and observed as follows:
14. As
is clear from a reading of sub-section (1) of the said Section 38, it is not
every clearing or forwarding agent or dalal or person transporting goods who
comes into possession of the particulars and information required to be
furnished under the said Act and Rules for the sub-section itself casts that
obligation only upon such clearing or forwarding agents, dalals or persons
transporting goods who during the course of their business handle documents of
title to goods for or on behalf of any dealer'. It is, therefore, at best, only
such clearing or forwarding agents or dalals or other persons transporting
goods who handle documents of title to goods for or on behalf of dealers who
can be said to have a connection with the transaction of sale thereof. It is
only such clearing or forwarding agents, dalals or other persons transporting
goods who can be required to obtain from the assessing authority under the said
Act a licence for carrying on their business and be made liable to cancellation
of such licence and penalty for breach of their obligations under the said Act.
However, inasmuch as the said Act does not define what precisely it means by
the expression documents of title to goods, it is unclear which class of
forwarding or clearing agents or dalals or persons transporting goods it
intends to bring within the ambit thereof. To clearing and forwarding agents, dalals
and other persons transporting goods who do not handle documents of title to
goods for or on behalf of any dealer, the provisions of the said Act can have
no application at all. In respect of such persons the State Legislature has no
power of legislation under the legislative entry concerned. Qua them the
legislation is not in respect of any matter ancillary or subsidiary to the
legislative entry which entitles the State Legislature to impose a tax on the
sale of goods.
15.
The same point can be stated differently. A clearing or forwarding agent or dalal
or person transporting goods does not necessarily handle the booking or receipt
of goods which have been sold; they could very well be handling goods which a
consignor may consign to himself from one town or village to another in the
State. The said Act does not take account of this and requires all forwarding
and clearing agents, dalals and persons transporting goods to be licenced under
the said Act. To this extent the said Section 38 goes beyond the ancillary and
subsidiary powers of the State Legislature in enacting a law imposing sales
tax.
This
Court then concluded as follows:
19.
There can be no doubt that the State Legislature would be entitled to impose
sales tax upon a person who carries on the business of selling goods and who
has in the customary course of business authority to sell goods belonging to
the principal. A clearing or forwarding agent, dalal or person transporting
goods does not carry on the business of selling goods and does not have, in the
customary course of his business, authority to sell goods belonging to the
dealer whose goods he books or receives. As we have already stated, there has
to be a reasonable and proximate connection between the transaction of sale and
the clearing or forwarding agent, dalal or person transporting goods before the
State Legislature can, in exercise of the power to levy sales tax, enact
legislation concerning him. We are not satisfied that there is such close and
direct connection between the transaction of sale of goods by a dealer and the
clearing or forwarding agent or dalal who books or receives such goods or a
person who transports such goods within the meaning of the said Section 38.
It is
for the aforesaid reasons that Section 38 was held to be beyond the purview of
the State Legislature and was struck down. It will be seen that while the
validity of Section 37 of the Haryana Sales Tax Act was upheld by this Court in
Delite Carriers (supra), it is Section 38, dealing with dalal or clearing or
forwarding agents being required to take out a licence, that the court held the
section to be ultra vires primarily for the reason that the forwarding or
clearing agent or dalal does not carry on the business of selling goods and
does not have in the customary course of a business authority to sell goods
belonging to the dealer whose goods he books or receives. Section 37 (upheld in
Delite Carriers case which is similar to 78 here) and Section 38 of the Haryana
Act operate differently. The two provisions are not identical and it is
presumably for this reason that there is no reference to Delite Carriers cases
decision in Sant Lals case.
The
applicability of the decision of Sant Lals case (supra) came up for
consideration in Tripura Goods Transport Association and Another vs.
Commissioner of Taxes and Others . The appellants therein were an association
which was doing the business of transporting goods within and outside the State
of Tripura. On the ground that they were
transporters and not dealers within the meaning of the Act, the appellants
therein had challenged different provisions of the Tripura Sales Tax Act and
the Rules framed thereunder which had required them to obtain a Certificate of
Registration and to comply with other formalities prescribed under the Act and
Rules.
Rules
were framed under the Act which were also impugned. Rule 46-A, inter alia,
required the transporter to give a complete and correct account of the goods
carried by him in a prescribed form which could be inspected by the officer in
charge of the check-post or the barrier about the correctness of the statements
made therein. Rule 63-A gave the power of search at any place to an officer in
charge of the check-post, Superintendent of Taxes or any officer specially
empowered by the Commissioner. In furtherance of this power, the driver or any
other person in charge of the goods vehicle could be stopped and the vehicle
examined and the records inspected. If it was found that the goods are being
carried in contravention of the provisions of the Act or the Rules, the officer
conducting the search could seize the goods found in the vehicle along with any
container or materials used for packing. Rule 64-A lay down the procedure for
the registration of transporter etc. For the non-compliance of the provisions
of the Act and the Rules, punishments were provided. On behalf of the appellants
it was contended that they were mainly transporters, carrying goods of the
consignor to the consignee, and they were neither a dealer nor were they doing
any business of sale or purchase of any goods and hence the obligations cast on
them including punishment for the offences was beyond the legislative
competence of the State Legislature under Entry 54 of List II of the Second
Schedule. While upholding the validity of the aforesaid provisions, this Court
observed as follows:
Every
taxing statute has charging sections. It lays down the procedure to assess tax
and penalties etc. It also provides provisions to cover pilferage of such
revenue by providing such mechanism as it deems fit, in other words, to check
evasion of tax and in doing so, if any obligation is cast on any person having
connections with the consignor or consignee in relation to such goods, maybe
other than a dealer, to perform such obligation in aid, to check evasion and in
case he is made liable for any offence, for his dereliction of duty or
deliberate false act contrary to what he is obligated to do. In our opinion it
cannot be construed to be beyond the competence of the State Legislature. The
impugned provisions are not charging sections, no tax liability is placed on
the transporters. We find neither Sections 29, 30, 32 and 36-A nor Rules 46-A,
63-A and 64-A lack any legislative competence. They are within the legislative
competence of the State and would fall under List II of Entry 54 of the Seventh
Schedule of the Constitution of India.
