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TMI Blog2003 (3) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... SYED SHAH MOHAMMED QUADRI AND ASHOK BHAN JJ. Yashank Adhyaru, Senior Advocate (Mrs. V.D. Khanna, Advocate, with him), for the respondents. B. Sen and Rakesh Dwivedi, Senior Advocates (Dayan Krishnan and S. Mishra, Advocates for M/s. Sinha and Das, Advocates, with them), for the appellants. -------------------------------------------------- The judgment of the Court was delivered by SYED SHAH MOHAMMED QUADRI, J. -These appeals from various orders of the West Bengal Taxation Tribunal (for short, "the Tribunal") raise a common question as to the constitutional validity of provisions, mentioned hereunder, of the West Bengal Sales Tax Act, 1994 (West Bengal Act 49 of 1994) (for short, "the Act") and the Rules made thereunder. The Act came into force on March 23, 1995. It repealed the Bengal Finance (Sales Tax) Act, 1941 which was then in force. 2.. The respondents challenged the constitutional validity of the following provisions of the Act: (i) section 2(6); (ii) Explanation to sub-section (1), sub-sections (5), (7), (8), (10), (11) and (12) of section 11; (iii) sub-section (4) of section 14; and (iv) rules 172, 173, 174, 188 and 189 of the West Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent evasion of tax. The learned counsel has argued that the Tribunal is clearly wrong in declaring Explanation below section 11(1) of the Act as arbitrary, unreasonable so unconstitutional. 4.. In examining the constitutional validity of the impugned provisions of a statute, it will be useful to bear in mind the following well-settled propositions. If a legislation is found to lack in legislative competence or is found to be in contravention of any provision of Part III or any other provision of the Constitution, the impugned legislation cannot escape the vice of unconstitutionality (See: Kesavananda Bharati Sripadagalvaru v. State of Kerala AIR 1973 SC 1461 and also State of Andhra Pradesh v. McDowell Co. (1996) 3 SCC 709. A challenge to any statutory provision on the ground of the classification being discriminatory and violative of article 14 of the Constitution, can be successfully met on the principle of reasonable classification having nexus to the object of the Act sought to be achieved; (See State of Bombay v. F.N. Balsara [1951] SCR 682 and Budhan Choudhary v. State of Bihar [1955] 1 SCR 1045. However, the Legislature enjoys a greater latitude for classification in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught such goods as specified in sub-clause (a) or procured such goods as specified in sub-clause (b) or purchased such goods as specified in sub- clause (c), as the case may be, on his own account." 6.. A perusal of the definition of the expression "casual trader" shows that it has three parts. The first part defines the expression to mean a person, other than a registered dealer, not having a fixed place of business in West Bengal and who: (a) either as a consignor or as a consignee, brings into West Bengal any goods other than those specified in Schedule I or Schedule IV or those notified under sub-section (2) of section 10 (hereinafter referred to as "the excluded goods") from any place outside West Bengal for sale in West Bengal, or (b) procures goods, other than the excluded goods, otherwise than by way of purchase from a person other than a registered dealer for sale in West Bengal, or (c) purchases any goods, other than the excluded goods, in West Bengal from any person, other than a registered dealer, for purposes other than his personal use or consumption of such goods in West Bengal. The second part takes in its fold a person, whether he has a fixed place of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included within the meaning of "casual trader"; the first is the transporter who while carrying the goods fails to disclose the name and address of the consignor or the consignee in West Bengal or having so declared the names, fails to furnish a copy of the invoice, challan, transport receipt or consignment note or document of like nature in respect of such goods. Every prudent bona fide transporter is expected to know the particulars of the consignor of the goods for transportation and of the consignee to whom the goods have to be delivered in West Bengal. Similarly, every reasonable transporter is expected to have a copy of the challan, transport receipt or consignment note or document of like nature in respect of goods which are being transported. The requirement to furnish these particulars cannot, therefore, be treated as requiring the transporter to furnish information which is beyond his capacity or control. So also a prudent and reasonable owner or lessee of a warehouse where such goods are stored is expected to know the name and address of the owner of such goods and requiring him to furnish those particulars cannot be said to be either oppressive, irrelevant or arbitrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible to support the reasoning and the conclusion of the Tribunal on this aspect. 