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TMI Blog1995 (7) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... evasion of tax in any place or places in the State, it is necessary to do so, it may, by notification in the Official Gazette, direct that such number of check-posts shall be set up or such number of barriers shall be erected at such places as may be specified in the notification. (2) At every check-post or barrier set up or erected under sub-section (1), the driver or any other person-in-charge of any vehicle, boat or animal shall stop the same, and keep it stationary so long as may reasonably be necessary, and allow the officer-in-charge of the check-post or barrier to examine the contents in the vehicle or boat or on the animal and inspect all records relating to the goods carried in the vehicle or boat or on the animal which are in the possession of such driver or other person-in-charge who shall, if so required, give his name and address and the names and addresses of the owner of the vehicle, boat or animal as well as of the consignor and consignee of such goods; and where any of the consignors or consignees is a dealer registered under this Act or the Central Sales Tax Act, 1956 or relevant Act in any other State, the driver or any other person-in-charge of the vehicle, bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -in-charge of the check-post or barrier may, during inspection and verification of goods under transport including the documents and records relating thereto, direct the carrier not to part with the goods including re-transporting or re-booking until verification of goods, records and documents is done or enquiry, if any, is completed. Explanation.-In this section (a)'goods vehicle record' means the documents required to be carried by the driver of a transport vehicle under the Motor Vehicles Act, 1939 (4 of 1939) or the rules made thereunder; (b)'log book' means a register statement or other record containing particulars of the goods under transport; (c)'trip sheet' means a sheet or other documents containing particulars relating to the tripwise use of a transport vehicle, required to be carried by the driver under the Act referred to in clause (a); (d)'goods under transport' means goods which have been handed over to a carrier and complete delivery thereof has not been taken from such carrier; (e) 'carrier' means any person or agency who undertakes to carry or transport goods from one place to another." In pursuance of the aforesaid provisions, rule 62-A was ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler within the State (hereinafter referred to in this rule as the 'importer') intends either by way of purchase or otherwise, to bring, import or receive any specified goods from a place outside the State of Gujarat, of the value of rupees five thousand or more for use, consumption or disposal within the State, he shall make and furnish or cause to be furnished a declaration in form 45-B, Explanation.-For the purpose of this rule, specified goods means cement. (b) Form 45B shall be obtained by making a simple application to the Sales Tax Officer concerned of the area where the importer ordinarily resides. Such application shall bear a court fee stamp of rupees two for each form. The counterfoil of the declaration shall be retained by the importer and portions thereof marked original and duplicate shall be produced before the officer-in-charge of the check-post, who shall retain such original portion and return such duplicate portion duly sealed and signed in token of having verified it to the importer producing it. Provided that such application shall be rejected if the Sales Tax Officer is satisfied that such form is not required for bona fide use. (c) An importer obtaining f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porter of cement who is other than a registered dealer form 45-C is to be furnished by an importer who is a registered dealer. It is further to be noticed that if it is form 45-B, it is to be obtained from the Sales Tax Officer concerned of the area where the importer, in case of not being registered dealer, ordinarily, resides; in case of registered dealer the form 45-C is to be obtained from the registering authority. The issuance of form 45-C has further been subjected to fulfilment of requirement of provisions of sub-rules (3) to (12) of rule 24-A and clauses (e) and (f) of rule 24-B of the Gujarat Sales Tax Rules. While sub-rules (3) to (12) of rule 24-A deal with the situation arising from loss, destruction or theft of the specified forms issued under the rules or the blank forms left with the dealer on his registration certificate being cancelled which are not very relevant for the present purpose. Rule 24-B, clauses (e) and (f) prescribe conditions for issuing the form itself and have a bearing on the controversy raised before us, the same are reproduced hereinbelow: "24-B. Conditions to be fulfilled for obtaining from the registering authority books containing forms pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from: Signature and designation of issuing authority. Declared and certified that the details of the goods covered by the above permission are as under: Name and complete address of the: (1) (a) Out-State consignor: (b) A certificate of registration No. of the consignor. (i) under the.........