It
also noticed the decisions of this Court in Sodhi Transport Companys case
(supra). After referring to Sant Lals case (supra) it was held that the same
was clearly distinguishable inasmuch as the provisions of the Haryana General
Sales Tax Act were not similar to those which were impugned in the Tripura
Associations case (supra).
It
appears to us that the scheme and the provisions under the Tripura Sales Tax
Act and the Rules are similar to that contained in Section 37 of the Haryana
Sales Tax Act as well as to Section 22-A of the Rajasthan Sales Tax Act, 1954
and Section 78 of the Rajasthan Sales Tax Act, 1994.
It is
thus settled law that provisions to check evasion of tax are within the
legislative competence of the States under Entry 54 of List II. This being so,
the provisions to make the imposition of tax efficacious or to prevent evasion
of tax are within the legislative competence. Unlike the dalals and forwarding
agents, as in Sant Lals case, the persons referred to in Section 78(2) are
persons concerned with the movement of goods which are sold or likely to be
sold. With there being no valid challenge to Section 78(2) a provision
contained in sub-section (5) of Section 78 which provides for levy of penalty
in case of non-compliance of Section 78(2) can only be regarded as
consequential and valid. If there was legislative competence to enact Section
78(2) then the same power contained in Entry 54 of List II could enable the
State Legislature to provide for consequence of non- compliance by incorporating
sub-section (5) therein. Section 78(5) and Section 78(8) are part of an
integral scheme and deal with two separate classes of people referred to in
Section 78(2).
Unlike
Sant Lals case, here under Section 78(5) levy of penalty is only on the person
in charge of the goods. It is he who should have all the requisite documents
relating to the title or sale of the goods which are being transported. Penalty
under Section 78(5) is leviable under two circumstances. Firstly if there is
non-compliance with Section 78(2)(a) i.e. not carrying the documents mentioned
in that sub-clause or, secondly if false or forged documents or declaration is
submitted. This sub-section cannot relate to personal belongings which are not
meant for sale but would relate to those types of goods in respect of which
documents referred to in Section 78(2)(a) exist or can exist.
Such
submission of false or forged documents or declaration at the check-post or
even thereafter can safely be presumed to have been motivated by desire to
mislead the authorities. Hiding the truth and tendering falsehood would per se
show existence of mens rea, even if required. Similarly where, despite
opportunity having been granted under Section 78(5) if the requisite documents
referred to in sub- clause 2(a) are not produced, even though the same should
exist, would clearly prove the guilty intent. It is not possible to agree with
the counsel for the respondents that breach referred to in Section 78(5) can be
regarded as technical or venial. Once the ingredients of Section 78(5) are
established, after giving a hearing and complying with the principles of
natural justice, there is no discretion not to levy or levy lesser amount of
penalty. If by mistake some of the documents are not readily available at the
time of checking, principles of natural justice may require some opportunity
being given to produce the same. This provision cannot be read as to imply that
the penalty of 30% is the maximum and lesser penalty can be levied.
The
legislature thought it fit to specify a fixed rate of penalty and not give any
discretion in lowering the rate of penalty. The penalty so fixed is meant to be
a deterrent and we do not see anything wrong in this. The quantum of penalty
under the circumstances enumerated in Section 78(5) cannot, in our opinion, be
regarded as illegal. The legislature in its wisdom has thought it appropriate
to fix it at 30% of the value of goods and it had the competence to so fix. As
held by this Court in Rai Ramakrishna & Others vs. The State of Bihar at 910;
The objects to be taxed so long as they happen to be within the legislative
competence of the legislature can be taxed by the legislature according to the
exigencies of its needs, because there can be no doubt that the State is
entitled to raise revenue by taxation. The quantum of tax levied by the taxing
statute, the conditions subject to which it is levied, the manner in which it
is sought to be recovered, are all matters within the competence of the
legislature, and in dealing with the contention raised by a citizen that the
taxing statute contravenes Art. 19, courts would naturally be circumspect and
cautious as such there cannot, in the present case, be any valid challenge to
the rate of penalty provided for in Section 78(5) of the Act.
Following
the decisions of this Court in cases of Sodhi Transport Co. and others (supra),
Delite Carriers (supra), Indian Roadways Corporation (supra) Sarna Transport
Corporation (supra) and Tripura Goods Transport Association (supra) we hold
that the provisions of Section 78(5) of the Rajasthan Sales Tax Act, 1994 are
valid and the impugned decision of the High Court in this regard is not
correct. These appeals, except Civil Appeal No. 1321 of 2001, are accordingly
allowed. Civil Appeal No. 1321 of 2001 is dismissed.
Parties
to bear their own costs.
.....J.
[ B.N.
Kirpal ] ...J.
[ N. Santosh
Hegde ] .J.
[ B.N.
Agrawal ] October 4, 2001.
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