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TMI Blog1991 (10) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is collusion for the purpose of evading tax. Sub-section (2A) authorises detention of vehicle also. Sub-section (2B) contemplates three contingencies. They are concerning reasonable belief on the facts, (i) that tax payable for the sale or purchase of goods under transport is not paid; or (ii) that the dealer, whose goods are transported, has not paid any tax in accordance with the procedure prescribed; or (iii) that he has, at any time, defaulted payment of tax for any period. In such cases, the officer can prevent the goods and he need allow the goods to be transported only after realising the tax due on the turnover of the goods transported. In case of refusal, goods shall be detained and dealt with as if it was an attempt to evade tax. Relevant portions of exhibit P2 contain executive directions to effectuate the abovesaid provisions. 3.. Section 5 of the Kerala General Sales Tax Act ("the Act", for brevity) contains the charging provision, which provides for levy of tax on sale or purchase of goods. Section 7(2) contains provision for permission on application to pay tax in advance on monthly or other prescribed instalments and for that purpose to submit returns also. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decisions cited before me by the petitioners, that if a statute enacts that a thing shall be done in a particular manner and in no other manner, any deviation will invalidate the proceedings. When a power is given to do a thing in a particular way, it must be done in that way or not at all. Other modes of performance must be taken to be necessarily forbidden. That principle has also no application to the facts of these cases, inasmuch as nothing seems to be done in violation of the statutory provisions. 6.. Distribution of legislative powers as between the Union and the States is dealt with in Part XI, Chapter I of the Constitution. As provided in article 246, List I of the Seventh Schedule is the Union List and List II is the State List. Entry 54 in the State List is taxes on sale or purchase of goods other than newspapers subject to the provisions of entry 92A in the Union List. That is the legislative power of the State. Entry 92A in the Union List is taxes on sale or purchase of goods other than newspapers when such sale or purchase takes place in the course of inter-State trade or commerce. That means, in respect of the legislative power of the State in entry 54, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods when such consignment takes place in the course of inter-State trade or commerce, in the items of taxes to be levied and collected by the Union, but to be assigned to the States. As pointed out in Goodyear India Limited's case [1990] 76 STC 71 (SC), it is well-settled that the entries in the Constitution only demarcate the legislative fields of the respective Legislatures and do not confer legislative powers as such. Tax on despatch of goods outside the territory of the State certainly is in the course of inter-State trade or commerce. In other words, it amounts to imposition of consignment tax, which is the exclusive prerogative of the Parliament. Entry 92B in List I will have to be given the widest interpretation. As a result of the constitutional changes introduced by the 46th amendment in article 269 read with the entry, tax on consignment of goods now comes within the exclusive legislative field of the Parliament. But the real question to be considered is whether the impugned provisions relate to any matter within the exclusive domain of the Parliament or not. In other words, one has to determine whether the impugned provisions amount to restrictions directly and imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Legislatures to impose tax on sale or purchase of goods and not on mere consignment of goods since consignment of goods simpliciter is neither a sale nor purchase or disposal of goods. 11.. Atiabari Tea Co. Ltd v. State of Assam AIR 1961 SC 232 also said that freedom declared by article 301 is not an absolute freedom from all legislations. Both the Parliament and State Legislatures are given powers to legislate in respect of trade, commerce and intercourse, though it is equally clear that legislation should not have the effect of putting impediments in the way of free-flow of trade or commerce. It is not an absolute freedom as is seen from entries 89 and 92A in List I, entries 52, 54 and 56 to 60 in List II and entry 35 in List III. The Union and the State Legislatures have the power to legislate by way of taxation so as not to erect trade barriers. Freedom under article 301 does not mean freedom simpliciter, but it only means freedom from taxation, which has the effect of directly impeding the free-flow of trade, commerce and intercourse. It is subject to the non-discriminatory restrictions imposed by Parliament in public interest under article 302. Automobile Transport (Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 29A only enables verification for the satisfaction that there is no tax evasion. Section 29A(2A) in such a situation only authorises security being enforced and the proviso authorises release of goods on execution of bonds also in appropriate cases. Section 29A(2A) deals only with a grave situation where a calculated act of collusion to evade tax is noticed. It authorises detention of vehicles also pending security. Section 29A(2B) authorises detention of goods for being dealt with in certain cases as if the transport was an attempt to evade tax in three contingencies. The first and second