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TMI Blog1968 (3) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... he paddy, it (the assessee-firm) weighs each bag at 77 kgs. and enters it in the B. Register at 75 kgs. setting of 2 kgs. as weight of the gunny bag. But this explanation was rejected, as it was found that a gunny bag weighs only 1 kg. and not 2 kgs. and that even this explanation does not account for the 492.56 bags. In W.P. No. 1554 of 1965, the Commercial Tax Officer had unearthed on 8th September, 1965, from a rice bag stored in a corner of a room in the mill of the assessee a slip relating to the mill. This slip contained amongst other items, 2 items relating to 238 bags of paddy received on 6th September, 1965, and 8th September, 1965. These bags were unaccounted for in the gate book khata or in any other book of the assessee and, consequently, the stocks were seized and were released on payment of Rs. 3,431 being half the value of the stock seized. He was asked to show cause within 7 days why the excess should not be confiscated. In the last of the writ petitions, 140 bags of ammonium phosphate worth Rs. 4,648 were seized from a lorry while being transported from Madras to Guntur, as they were not covered by the way bill issued by the consignor, for which a penalty of Rs. 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench also took the view that the procedure laid down under the Andhra Pradesh General Sales Tax Rules, 1957, for seizure and confiscation of goods does not impose any unreasonable restrictions or confer any untenable or unguided power in the hands of the officers of the department and, therefore, does not infringe Articles 14 and 19(1)(f) and (g) of the Constitution. However, the learned Advocates for the petitioners contend before us firstly that the provision of section 28(6) offends Article 14 of the Constitution in that it contemplates seizure and confiscation of goods in respect of persons who make an attempt to evade the payment of tax and while in respect of persons who are actually found to have evaded, the maximum penalty prescribed under section 14 of the Act is only five times the tax, the power under section 28(6) is much more drastic and onerous than the power under section 14. The assessees who attempt to evade the tax and the assessees who actually evade the tax, it is submitted, are in the same position by circumstances or attainment, but the Act seeks to treat them differently, and that the classification is not based on real and substantial distinction, nor is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships were indicating that the correctness of the decision in Papanna's case(1) was open to doubt. We can find no justification for this assumption. Section 41(4) of the Madras General Sales Tax Act, which was being considered by their Lordships, is as follows: "Any such officer (i. e., any officer empowered by the Government) shall have power to seize and confiscate any goods which are found in any office, shop, godown, vessel, vehicle, 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, records and other documents maintained in the course of his business: Provided that before ordering the confiscation of goods under this sub-section, the officer shall give the person affected an opportunity of being heard and make an inquiry in the prescribed manner: Provided further that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation(a) in cases where the goods are taxable under this Act, in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater; and (b) in other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods exempted under section 8 or section 9, a penalty not exceeding rupees five hundred where the non-production of the way bill was wilful; (ii) in the case of goods other than those exempted under section 8 or section 9, a penalty equal to five times the tax leviable on the goods where the non-production of the way bill was wilful: Provided that before taking action for the levy of penalty as aforesaid, such officer shall give the person affected an opportunity of being heard while making an inquiry in the manner prescribed. " Section 29(4): "Where the penalty levied under sub-section (3) is paid, the goods so seized shall be released, but where such penalty is not paid by the person concerned within the time prescribed, such officer shall confiscate the goods so seized." It may be stated that section 25 provides that every person licensed or registered under the Act, every dealer liable to get himself registered under the Act and every other dealer who is required so to do by the prescribed authority by notice served in the prescribed manner, shall keep and maintain a true and correct account in any of the languages specified in the Eighth Schedule to the Constitution or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion and persons who have actually evaded, viz., Mohta & Co. v. Viswanatha Sastri[1954] 26 I.T.R. 1; A.1 R. 1954 S.C 545., Meenakshi Mills v. Viswanatha Sastri[1954] 26 I.T.R. 713 , A.I.R. 1955 S.C. 13. and S.C. Prashar v. Vasantsen[1963] 49 I.T.R 1; A.I.R 1963 S.C. 1356., are all cases in which the Supreme Court struck down the concerned provisions which sought to make a discrimination between the same or similar class of persons, unlike in this case. The first of the cases was dealing with income-tax evaders, specified in sub-section (4) of section 5 of the Taxation on Income (Investigation Commission) Act, 1947, and section 34 of the Indian Income-tax Act, 1922. These two classes of