(mention the name of the State) Sales Tax Act (Certificate No.)........... (ii) under the Central Sales Tax Act, 1956.......... (2) Name and complete address of the importer (consignee) (3) (a) Name and complete address of the agent, person, broker through whom the order is booked. (b) A certificate of registration No. of such agent, person, etc. (i) under the.........(mention the name of the State) Sales Tax Act, (ii) under the Central Sales Tax Act, 1956..................... (4) Copy of the order so placed is attached. (5) Complete address including the name of: (i) District (ii) State, from which the goods are despatched. (6) Complete address of the destination including the name of (i) Taluka (ii) District of the State to which the goods are despatched: (7) Description of goods. (8) Quantity and the weight of goods. (9) Value of goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate........to be presented along with this declaration for inspection). (12) Details of the transport such as: (i) Truck No...... (ii) L.R. No. date....... (iii) Name of the transporting company. (13) Signature and designation of the signatory. According to the averments made in the petition prior to November, 1993, on the representation of cement manufacturers in the State of Gujarat, the then Chief Minister of the Gujarat State made a public statement that the directions were given to the State Government to take certain measures for protecting the interest of cement manufacturers in Gujarat. It was in consequence of that the impugned notification was issued. In reply thereto, the following averments were made by the respondents on affidavit narrating the circumstances which led to insertion of the impugned sub-rules in rule 62-A in the Gujarat Sales Tax Rules, 1970. "4. In exercise of its powers under sub-section (5) of section 8 of the Central Act, the Government of Rajasthan reduced the rates of tax on inter-State sales of cement first to 7 per cent and then to four per cent and dispensed with requirement of'C' form. The effect of this reduction of rate of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om any place outside the State of Gujarat, they will be required to give a declaration. (iii) With a view to implement the aforesaid decision, the Gujarat Sales Tax Rules, 1970, were amended by re-numbering rule 62-A thereof as 62-A(1) and inserting sub-rules (2) to (6) therein and appending forms 45-B and 45-C thereto. 6.. That in the matter of taxation, the Legislature enjoys wide latitude and has powers to provide for all matters ancillary or incidental to the legislation. Further, that there is no precise or set formula or doctrine tests of precise of the felt needs of the times and exigencies of situation. That in the situation narrated hereinabove, the State Government had to consider two options as follows: (1) to reduce the rate of tax on sale of cement under the local Act, or (2) to create a regulatory machinery which would while not restricting or undermining freedom of inter-State trade or commerce minimise, if not totally remove, the possibility of any undue advantage being taken in the guise of effecting an inter-State sale or purchase. The State Government felt that reducing the rate of tax on sale of cement under the local Act would adversely affect reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consignor or the carrier who is otherwise supposed to divulge the same information under the parent provision. The requirement from the consumer importer or the registered dealer within the State of Gujarat to furnish this declaration to the carrier to be carried along with goods directly results in making the goods stationary until the information is received by the importer from the consignor and/or transporter after the goods have been subjected to invoice, delivery to the transporter, and the vehicle or the other carriage is identified in which the goods are to be carried and, thereafter, the declaration is filled in by the importer under his signature and delivered to the carrier. Therefore, until the declaration duly filled and signed by the importer is delivered after the goods have been ready for delivery, the goods have to be kept stationary at the transporter's end or it implies that all transactions must be carried on in the presence of the importer and the man must be deputed and stationed at the place of despatch to collect necessary information and deliver it to the carrier at that stage or to keep a track of the movement of goods from the place of despatch until ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local manufacturers of cement from the competitive market. Therefore, the exercise of powers in framing rules is not only ultra vires the parent Act and provisions of the Constitution but is colourable exercise of the powers by delegate. In this connection, it was also argued that if the purpose for which the rule 62-A(2) and (3) has been framed and subjected to condition prescribed in rule 24-B(e) and (f) is prevention of tax evasion then there is no discernible reason why such provisions have been made applicable only to the commodity known as cement and that too only to the transaction of import. It cannot be said that there is any specific problem of evasion of tax related to import of cement requiring a special