contingencies may not create any problem because they only deal with cases of evasion of tax concerning goods involved in the transport. But the third contingency stands on a different footing. It deals with cases of previous default for any period. That means, so far as the third contingency is concerned, section 29A(211) is intended as an enforcing provision for realisation of past arrears. That provision has no nexus to the object of avoiding tax evasion. It may act as an impediment in the free-flow of goods unconnected with the object of tax evasion. Previous arrears could be there for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances occur, parties could approach this Court also. There can be honest and dishonest traders and dealers. Anyhow, it is within the powers of the State to provide for measures which are only incidental or ancillary for enforcement of the tax liability. 15.. It was argued that the Act and Rules do not provide for collection of advance tax and that the assessee is having time till 15th of next month to submit returns and pay monthly tax in advance. It was also pointed out that the unit of taxation is the annual turnover and hence, liability could only be annual. For that purpose, it was pointed out that the taxable events cannot be taken as individual sales or purchases. I do not think I will be able to agree. If an individual sale or purchase goes beyond the taxable limit, that by itself is a taxable event, even though the annual tax as a whole, on the basis of the transactions for the whole year, may be the limit. In spite of the provisions of assessment and recovery, annually or at periodical intervals after submission of returns, the right to make collection in the event of attempts at evasion of tax is ancillary or incidental to the powers of realisation of tax. Such power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of articles 19(1)(g) and 301. It was thereafter that section 29A was introduced and its validity was again upheld in P.K. Aboobacker v. State of Kerala [1979] 44 STC 250 (Ker). Section 29A(2A) and (2B) were introduced only thereafter. Counsel, on behalf of some of the petitioners, said that the decision in [1970] 26 STC 45 (Ker) [FB]; (1970) KLT 154 (Yogesh Trading Co. v. Intelligence Officer of Sales Tax) in relation to less drastic provisions is sufficient authority for holding that section 29A(2A) and (2B) of the Act, which include more drastic provisions, is unconstitutional. But the argument of the Government Pleader was that the decision in [1970] 26 STC 45 (Ker) [FB]; (1970) KLT 154 (Yogesh Trading Co. v. Intelligence Officer of Sales Tax) is even now pending appeal before Supreme Court and that the decision could be taken as impliedly overruled in view of the decision of Supreme Court in Maharaja Tourist Service v. State of Gujarat AIR 1991 SC 1650. 17.. Check Post Officer v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC) said that the provisions for confiscation cannot be taken as an ancillary power. But that provision was enacted on the assumption that goods carried in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not depend upon taxes alone. Article 304 is an exception to article 301 and the exception need be resorted to only if the tax impugned is hit by articles 301 and 303. If not, article 304 will not come into the picture at all. Article 301 is only to prevent discrimination against imported goods by imposing tax on such goods at a rate higher than that borne by local goods. Discrimination in such a case would depend upon a variety of factors, including the rate of tax, and the item of goods in respect of the sale, on which it is levied. The concept of economic barrier must be adopted in a dynamic sense with changing conditions. What constitutes an economic barrier at one point of time often ceases to be so at another point of time. 19.. There is no point in contending that article 14 is also violated. The equality clause contained in article 14 of the Constitution requires that all persons subjected to any legislation should be treated alike under like circumstances and conditions. Equals will have to be treated equally and unequals ought not to be treated equally. Though article 14 prohibits classification, it permits classification for the purpose of implementing the right of equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., the choice of a course which reason dictates. In considering these aspects, as held in Shashikant Laxman Kale v. Union of India AIR 1990 SC 2114, it is permissible to look into the circumstances which prevailed at the time when the law was passed and which necessitated passing of that law. For that limited purpose, the Statement of Object and Reasons could be looked into. The objects and reasons behind the impugned provisions are checking tax evasion and malpractices rampant at that time and inadequacy of the provisions for that purpose. There may be honest and dishonest dealers. To deal with dishonest dealers for the purpose of avoiding evasion of tax, stringent measures may be necessary. If all these provisions are struck down, the economy of the State will be in jeopardy and the situation will be a blessing to dishonest dealers. 21.. The only provision that is liable to be struck down is the authorisation given in section 29A(2B) to detain the goods and deal with them in the manner provided for as if the transport of goods was an attempt to evade payment of tax in cases where the officer has reason to believe that the dealer has at any time defaulted tax for any period. I s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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