1968 (9) TMI 95 - HC - VAT and Sales Tax

Summary

Issues:
Appeal against order dismissing petitions to quash penalty and for delivery of seized goods under the Madras General Sales Tax Act, 1959. Validity of section 42(3)(a) in light of previous judgments. Distinction between section 41(4) and section 42(3) in terms of power to seize and confiscate goods. Legislative competence to enact provisions for confiscation of goods.

Analysis:
The judgment of the Madras High Court, delivered by Veeraswami, J., pertains to appeals arising from an order dismissing petitions challenging a penalty and seeking the delivery of seized goods under the Madras General Sales Tax Act, 1959. The Court considered the validity of section 42(3)(a) in comparison to previous judgments, notably R.S. Jhaver v. Commissioner of Commercial Taxes and Commissioner of Commercial Taxes v. R.S. Jhaver, which dealt with similar provisions under section 41(4). The Court highlighted the distinction between the two sections, emphasizing that the power to seize and confiscate goods under section 42(3) is substantially similar to that under section 41(4) and is subject to the same reasoning for invalidity.

The Court addressed the argument made before Ramakrishnan, J., regarding the difference between section 41(4) and section 42(3). Despite the perceived factual differences, the Court concluded that the legislative competence to provide for confiscation of goods depended on whether such power was ancillary to the power to check tax evasion. The Court reiterated the stance taken in R.S. Jhaver v. Commissioner of Commercial Taxes that the power to confiscate goods was not incidental to the power of taxation on sales or purchases. The Court emphasized that the legislative competency to enact such provisions was not contingent on the occurrence of a sale or purchase but on the language employed by the Legislature, which, if repugnant to the Act's scheme, rendered the provisions invalid.

In its analysis, the Court found that the factual circumstances of the case, including the appellant's status as an out-of-state dealer and the absence of taxable events within the State, did not justify the seizure and confiscation of goods under section 42(3). The Court emphasized that the provisions charged goods to tax even before a taxable event occurred, contradicting the Act's scheme. The Court also noted the relevance of a previous case, Papanna v. Deputy Commercial Tax Officer, in highlighting the absence of a similar provision in the Andhra Act, which influenced the Court's decision.

Ultimately, the Court declared section 42(3) unconstitutional and invalid, striking it down. The appeals were allowed with costs, and the Court ordered the respondents to pay the sale proceeds of the confiscated goods to the appellant. Additionally, a separate petition was allowed with no costs, concluding the judgment delivered by the Madras High Court.