treatment for that purpose for which, according to the petitioners, there is no clue in the return furnished by the respondents. If that is not so, then the provision per se not only violates articles 303 and 304(a) of the Constitution but also articles 14 and 19(1)(g) affecting the freedom of trade of citizens unreasonably. That discrimination on account of unreasonable classification is stamped on the face of it. It is also the contention of the learned counsel tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 987] 66 STC 204, a decision of the Rajasthan High Court. It was strongly contended by the learned counsel for the Revenue that section 59-A is a provision enacted for preventing evasion of tax. It authorises the State Government, the rule-making authority, to prescribe any document containing requisite information to be carried along with goods by the transporter. In exercise of that power, it has been prescribed that impugned declarations be furnished by the importer of the goods to be carried by the transporter. The information required from the importer is all relevant information which has nexus to the question of preventing avoidance and evasion of tax in respect of the goods which on being imported become mass of the property within the State and is liable to be dealt with the registered dealer or the consumer within the territory of State which may attract liability of tax. The fact that the information is required from the importer and not from the driver is of little importance so long the required information is relevant. It is not important from whom the information is required. It was urged by the learned counsel that though rule 62-A introduced originally requiring d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of goods for making levy of tax workable with the purpose of achieving object of preventing evasion of tax in any place or places in the State. The goods during the transport can be subject to inspection at check-post created for that purpose within State and the carriage can be kept stationary as long as required for that purpose. As such provision could affect unfettered free-flow of trade, the provision was inserted vide President's assent in terms of article 304(b). The purpose of the parent provision is disclosed in wordings of section 59-A(1) itself. Secondly, the information required through declaration in forms 45-B and 45-C is relevant and not de hors the purpose. The contention is in respect of person from whom such information is required and the condition which has been imposed on such person for obtaining the requisite forms for importing the cement from outside the State of Gujarat. As the impugned provisions of the rules and the forms appended thereto have been challenged both on the ground of having been made in excess of authority conferred by the parent Act in this regard and also being in contravention of the provisions of the Constitution, more specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the declared purpose, Lord Redcliffe said: "How then, can a court of law decide that the vesting was for another and extraneous purposes or hold that what the Governor-in-Council has declared to be necessary is not in fact necessary for the purpose he has stated. There is no warrant at all for presenting this as a case in which powers entrusted for one purpose are deliberately used with design of achieving another itself unauthorised or actually forbidden. If bad faith of that kind can be established, a court of law may intervene." These principles were reiterated by Court of Appeal in Mc. Eldomney v. Forde [1969] 2 All ER 39, by Lord Mc. Dermolt, C.J. In Sant Saran Lal v. Parsuram Sahu AIR 1966 SC 1852, the Supreme Court had occasion to examine the scope and ambit of rule-making power conferred by section 27 of the Bihar Money Lenders Act to prescribe the form of registration certificate and particulars to be included in an application made for the purpose of being registered as a money-lender. The rule-making authority authorised the registering authority to mention maximum amount up to which the money lender could transact his business under the registration certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the enabling Act? and (6) whether the provision infringes any of the fundamental rights or other restrictions or limitations imposed by the Constitution? To see what is the authorisation, we shall first have to look at the enabling provisions. Section 59-A of the State Act has been enacted for the purpose of enabling the State Government to establish check-posts at any place or places within the State for the purpose of preventing evasion of tax in any place or places within the State. For achieving that purpose, further empowers the officer-incharge of the check-post or barrier to stop the vehicle, boat or animal carrying goods and to examine the contents in the vehicle, boat or on the animal, which are in the possession of the driver or other person-in-charge of the goods. The driver or other person-in-charge of the goods have to meet with certain obligations when so required to stop the vehicle, boat or animal by the officer-in-charge of the check-post or barrier. In furtherance of the very object, it has further been designed that the driver or other person-in-charge of the vehicle, boat or animal is