1986 (5) TMI 258 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to the vires of a notification restricting movement of goods in inter-State trade and commerce and imposition of penalty without authority of law.

Analysis:
The petitioners challenged a notification dated 28th December, 1985, as ultra vires and beyond the legislative competence of the State Legislature, restricting the movement of goods in inter-State trade and commerce. The petitioners argued that the penalty imposed on petitioner No. 1 was without legal authority as they were not liable to pay any tax. The notification was linked to specific sections of the Bihar Finance Act, 1981, as amended by the Bihar Finance Act, 1984. The petitioners relied on a Supreme Court decision to argue that the notification could lead to forfeiture of goods, posing a threat to individuals even carrying personal goods across states.

The petitioners, a transport company, contended that they were not liable to pay tax under the Act as they solely transported goods. The petitioners' truck was checked, and a penalty was imposed for seized goods. The Court noted that only a penalty, not tax, was imposed, emphasizing the power to prevent tax evasion as ancillary to sales tax levy. The provisions aimed at securing revenue due under the Act by penalizing attempts to evade tax. The Court highlighted that the penalty was related to the owner's liability to pay tax, not the driver's failure to carry documents.

The Court examined the constitutional validity of the provisions requiring document verification for transporting goods. It held that the requirements were not an unreasonable restriction on citizens' rights under Article 19, as they aimed to prevent tax evasion and ensure public interest. The Court distinguished a previous case where seizure and confiscation of goods were deemed unrelated to sales tax levy, unlike the present case where verification was a condition precedent to penalty imposition for tax evasion attempts.

The Court emphasized that the provisions were essential to prevent tax evasion and ensure legitimate transactions, falling within the constitutional framework. It advised the petitioners to utilize internal remedies available under the Act for appealing the penalty order. Ultimately, the Court dismissed the application, finding no merit in the petitioners' arguments, and upheld the legality of the notification and penalty imposition.

This detailed analysis of the judgment showcases the Court's reasoning on the challenges to the notification's validity, the imposition of penalties, and the constitutional aspects of preventing tax evasion in the context of inter-State trade and commerce.