1984 (12) TMI 273 - HC - VAT and Sales Tax

Issues Involved
1. Legality and validity of the show cause notice issued under the A.P.G.S.T. Act.
2. Power of seizure and confiscation under section 28(6) of the A.P.G.S.T. Act.
3. Detention and confiscation of goods under section 29 of the A.P.G.S.T. Act.
4. Jurisdiction of the High Court under Article 226 of the Constitution to quash a show cause notice.
5. Allegations of tax evasion and the role of transport companies as agents of non-resident principals.

Detailed Analysis

1. Legality and Validity of the Show Cause Notice
In W.P. No. 5560 of 1984, the petitioner, a transport corporation, challenged the show cause notice issued by the Commercial Tax Officer for alleged violations of the A.P.G.S.T. Act. The notice called upon the petitioner to explain why penal action should not be taken for not registering as a dealer and for acting as an agent of non-resident principals. The court held that the allegations in the show cause notice raised mixed questions of fact and law, which required a detailed enquiry. Therefore, the writ petition was not the proper remedy to challenge the show cause notice, and the petitioner was advised to submit an explanation to the concerned authorities.

2. Power of Seizure and Confiscation under Section 28(6) of the A.P.G.S.T. Act
The court examined the validity of section 28(6) of the A.P.G.S.T. Act, which empowers officers to seize and confiscate goods not accounted for in the dealer's accounts. The court referred to earlier decisions in Papanna v. Deputy Commercial Tax Officer and Kalangi Krishna Murty & Co. v. Commercial Tax Officer, which upheld the constitutionality of section 28(6). The court distinguished this provision from section 42(3) of the Madras General Sales Tax Act, which was struck down by the Supreme Court in Check Post Officer v. K.P. Abdulla & Bros. The court concluded that section 28(6) is a regulatory measure designed to prevent tax evasion and is within the legislative competence of the State Legislature under entry 54 of List II of the Seventh Schedule of the Constitution.

3. Detention and Confiscation of Goods under Section 29 of the A.P.G.S.T. Act
In W.P. Nos. 6460, 14063, 14086, 6623, and 14069 of 1984, the petitioners, who were tyre manufacturing companies, challenged the detention orders issued by the authorities under section 29 of the A.P.G.S.T. Act. The court held that the power of detention under section 29 is limited to ensuring the payment of tax on goods in transit and does not extend to seizing goods for alleged past tax evasion. The court reiterated that the power to seize and confiscate goods under section 28(6) is valid, but such power should be exercised following the prescribed procedures, including giving the affected parties an opportunity to be heard.

4. Jurisdiction of the High Court Under Article 226 of the Constitution
The court emphasized that the jurisdiction of the High Court under Article 226 of the Constitution should not be used to obstruct or interdict an enquiry into allegations of tax evasion. The court noted that the show cause notice in W.P. No. 5560 of 1984 raised several factual issues that needed to be investigated by the tax authorities. Therefore, the court dismissed the writ petition, allowing the authorities to proceed with their enquiry.

5. Allegations of Tax Evasion and the Role of Transport Companies as Agents of Non-Resident Principals
The court examined the allegations that tyre manufacturing companies were using their branches in Silvaasa, a tax-free zone, to evade sales tax by routing their goods through transport companies. The court noted that the tyre companies were allegedly selling goods in Andhra Pradesh without paying the applicable sales tax. The court held that the transport companies, acting as agents of non-resident principals, were liable to be treated as dealers under the A.P.G.S.T. Act and were subject to the same tax obligations.

Conclusion
The court upheld the show cause notice issued under the A.P.G.S.T. Act and validated the powers of seizure and confiscation under section 28(6) of the Act. The court dismissed the writ petitions challenging the detention orders, emphasizing the need for a detailed enquiry into the allegations of tax evasion. The court also clarified the jurisdictional limits of the High Court under Article 226 of the Constitution, advising the petitioners to seek alternative remedies available under the law.

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