required to give his name and address, name and address of the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depending upon whether the movement of the goods has directly occasioned as a result of sale or not? In the case of goods coming from outside there is no such liability of the State tax on that transaction is attracted, yet the provisions can be reasonably related to preventing of apprehended evasion of tax which is likely to arise as a result of dealing with the goods after the same has become part of the mass of the property within the State and is dealt with within the State thereafter. The list of the documents to be carried along with the goods has been described in the provision itself. The limited authority for the purpose of this provision which has been conferred on the rule-making authority is to prescribe documents other than mentioned in the Act relating to goods and containing such particulars as may be prescribed. At the same time a separate independent provision has also been made for securing "declaration" relating to particulars of goods carried in the vehicle which is to be obtained from driver or other person-in-charge of the vehicle. Originally, under rule 62-A as reproduced above, the rule-making authority prescribed form 45-A in which declaration required u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over as collateral security to furnish with the papers or the documents for the manifestation of the ownership and cargo. The declaration in contract has been defined to mean "a simple affirmation allowed to be taken in certain cases instead of oath or solemn affirmation". Parent Act deals with tax on sale or purchase of goods. It is relating to such goods that documents are required to be carried along with the goods by the transporter. In this context, the "document" relating to goods containing prescribed particulars can only mean such documents as are used in the ordinary course of business as proof of the possession or control of goods and proof of dealing with the goods by the consignor and consignees, whether as owner, transferor, transporter or otherwise. A declaration of certain statement of facts or divulging certain information only is not in the ordinary sense of the commercial world with whom the statute deals, a document relating to goods. In the context of the provisions, the word "documents" has been used in the sense of some form of written proof which discloses the connection of such goods with the consignee and the transporter which is a primary evidence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f-contained provision and confers a limited power on the rule-making authority for prescribing documents to be carried along with the goods, did not authorise the rule-making authority to obtain declaration of any person other than the driver or person in-charge of the vehicle, boat or animal carrying goods in exercise of the powers. In this connection, it is further to be noticed that by the impugned rules 62-A(5) and (6), the issuance of form 45-C has further been made subject to clauses (e) and (f) of rule 24-B, i.e., to say making of declaration itself by the importer has been made possible only in case he has satisfied the conditions of rule 24-B(e) and (f) noticed hereinabove. The power conferred under section 59-A(3) is limited to the extent of prescribing documents to be carried along with the goods by the carrier and the same to be produced when called upon to do so by the officer-in-charge of check-post or the barrier. As noticed above, in such a case, the exercise of power has to be justified within the scope and ambit of the power conferred and if the power has been exercised beyond the authority, the same is invalid. The provision nowhere authorises the rulemaking au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a form of permit which was to be filled by the permit holder before the Transport Officer. From the aforesaid provisions, it is apparent that the Bihar Act has specifically empowered carrying on a declaration distinct from "documents", in such form as has been prescribed by the Commissioner. The declaration was not statutorily required to be furnished by the driver only as is the case under the provisions of the Gujarat Sales Tax Act with which we are concerned. Section 35 of the Bihar Finance Act, specially provided for authorising restriction on movement or exit of goods by subjecting the same to "permit" rule which provision was not challenged. There is no such provision like section 35 of the Bihar Act under the State Law authorising rule-making authority to subject the import of any commodity to the issue of permit by officer authorised to issue form of declaration. Therefore, in our opinion, the scheme with reference to which the question had arisen before the Supreme Court in Harihar Prasad's case [1989] 73 STC 353; AIR 1989 SC 1119 was entirely different from the one with which we are concerned and has no bearing on the question whether the rule-making authority has exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibits the Parliament as well as the State Legislature from making any law making or authorising preference to one State over another or making or authorising of making discrimination between one State and another by virtue of any entry relating to legislative powers