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TMI Blog1987 (1) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... d representative of petitioner No. 2, at Jaipur. Petitioner No. 2 is having its registered office at C-3, Panki Industrial Estate, Kanpur, in Uttar Pradesh. The factory of the petitioner for manufacturing of scooter is also at Panki Industrial Estate, Kanpur in Uttar Pradesh. Petitioner No. I has placed an order for purchase of Vespa scooter with M/s. Lohia Machines Ltd., Kanpur in 1983. It is the case of the petitioners that petitioner No. 2 announced a scheme for booking of scooters by the intending purchasers from the general public and by the debenture holders of the company, under which the intending purchasers were required to make an application/place an order for booking of scooters to the petitioner-company in a prescribed form along with payment of Rs. 500, by way of booking advance. The applications made by the intending purchasers were thereafter scrutinised and valid applications were accepted by petitioner No. 2. The contention of the petitioners is that thus a contract came into existence between petitioner No. 2 and petitioner No. 1 for purchasing a scooter. The company sells scooters directly from Kanpur to the individual customers who have placed their orders with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly covered under section 3(a) of the Central Sales Tax Act (for short, the Central Act). The Government of Rajasthan has issued a notification dated 31st October, 1986, under which the provisions of rule 62-A have been amended and it has made compulsory for any customer importing in the State of Rajasthan, the motor vehicles including scooter, etc., the value of which exceeds Rs. 1,000, to produce a declaration in new form No. ST-18 at the check post in the State of Rajasthan, failing which the scooter is liable to be seized in terms of section 22-A of the Rajasthan Sales Tax Act. Petitioners' challenge is that the provisions of rule 62-A are ultra vires as the requirement of furnishing of form No. ST-18 as per rule 62-A by a person receiving the goods for his personal use is beyond the provisions of section 22-A of the Act and is also beyond the State's power to make laws as covered by entry 54 of List II of the Seventh Schedule of the Constitution of India. The case of the State is that on the basis of the facts disclosed in the writ petition, no agreement between the company and the intending purchaser is made out for the sale of scooter. In fact, the State has denied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the various documents referred to above, there remains no doubt that there is a contract of sale for selling Vespa scooter, between petitioner No. 2 and petitioner No. 1. I may mention here that in the writ petition there is a generalisation of facts, but without entering into the generalisation as far as the present petitioners Nos. I and 2 are concerned, there is a contract of sale between the parties. In the sale letter, it has been mentioned that the vehicle described in it has been sold to the customer whose name is given by M/s. Lohia Machines Ltd., Kanpur, in pursuance of the order of the customer placed with M/s. Lohia Machines Ltd., Kanpur. In the sale letter, engine No., chassis No., colour, model, etc., are given. In the despatch advice, there is a request for payment of the balance price through an account-payee demand draft in favour of M/s. Lohia Machines Ltd, payable at Kanpur. It also appears that the respondents were satisfied about the bona fide of transaction and after being satisfied form No. ST-18 was issued to petitioner No. 1. In this view of the matter, I am of the opinion that there is a contract of sale between petitioner No. 2 and petitioner No. 1. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Mysore [1963] 14 STC 175 (SC); (c) State Trading Corporation of India v. State of Mysore [1963] 14 STC 188 (SC); (d) Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes [1970] 26 STC 354 (SC); (e) Union of India v. K.G. Khosla and Co. [1979] 43 STC 457 (SC); (1979) 2 SCC 242. The said decisions clearly laid down that the only point to be kept in mind in determining the character of the transaction, whether it is inter-State trade or commerce, is to see whether the movement of goods has been occasioned by any contract of sale between the manufacturer and the purchaser. The Supreme Court clearly pointed out that if the movement of goods from one State to another is the result of covenant or an incident of contract of sale, then the sale is inter-State sale. In view of the clear proposition of law laid down by the Supreme Court, it is clear that in the instant case the sale is an inter-State sale. The next controversy that remains to be resolved is about the validity of rule 62-A of the Rajasthan Sales Tax Rules. Shri Jain, learned counsel for the petitioners, submitted that the provisions of the Rajasthan Sales Tax Act are applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis is that once it is held that the provisions have been made with a view to prevent and check evasion of tax, the same has to be taken within the competence of the State Legislature. I have given my thoughtful consideration to the submissions made by Shri Jain, learned counsel for the petitioners, and Shri Bapna, learned counsel for the State. There is no dispute between the parties that an entry in a legislative list must be read in its widest amplitude and, therefore, the legislature must be held to have power not only to legislate with respect to the subjectmatter of the entry, but also to make ancillary