persons, their Lordships held, have similar characteristics and similar properties, the common characteristics being that they are persons who have not truly disclosed their income and have evaded payment of tax on income. Nonetheless, there was a discriminatory procedure prescribed for dealing with these two types of evaders, in that persons against whom proceedings are taken under section 5(4) of the Taxation on Income (Investigation Commission) Act were deprived of the right of appeal, second app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his contention because the provisions in sections 28(6) and 29(3) and (4) are regulatory provisions designed to prevent whether actual or attempted evasion of tax and is distinctly a class by itself. Of course, as we have already stated, the Legislature has been held to have ancillary or incidental power to legislate in this regard. Once it has the power, it alone has the wisdom to determine what measures would be necessary to deter the evasion of tax. The tax on sale of goods as well as excise duty or customs duty are indirect taxes, unlike taxes on property or income. The taxable event in the case of sale of goods is on the sale, while for excise it is the tax on manufacture and under the Sea Customs Act, it is the duty on the movement of goods across the customs barriers. The confiscation of the goods for contravention of the provisions of the Excise Act or the provisions of the Sea Customs Act for preventing the evasion of the respective taxes, though they are not direct taxes on the goods, would be within the competence of the Legislature and is not ultra vires or offend the provisions of the Constitution. In the reference under Article 143(1) of the Constitution, In re Sea Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smuggling might not be possible of being effectively checked, the question arises whether the law could be held to be violative of the freedom guaranteed by Article 19(1)(f) and (g) as imposing an unreasonable restraint. That the restrictions are in the 'interest of the general public' is beyond controversy. But is the social good to be achieved by the legislation so disproportionately small that on balance it could be said that it has proceeded beyond the limits of reasonableness? We would answer this in the negative." In our view, similar considerations would certainly justify us in holding that the prevention of evasion or attempted evasion of tax is the object which the Legislature is justified in achieving by the imposition of such deterrent as would be considered necessary for achieving that object. We do not think that the penalty of confiscation is such an unreasonable restriction, nor does it offend Article 14 because it is a class by itself and there is no discrimination as already stated. A reference to rules 45 and 48 would show that every dealer whose turnover is less than Rs. 40,000 per year shall keep and maintain a true and correct account in any language to show t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining ours*) and sub-rule (5) authorises the sale of the goods confiscated. Under sub-rule (6), if on enquiry under sub-rule (4), it is considered by the officer who seized the goods that the confiscation is not warranted or if any order of confiscation is set aside or modified, such goods shall be returned to the owner or any person authorised by him if they had not been sold in public auction. Sub-rule (7) deals Here italicised. with the confiscation order passed in respect of any goods, the ownership of which was not ascertainable before the order is passed and states that such owner of the goods or any person on his behalf may appear before the officer who ordered the confiscation and satisfy him with relevant records regarding the bona fides of the goods in question and regarding the reasons for his non-appearance. If the officer has been satisfied that there is no evasion or attempt at evasion of tax, he may order return of the goods, or the refund of the sale proceeds if such goods have already been sold. These rules would show that there is a power vested in the officer seizing the goods, to confiscate the whole or any part of them according to the circumstances of each ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed after consulting the factories and the Canegrowers' Co-operative Societies ..... and any order made by the Cane Commissioner thereunder is liable to an appeal to the State Government at the instance of the party aggrieved [vide section 15(4)]. The same is the position in regard to the orders made by the Cane Commissioner in the course of his management and supervision of the Canegrowers' Co-operative Societies and any order made by him in regard thereto is subject to appeal to the State Government at the instance of the party aggrieved (vide rule 63). If this is the position, it cannot be urged that wide powers are conferred on the Cane Commissioner which can be used by him in a discriminatory manner so as to violate the fundamental right guaranteed under Article 14." These observations apply with equal force to the contentions urged by Mr. Rama Rao. In our view, the provisions of sections 28(6) and 29(3) and (4) are neither violative of Article 14 or 19(1)(f) and (g). The contention that the provisions are expropriatory and violate Article 31 of the Constitution is without substance, as there is no acquisition of the property by the State, the confiscation of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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