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TMI Blog1966 (11) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial Tax Officer, Guntakal, seized the entire stocks of 120 bags. On receipt of information, the petitioner filed his objections and in spite of repeated requests pointing out the urgency for the disposal of the goods, the petitioner did not get any reply from the authority, but came to know that his commission agent at Kodikonda received a notice that the jaggery would be sold on 25th October, 1962. Without even passing an order of confiscation of the goods, the Deputy Commercial Tax Officer gave notice to sell the goods in public auction as they were of a perishable nature. Before the order of confiscation could be passed, the petitioner filed this application challenging the action of the Commercial Tax Officer on two grounds: firstly that section 29 of the Andhra Pradesh General Sales Tax Act, 1957, in so far as it provides for confiscation of goods, is ultra vires of the Legislature and secondly, that, in any event, the said power of confiscation is invalid as it violates the fundamental right of the petitioner guaranteed to him under Article 19(1) of the Constitution of India being an unreasonable restriction on the holding of property. W.P. No. 1044 of 1962. This is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to inspection at all reasonable times. Sub-section (3) authorises the concerned officer to seize such accounts, registers or other documents of the dealer if the officer has reason to suspect that the dealer is attempting to evade the payment of the tax due from him under the Act and various other provisions are made regulating the retention of the books by the officer. Sub-section (4) confers the power to enter and search at all reasonable times, any office, shop, godown, vessel, vehicle or any other place of business or any building or place where such officer has reason to believe that the dealer has been keeping the goods, accounts, etc. Sub-section (5) gives the power to the officer to break open any box in which any accounts or documents are kept or to break open the door of any premises where such documents may be kept. Sub-section (6) of section 28 which is impugned before us runs as follows: "Any such officer shall have power to seize and confiscate any goods which are found in any office, shop, godown, vehicle, vessel or any other place of business or any building or place of the dealer, but not accounted for by the dealer in his accounts, registers and other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , order the release of the confiscated goods. The officer shall also specify in his orders the amount due to be paid towards the charges, if any, incurred by the State for the safe custody of the goods and other incidental charges. If the officer is not so satisfied, he may after recording the reasons therefor, order that the sale under sub-rule (5) may be proceeded with." Rule 48(1) runs as follows: "If any officer authorised under section 28 of the Act, finds any goods in any office, shop, godown, vehicle, vessel or any other place of business or any other building, or place of a dealer which have not been accounted for in his accounts, registers or other documents maintained in the course of his business, he may seize and confiscate such goods after following the procedure prescribed in rule 46......." The order of confiscation is open to appeal under section 19 of the Act. As already stated, the contention of the learned counsel for the petitioners is that the power to confiscate the goods does not fall within the ambit and scope of the legislative power conferred on the State under Entry 54 of List II of Schedule VII appended to the Constitution of India. The said Entry 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental.......'" Hence, the question that falls for decision is whether confiscation of the goods is a power ancillary or subsidiary to the object of preventing evasion of tax under the Act. A similar question was raised before the Mysore High Court in Venkatachalapathi v. Commercial Tax Inspector[1965] 16 S.T.C. 894. , in which the validity of section 28-A of the Mysore Sales Tax Act, 1957, relating to confiscation of goods was considered. It was held in the above decision of the Mysore High Court, (i) that the power to legislate on a topic of legislation carries with it the power to legislate on an ancillary matter which can be said to be reasonably included in the power given and that the power to provide for the taking of steps to prevent evasion of tax is reasonably related to the legislative power itself of imposing such tax; (ii) that persons who are not directly liable to pay the tax may also have their activities reasonably restricted with a view to prevent the principal persons liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were a tax. What it does is to make certain provisions with a view to prevent evasion of tax and to impose penalty for contravention of those provisions. Penalty is obviously intended to make the machinery against evasion effective." It was accordingly held on the above reasoning that the impugned provision being intended as a step for preventing evasion, it was within the ambit of ancillary powers of legislation under Entry 54 of List II in the Seventh Schedule of the Constitution. While upholding the legislative vires of the section, the Mysore High Court no doubt struck down the section as the procedure laid down thereunder offends Article 19 of the Constitution. We