10.. We shall now advert to various provisions of section 11 which are brought under challenge. Inasmuch as almost entire section 11 is under challenge, it is quoted here: "11. Liability to pay tax on sales by casual trader. -(1) Notwithstanding anything contained elsewhere in this Act, a casual trader shall be liable to pay tax on all his sales in West Bengal of goods, other than those specified in Schedule I or Schedule IV or those notified under sub-section (2) of section 10, brought by him into West Bengal from any place outside West Bengal, or on all his sales in West Bengal of goods, other than those specified in Schedule I or Schedule IV, procured by him otherwise than by way of purchase from a person other than a registered dealer: Provided that no tax shall be levied on sales of goods which are effected on or after the date on which he becomes liable to pay tax under section 9 or sub-section (3) of section 27 and is registered under section 26 or section 27. Explanation .-Where a transporter, or an owner or a lessee of a warehouse, deemed to be a casual trader in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of this section or section 14, the owner or lessee of a warehouse where goods are stored, shall furnish, on demand, before the Commissioner or the authorised officer,- (a) if he is the owner of such goods, the invoice, challan or other documents in support of the manner of securing such goods, or (b) if he declares that the goods are being stored by another person, name and address of the person who has stored the goods and evidence in support of occupancy of the warehouse by that person, and in the event of failure to furnish such particulars or evidence within a reasonable time, the authorised officer may seal such warehouse for a period ordinarily not exceeding twenty-four hours from the time of enquiry or search for the purposes of sub- section (7) and sub-section (8). (7) If the Commissioner or any person appointed under sub- section (1) of section 3 to assist him is satisfied that a casual trader may become liable to pay tax under sub-section (1) in respect of any goods, he may, in order to secure payment of tax that may become due upon determination of tax under sub-section (3) and for reasons to be recorded in writing, demand from such casual trader an amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) If the penalty is not paid, the seized goods may be sold in open auction and sale proceeds thereof shall be applied in the manner, and subject to the conditions, provided in sub-section (4), sub-section (5), sub-section (6), sub-section (7) and sub-section (8), of section 71 as may be applicable for the purposes of this section." 11.. Section 11 is a charging section in respect of all sales of a "casual trader". Sub-section (1) thereof opens with a non obstante clause, gives it overriding effect over other provisions of the Act and mandates that a casual trader shall be liable to pay tax on all his sales in West Bengal of goods, other than the excluded goods, brought by him into West Bengal from any place outside West Bengal or on all his sales in West Bengal of goods procured by him otherwise than by way of purchase from a person other than a registered dealer. The proviso is not relevant for our purpose. 12.. The Explanation to sub-section (1) says that where a transporter or an owner or lessee of a warehouse, deemed to be a casual trader in respect of any goods referred to in sub-section (1), is found to have disposed of such goods, the disposal of such goods shall be dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory presumption incorporated in Explanation to sub-section (1) of section 11. For these reasons, we cannot sustain the finding of the Tribunal. We hold that the said Explanation is valid in law and the challenge to its invalidity is misconceived and unsound. 13.. In Sodhi Transport Co. v. State of U.P. See [1986] 62 STC 381 (SC). (1986) 2 SCC 486, section 28-B of the Uttar Pradesh Sales Tax Act, 1948 was assailed as unconstitutional. It enacts a rebuttable presumption on the failure of a driver or other person-in-charge of vehicle carrying the goods to deliver the pass to the officer in-charge of the check-post or barrier before his exit from the State. It says, "it shall be presumed" that the goods were sold within the State. Upholding the constitutional validity of the said provision, it was observed that as a rebuttable presumption, it had the effect of shifting the burden of proof. The court has pointed out that the authority concerned before levying sales tax arrives at the conclusion by a judicial process that the goods have been sold inside the State and in so doing, relies upon the statutory rule of presumption contained in section 28-B of the Act which may be rebutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hours for the purposes of sub-sections (7) and (8) of that section, only if it appears to him that the goods are being transported by a casual trader or by some other person on his behalf. 