or incidental provisions in aid of the main topic of the legislation. Reference may be made to Kasturi Lal Harlal v. State of U.P. [1987] 64 STC 1 (SC); [1986] 4 SCC 704, in which other Supreme Court judgments have been considered and now this question is no longer res integra. The main attack of Shri Jain is that section 22-A of the Act clearly provides the powers of the State Government or the Commissioner to issue notification for the purpose of preventing or checking evasion of tax under the State Act and, thus, it is only with respect to the State Act that ancillary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unauthorised and consequently the same was quashed. A Full Bench of the Patna High Court in Harihar Prasad Debuka v. State of Bihar [1987] 66 STC 178 also considered a question of the same nature, wherein a notification was challenged which prescribed a declaration form to be carried on a goods carrier or in a vessel for transporting goods through the State of Bihar during the course of inter-State trade. The Full Bench considered in detail the case of Hansraj Bagrecha [1971] 27 STC 4 (SC); [1971] 1 SCC 59 and ultimately held that such a requirement under the notification is violative of articles 301 and 304 of the Constitution of India. The notification was quashed. In that case, their Lordships of the Patna High Court made the following observations: "15. Now, once it is found as above, it seems plain that the present case cannot be taken out of the ambit of the ratio of Bagrecha's case [1971] 27 STC 4 (SC); [1971] 1 SCC 59. Undoubtedly the goods merely passing in transit through the State of Bihar are not exigible to any State sales tax. Consequently, as held in Bagrecha's case [1971] 27 STC 4 (SC); [1971] 1 SCC 59 the State of Bihar has no competence or power of ensuring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried thereby have been sold within the State by the owner or person-in-charge of the vehicle". It raises a rebuttable presumption that the goods must have been sold in the State if the transit pass is not handed over to the officer at the check post or the barrier near the place of exit from the State. In the State Act, there is a provision in the form of section 22-B, which is of the same nature. Thus, the Sodhi Transport Company's case [1986] 62 STC 381 (SC) may be an authority for interpreting section 22-B of the State Act but it cannot be said to be an authority for the purpose of interpreting and considering the scope of section 22-A of the Act. In the Full Bench judgment of the Patna High Court, the case of Sodhi Transport Co. [1986] 62 STC 381 (SC) has been considered and it was distinguished. I am in agreement with the Full Bench judgment of the Patna High Court that Sodhi Transport Company's case [1986] 62 STC 381 (SC) does not in any way advance the case of the respondents. Rule 62-A clearly states about the inter-State sale. The relevant expression is: *"Koi mal rajya ke bahar se kray karna chahe tho wah prarup vi. ka. 18 men goshana karega aur prasthuth karega yaa kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the State Legislature is competent in enacting sales tax legislation to make a provision which is ancillary and incidental to any provision relating to levy, collection and recovery of sales tax and purchase tax. But a provision which is made by the Act or by the Rules, which seeks to prevent evasion of liability to pay intraState sales or purchase tax would, therefore, be within the competence of the legislature or the authority competent to make the rules, but the State Legislature has no power to legislate for the levy of tax on transactions which are carried in the course of inter-State trade or commerce. Rule 31-B and the notification issued by the State Government in Hansraj Bagrecha's case [1971] 27 STC 4; [1971] 1 SCC 59 were declared ultra vires by the Honourable Supreme Court on the same logic and analogy. There is no escape but to declare rule 62-A and the notification dated 31st October, 1986 ultra vires. Shri P.N. Bhandari, Commissioner, Commercial Taxes, Rajasthan, Jaipur, appeared in person in this case. While making submissions on his own behalf and on behalf of the State of Rajasthan, he candidly explained the circumstances in which vide notification dated 31s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad morality for anybody to so arrange his affairs as to reduce the brunt of taxation to a minimum. However, whenever it is noticed that a particular provision is being misused to escape from proper incidence of taxation, proper amendments are made in the Act or the Rules made thereunder. In case, the State feels that there are chances of evasion of tax and to check evasion, it requires certain particulars, the particulars may be demanded from the registered dealer, who is in the present case M/s. Sanghi Traders and Investments Pvt. Ltd., who is an authorised representative of M/s. Lohia Machines Ltd. and it is through him that the vehicles are delivered and demand drafts are collected. The particulars which are being sought from the customers may be collected from the authorised representative and the purpose of the State will be fulfilled. In the premises aforesaid, it is held that rule 62-A of the Rajasthan Sales Tax Rules introduced by the notification dated 31st October, 1986, prescribing a declaration form No. ST-18 and insisting on production of the said form at check post in Rajasthan where scooters are sent by petitioner No. 2 from Kanpur to the customers in Rajasthan who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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