will refer to this point at the appropriate stage. The same question came up for consideration before the Madras High Court in R. S. Jhaver v. Commissioner of Commercial Taxes[1965] 16 S.T.C. 708. in which, while upholding the power of seizure of the goods, the learned Judges held that the power to confiscate the goods under section 14(4) of the Madras General Sales Tax Act, 1959, does not come within the ambit of Entry 54 of List II of the Seventh Schedule of the Constitution as it is neither ancillary nor incide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dealers what they have unlawfully collected from their customers. In other words, the State Government has no power to collect money which is not a tax as if it were a tax. Under these circumstances, it was held that in the guise of ancillary legislation, such a power to collect monies cannot be justified. We do not see that the principle of the said case has any analogy to the present case. In this connection, we are inclined to agree with the view of the learned Judges of the Mysore High Court that the power to seize and confiscate the goods is only by way of punishment or penalty which is intended to operate as the most effective deterrent against tax-evaders, and that it is, therefore, ancillary in the sense that it seeks to achieve the object of preventing evasion of tax. It is contended by Shri N. Rammohanrao, the learned counsel for the petitioner that though confiscation of goods may be one of the modes of checking evasion of tax, it is not an ancillary power because it may not be necessary to impose such a drastic step and that a mere inspection of the accounts or the goods and documents, etc. is sufficient to gather the material or data to levy tax or penalty from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiry, has totally failed to indicate what the purpose of enquiry is and the so-called enquiry provided in the section must be regarded as a pretence, and that the procedure offends Article 19." With great respect, we are unable to accept this conclusion. In Chaturbhai v. Union of IndiaA.I.R. 1960 S.C. 424., dealing with the contention that certain Central Excise Rules laying down restrictions on warehousing and penalties providing for confiscation etc. are unreasonable and not saved by Article 19 of the Constitution of India, the Supreme Court observed as follows: "The basis of this argument was that there is no procedure laid down in the provisions for levying penalties nor any provision made for notice or taking of evidence and power of confiscation was given to persons who could not be termed unbiassed. If the tribunal is to act judicially it must conform to the principles of natural justice of audi alteram partem and there is no dispute that in the instant case there was no breach of this rule. Not only this, there is a right of appeal and a revision is also provided and both these remedies the petitioner availed himself of. The argument of unreasonable restrictions because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituations when the points regarding a violation of Article 14 and an objection that a restriction is not reasonable so as to conform to the requirements of Article 19(5) or (6) may converge and appear merely as presenting the same question viewed from different angles. Such, for instance, are cases when the denial of equality before the law is based on the ground that the power vested, say, in an administrative authority to affect rights guaranteed to a citizen is arbitrary, being unguided or uncanalised. The vesting of such a power would also amount to the imposition of an unreasonable restriction on the exercise of the guaranteed right to trade or carry on a business etc. Where, however, there is guidance and the legislation is challenged on the ground that the law with the definite guidance for which it provides has outstepped the limits of the Constitution by imposing a restraint which is either uncalled for or unreasonable in the circumstances, the scope and content of the enquiry is far removed from the tests of conformity to rational classification adopted for judging whether the law has contravened the requirement of equal protection under Article 14." Similarly in Balaji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuse their powers is not a ground as pointed out by the Supreme Court for invalidating the statute. We have not been shown how the rules under the Mysore Act stand in comparison with the rules under the Andhra Pradesh Act. Regarding the provisions for confiscation of goods as the extreme deterrent punishment intended to achieve the object of evasion of taxes, we are not prepared to hold that confiscation of the goods would be an unreasonable restriction on the holding of property or the carrying on of business by a dealer. As already stated, the reasonableness of a restriction or a provision of law has to be judged with reference to various factors enunciated above. We are, therefore, convinced that the procedure laid down under the rules cannot be said to be violative of Article 14 or 19(1)(f) or (g) of the Indian Constitution. In the view we have taken above, it is not necessary to deal with the alternative argument advanced by Sri D. Venkatappaiah Sastry, on behalf of the Government, that even if the provisions of sections 28 and 29 of the Act do not fall within the scope and ambit of Entry 54 relating to taxation of sale or purchase of goods, it may be brought in under Entry ..... 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