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TMI Blog1997 (8) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... Senior Advocates, J.B. Dadachanji, S. Sukumaran, Vivek Gambhir, Anip Sachthey, Niraj Sharma and Prakash Shrivastava, Advocates with them, for the Respondents. [Judgment per : B.N. Kirpal, J.]. The common question of law which arises in these appeals by special leave relates to the validity of Section 7(5) of The Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (hereinafter referred to, for the sake of convenience, the Entry Tax Act ). The said provision having been successfully challenged by the respondents before the Madhya Pradesh High Court, the State of Madhya Pradesh has filed the present appeals. 2. The facts, which are relevant for deciding the point in issue lie within a very narrow compass. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................... (iv) ....................... (v) ......................." 4. Sub-sections (1), (2) and (5) of Section 7 of the Entry Tax Act which are relevant for the determination of the controversy in issue, as amended from time to time, read as follows : 7. Registered dealers to issue bill etc. stating that goods sold are local goods. - (1) Every registered dealer who, in the course of his business, manufacturers, produces or grows any goods specified in Schedule II in a local area in such manner that the goods become local goods in relation to that local area, shall, on the sale of such local goods to any other registered dealer, issue to him a bill, invoice or cash memo specifically stating in such manner as may be pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by sub-section (5) of Section 7 was only one and a half time the amount of entry tax payable on the goods. With the penalty having been increased, as a consequence of amendment of sub-section (5) of Section 7, the respondents filed writ petitions in the Madhya Pradesh High Court challenging the validity of the said provision. 6. The main ground on which the challenge was based, on behalf of the respondents before the High Court, was that the levy of the penalty of ten times the amount of tax was confiscatory in nature and was ultra vires of the provisions of the Act and was also violative of Articles 14 and 19 of the Constitution of India. It was the contention of the respondents that the presumption contained in sub-section (5) of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said provision did not provide for a fixed rate of penalty. 10. We find merit in this contention. According to Section 3 the goods imported from outside the State which enter into any local area and are sold for consumption, use and sale therein are liable to pay entry tax if they belong to the categories mentioned in Schedule II. Thus goods which are manufactured in the local area become taxable only when they first enter into a local area other than the local area of its origin. It is in order to trace the goods manufactured in any local area and to ensure that the goods do not escape tax on their subsequent entry into another local are that certain checks and counter checks have been provided and in this connection Section 7 conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person in charge of the vehicle. In order to determine whether the aforesaid words shall be presumed occurring in Section 28B were rebuttable or not this Court in Sodhi Transport and Anr. Etc. Etc. v. State of U.P. and Anr. Etc. Etc. [(1986) 1 SCR 939] referred to Section 4 of the Indian Evidence Act and then observed at page 953 as follows : ..... These words, i.e., `shall presume are being used in Indian judicial lore for over a century to convey that they lay down a rebuttable presumption in respect of matters with reference to which they are used and we should expect that the U.P. Legislature also has used them in the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax would be confiscatory and, therefore, ultra vires since Mr. Sanghi, in fairness, submitted that the State treats it as the maximum limit and not fixed amount of penalty leaving no discretion for imposition of lesser penalty. This stand of the State itself concedes that the assessing authorities are not bound to levy fixed penalty equal to ten times the amount of entry tax whenever the provisions of Section 7(5) are attracted. Depending upon the facts of each case the assessing authority has to decide as to what would be the reasonable amount of penalty to be imposed, the maximum being ten times the amount of the entry tax. So construed, sub-section (5) of Section 7 cannot be regarded as confiscatory. Consequently, this also cannot be a g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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