of the Parliament or State Legislature as per the Lists enumerated in the Seventh Schedule. At the same time, it makes room for making laws by the Parliament alone for giving preference or making discrimination only in the case of a situation arising from scarcity of goods in any part of the territory of India if a declaration to that respect is specifically made by any such law. That is to say permissible criterion for preferential or discriminatory treatment in this regard is fixed by the Constitution itself leaving out the scope of bringing in other criterion for making laws for the purpose of giving preference to one State on other in the matter of trade, commerce or other intercourse. On that anvil law restricting export of a commodity from scarce area to other area can be justified but not the restriction on import within the State. Article 304(a) acknowledges the right of the State Legislature to legislate any l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature in question will have to be judged in the light of the relevant articles of Part XIII. Article 301 applies not only to inter-State trade, commerce and intercourse, the freedom of trade guaranteed by article 301 is freedom from all restrictions except those which are provided by the other articles in Part XIII. The court was dealing with a tax imposed by the Assam Taxation (on Goods carried by Roads or inland Waterways) Act, 1954. The Act was passed by Assam Legislature in order to provide for tax on certain goods transported by road or inland waterways in the State of Assam. The court held that: "..........restrictions, freedom from which is guaranteed by article 301, would be such restrictions as directly and immediately restrict or impede the free-flow or movement of trade. Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301. In determining the limits of the width and amplitude of the freedom guaranteed by article 301 a rational and workable test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement?" On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State, all restrictions which directly and immediately affect the movement of trade are declared by article 301 to be ineffective. It must be taken as settled law that the restrictions or impediments which directly and immediately impede or hamper the free trade, commerce or intercourse fall within the prohibition imposed by article 301 and subject to other provisions of the Constitution, they may be regarded as void." In Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4 (SC); (1971) 1 SCC 59 the court was concerned with validity of levy of purchase tax on jute under section 3-A of the Bihar Finance Act and rule 31-B prohibiting the transporting of goods outside the State except on obtaining a despatch permit in the prescribed form. Justice Shah, speaking for the court after considering the decisions in the cases of State of Madras v. N.K. Nataraja Mudaliar [1968] 22 STC 376 (SC); AIR 1969 SC 147, Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232, Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan AIR 1962 SC 1406, Firm A.T.B. Mehtab Majid and Co. v. State of Madras [1963] 14 STC 355 (SC), concluded that: "it must be taken as settled law that the restrictions or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibit transport of goods to any place outside the State of Bihar unless a certificate is obtained from the appropriate authority, it seeks to prohibit transport of goods pursuant to transactions which may not even be of the nature of sale or purchase transactions: in any case, it restricts transport pursuant to transactions in the course of interState trade and commerce. The operation of the rule is not restricted only to transactions in the course of intra-State trade and commerce. The rule authorises restrictions on inter-State transactions and is on that account unauthorised." In Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1119 the court held: "Whether there is a violation of the freedom guaranteed by article 301, one has to scrutinise whether the impugned legislative or executive act operates to restrict or barricade trade, commerce or intercourse directly and immediately, as distinct from creating some indirect or inconsequential impediment which may be regarded as remote. In other words, regulatory or compensatory measure cannot be regarded as violative of the freedom. Such measures may be of diverse nature or various kinds such as traffic regulation, making o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nor has it authorised laying down any condition for carrying of document along with the goods or for furnishing the declaration. So far as rule 62-A(2) and (3) prescribes the forms 45-B and 45-C for declaration by importers, assuming for the present purposes that a declaration of this sort could be prescribed as documents to be carried within the meaning of section 59-A(3)(a), the act of prescribing declaration by itself prima facie does not result in restriction on movement of trade. We notice from forms 45-B and 45-C that the provision is not merely for making a declaration but a declaration which can be made only on fulfilment of certain conditions. While the form 45-B envisages a permission by the prescribed authority to import the specified goods in the State of Gujarat and is only on such