2005 (2) TMI 795 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legality of demanding security money for registration under the Tripura Sales Tax Act, 1976.
2. Whether the demand for Rs. 10 lakhs as security money is an unreasonable restriction on trade.
3. Whether the Commissioner of Taxes has the authority to demand security money from transporters.
4. Compliance with Article 304(b) of the Constitution concerning restrictions on trade.
5. Validity of the Commissioner's discretionary power under Rule 64-A.

Detailed Analysis:

1. Legality of Demanding Security Money for Registration:
The petitioners, a partnership firm, sought registration under Rule 65 of the Tripura Sales Tax Rules to operate as transporters without depositing the demanded security money of Rs. 10 lakhs. They argued that the Commissioner of Taxes' decision to demand such a high amount was illegal, especially since they were willing to deposit Rs. 2.5 lakhs as a bank guarantee and the remaining amount in installments.

2. Whether the Demand for Rs. 10 Lakhs as Security Money is an Unreasonable Restriction on Trade:
The petitioners contended that the demand for Rs. 10 lakhs as security money was an unreasonable restriction on their business, violating Article 304(b) of the Constitution. They cited the Supreme Court's decision in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, arguing that any law directly affecting the free movement of trade constitutes a restriction on the freedom of business.

3. Whether the Commissioner of Taxes has the Authority to Demand Security Money from Transporters:
The petitioners argued that the Tripura Sales Tax Act explicitly allows the Commissioner to demand security from dealers but not from transporters. They referenced a seven-Judge decision in In re Article 143, Constitution of India, and Delhi Laws Act (1912), which emphasized that legislative functions should not be delegated to an outside agency without clear legislative guidelines.

4. Compliance with Article 304(b) of the Constitution Concerning Restrictions on Trade:
The petitioners claimed that the demand for security money was a restriction on trade, violating Articles 301 and 304(b) of the Constitution. They argued that this demand directly and immediately affected the free movement of trade and could not be considered a mere regulatory measure.

5. Validity of the Commissioner's Discretionary Power under Rule 64-A:
The respondents argued that the Commissioner's demand for security money was within his discretionary power under Rule 64-A of the Tripura Sales Tax Rules. They stated that the demand was consistent with the requirement of Section 38-B of the Act, which mandates transporters to obtain a registration certificate. The respondents also highlighted that other transporters had complied with similar demands without objection.

Judgment Summary:
The Court dismissed the petition, holding that the demand for security money by the Commissioner of Taxes was legal and within the scope of his authority under Rule 64-A. The Court emphasized that the requirement for transporters to obtain a registration certificate and maintain proper accounts was essential to prevent tax evasion. The demand for security money was deemed a reasonable measure to ensure compliance and was not considered an unreasonable restriction on trade. The Court also found that the petitioners had not been discriminated against, as similar demands had been made from other transporters. The Court concluded that the Commissioner's actions were in line with the legislative intent and the provisions of the Tripura Sales Tax Act and Rules.