16.. A careful reading of sub-section (7) makes it clear that the Commissioner or any person appointed under sub-section (1) of section 3 to assist him, on being satisfied that a casual trader may become liable to pay tax under sub-section (1) thereof in respect of any goods, may with a view to secure payment of tax that may become due upon determination under sub-section (3) and for reasons to be recorded in writing, demand from such casual trader an amount in advance equivalent to the amount of tax that may become due from him after determination, or security for an equivalent amount after taking into consideration the saleable value of such goods. It does not postulate payment of advance tax. What it aims is an amount in advance equivalent to the amount of tax that may become due from a casual trader or security for an equivalent amount depending upon the saleable value of the goods in question. There is thus a clear nexus between the amount in advance or security and the levy of impost on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand security from dealers for payment of tax. The contention of the petitioner was that the section conferred undefined, unlimited and unrestricted power to the Commissioner and that there was no limit fixed for the amount of security. It was also urged that no enquiry was contemplated before fixing the amount of security. The validity of section 8A was upheld on the view that it did not give any unlimited or unrestricted power to the Commissioner and that it was subject to the condition that it must appear to him to be necessary to demand security for the proper realisation of tax. It was observed that the power to levy tax included the power to impose reasonable safeguards for collecting it and, therefore, demanding security for the proper payment of tax was neither an arbitrary condition nor an unreasonable restriction. In our view, this judgment does not help the respondents for reasons more than one. Firstly, section 8A of that Act, as it stood at that time was upheld by the Constitution Bench as valid and secondly, in the instant case, the impugned provisions embody ample safeguards for a transporter of goods as also for an owner or lessee of a warehouse, enquiry is conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 3 of that impugned Act, which imposed the tax and made the producer liable to pay the same could not, therefore, be impugned on the ground of legislative incompetence. 22.. In Tripura Goods Transport Association v. Commissioner of Taxes See [1999] 112 STC 609 (SC). (1999) 2 SCC 253, sections 29, 30, 32, 36-A, 38-B and 2(b) of the Tripura Sales Tax Act, 1976 (11 of 1976) were assailed on the ground of lack of legislative competence. Those provisions required the appellants therein to obtain a certificate of registration and to comply with various other formalities prescribed under the Act and the Rules made thereunder. A learned single Judge of the Gauhati High Court had dismissed the writ petition See [1996] 100 STC 161 (Gauhati). That order was upheld by the division Bench of the High Court in appeal See [1996] 102 STC 577 (Gauhati).. On further appeal to this Court, it was contended that being transporters, they were not trading in sale or purchase of any goods and therefore they could not be held to be "dealers" within the meaning of the Act and as such the impugned provisions which laid certain obligation on them were beyond the legislative competence of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act which remains to be considered is sub-section (4) of section 14. Whereas section 11 deals with levy of tax or sales by casual trader, section 14 is a charging section in respect of purchases made by a casual trader. It directs that, notwithstanding anything contained elsewhere in the Act, a casual trader shall be liable to pay tax on every purchase of goods, other than those specified in Schedule IV in West Bengal. This liability is subject to the provisions of sub-section (3) of section 14. The purchases which are exempted are specified under the proviso to sub- section (1). Sub-section (2) speaks of rate of tax. Sub-section (3) deals with a situation where a casual trader makes regular purchases. Sub- section (4) which is impugned reads as under: "Every person transporting in a road vehicle goods, other than those specified in Schedule I or Schedule IV, purchased by him in West Bengal on his own account or on behalf of any other person shall, on interception by any person appointed under sub-section (1) of section 3 and authorised by the Commissioner in this behalf (hereinafter referred to in this section as the authorised officer), stop the road vehicle and produce, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicle for purposes of assessment and recovery of tax. This provision is also an anti-evasion of tax provision and overrides section 46. For the reasons abovementioned, we do not find any illegality in sub- section (4) of section 14 of the Act. 28.. We may add that the impugned provisions of sub-sections (5), (7), (8) of section 11 and sub-section (4) of section 14 are broadly akin to the provisions in the Bengal Finance (Sales Tax) Act, 1941, the validity of which was upheld by us in Civil Appeal No. 8180 of 1995 See State of West Bengal v. Road Transport Association [2003] 131 STC 1 (SC). by order dated February 25, 2003. 29.. No separate arguments were addressed in regard to the invalidity of the Rules. In the view we have taken in upholding the provisions of the Act, the impugned Rules, namely, Rules 172, 173, 174 and 188 and forms 28 and 31 are also to be upheld and they are, accordingly, upheld. The orders under challenge in regard to the declaration of the rules as invalid are, therefore, set aside. 30.. For all these reasons, we are unable to sustain the orders of the Tribunal under challenge and they are, accordingly, set aside. 31.. The civil appeals are, accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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