permission that the goods can be imported, obtaining form 45-C itself has been subjected to the conditions prescribed under rule 24-B(e) and (f) quoted above. Before the form can be obtained by the registered dealer, he has to satisfy the registering authority that all the returns due up to the time of making the application for obtaining form have been filed within the prescribed time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisite authority. That is to say, irrespective of the fact whether the returns have been made but if the same have been late, irrespective of the fact whether the levy of tax has been challenged and recovery are pending; or that the tax, penalty or interest has been the subject-matter of any dispute and any interim orders of the court or other appropriate authority, the registering authority is empowered to withhold the issuance of the form of declaration, which is only to serve as a purpose for collecting information in respect of the goods under movement, to keep track on future transaction that might take place within the State and the condition is imposed directly with reference to the purchase transaction made with an outside seller in present. In our opinion, such requirement under a taxing statute dealing with a tax which is not regulatory results in direct and immediate impediment of the free-flow of trade which is incidental and consequence of the sale and is not related to the regulatory measures for facilitating the trade throughout the frontiers of India. It may be pertinent if reference is made in this connection to Sodhi Transport Co. v. State of U.P. [1986] 62 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax has been delayed or tax has not been paid on account of pendency of disputes relating to levy does or for the like reason nor is the case of the State that the dealer is not entitled to trade at all in the eventuality of conditions of sub-rule (3) being not satisfied. That is to say a registered dealer is not precluded from intra-State or inter-State trade or any trading activity resulting in export when the transactions really may attract the levy and imposition of tax, etc., but the restriction has been imposed on the import of cement, a transaction on which the State tax is attracted, i.e., to say question of evasion and avoidance of State tax is not involved in the case of import and it is only that activity has been subjected to the impugned provisions. It is only that the subsequent dealings with cement may attract the State tax and it is alleged that for preventing the evasion and avoidance of tax on such subsequent transactions the provision has been made. If that were so, it does not stand to any reason that while a dealer is free to trade in the same commodity in respect of the transactions which are intra-State or which result in movement of goods outside the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objection on the ground that the presumption was a rebuttable one which is clearly a rule of evidence, has the effect of shifting the burden of proof and the provision was enacted to prevent the evasion of tax. So far as legislative competence to impose tax on the presumption was concerned, it was held to be intra vires by holding that it was a machinery provision for levying of tax which prevents evasion of tax otherwise liable to pay by holding it to be a rebuttable presumption. The court held that they (section 28 of the Act and rule 87 of the Rules) are introduced as stated earlier to check evasion and to provide a machinery for levying tax from person who dispose of goods inside the State and avoid tax which they are otherwise liable to pay. The law provides enough protection to them and makes enough provision to enable them to show that they are in fact not liable to pay any tax. As far as the ground of violation of article 301 concerned, it was held that: "...........restrictions imposed are not also shown to be unreasonable. They do not unduly hamper trade. On the other hand they are imposed in the public interest." From this, it is clear that the provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IR 1989 SC 1119. It would be appropriate, while considering this case, to notice the relevant provisions of the Bihar Act under which the matter had arisen. Under the scheme of the Bihar Act, section 34 provided setting up of check-posts or barriers with a view to preventing evasion of tax payable under that part of the Act. Sub-section (2) of section 34 authorises the State Government to prescribe by a notification to file a correct and complete declaration in such form and the manner prescribed. Section 35 authorises certain restrictions on movement of the goods by laying down that no person shall transport from any railway station, steamer station, airport, post office or any other place any consignment of such goods exceeding such quantities as may be specified in the notification except in accordance with such conditions as may be prescribed and such conditions shall be made with a view to ensure that there is no evasion of tax payable under this Act. Section 31 of the Bihar Finance Act provided of clearing and forwarding agents, wherein sub-section (2a) was inserted by the Finance Act, 1984, which provided that: "A person transporting goods shall carry a declaration in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it holder before the transport of goods. The names and addresses of the dealer and the consignor as well as the consignee must be filled in and equally the number of vehicle where the same is used. The requirement that such form should be filled in before the transport, ordinarily requires that same must be first sent to consignor in advance including the number of goods carrier which may not be issued in the State of origin of declaration. Goods may have to be transported from one vehicle to another and it is difficult if not impossible to postulate all the details required by the various columns of the prescribed form which may some times be difficult if not impossible of performance. Enumerating such other difficulties, the court held that the impugned provision results in impeding and obstructing, though not perhaps prohibiting the movement of the goods which may neither originate in the State nor are intended to be consumed in the State and are not exigible to any State tax being primarily in the course of inter-State trade and commerce and held the same to be ultra vires articles 301 and 304. When the matter came up before the Supreme Court, the principal factors which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of such declaration, and that the required particulars are to be furnished by carrier at the time of entry in the State when requisite information is with him and, therefore, the provisions which have been made is ancillary to the levy of tax for preventing evasion. The stoppage of goods for checking for obtaining and filling up the forms does not result in direct and immediate restriction in inter-State trade or commerce. It is to be noted that as per the rule and the Act under consideration by their Lordships, the declaration was to be furnished by any person transporting the goods. The rule did not require the declaration to be furnished by importer. However, the same cannot be said in the present case. The fact that carrier is not a person who can furnish the requisite information in terms of impugned provisions, as was the case before their Lordships in Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1119, is apparent from the written submission made by the learned counsel for the respondent in which it has been stated: "The State could require the purchaser to sign the documents at the checkpost and no objection could be taken thereto. The check-posts are loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust remain stationary until such declaration form under the signature of the declaratory reaches the transporter or in the alternative, the goods after their being entering the State of Gujarat are made stationary until further information about its entry and place is furnished to the importer and he manages to transmit his declaration to the transporter for being delivered to the officer-in-charge of the check-post or barrier before the carrier reaches such check-post or barrier. If the goods reaches the check-post or barrier and at the time of checking is not accompanied by such a declaration, the subsequent furnishing of declaration fulfilling the requirement is not envisaged by the impugned rules. That apart, purpose of seeking declaration is to secure information or evidence in the form of statement consisting particulars of the goods being imported within the State. It is the requirement of the Act itself that such particulars are to be furnished by the driver or person-in-charge of the goods. That requirement cannot be done away with and substituted with another declaration by the rule-making authority as discussed hereinbefore. As has been contended before us that as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the State of Gujarat and the similar goods manufactured outside the State when imported from other States and whether the impugned rules having been made in colourable exercise of rule-making powers to make law for preventing evasion of tax. As we have noticed earlier, articles 303 and 304(a) limits the legislative powers of the Parliament as well as the State Legislature to make law including law imposing tax which discriminates between the goods imported from other States or giving preferential treatment to the goods manufactured within one State over the goods manufactured in another State. In State of Rajasthan v. Ghasiram Mangilal (1969) 2 SCC 710, State of Rajasthan had exempted sale of bardana from tax at the hand of first importer in the series of sales in the State. In the said notification, the first importer selling bardana in the State of Rajasthan was subjected to tax and the tax was levied. That action was challenged. The Rajasthan High Court upheld the challenge and declared the sale of bardana on the first point to be in violation of articles 301 and 304(a). The decision of the High Court was upheld by holding that the decision of the High Court is apparentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able only in the case of importer of cement and no other commodity. The importer of cement has been subjected to two conditions which a purchaser of cement within the State or exporter of cement outside the State has not been subjected to. In State of Tamil Nadu v. Sanjeetha Trading Co. AIR 1993 SC 237, the court while sustaining the prohibition imposed on movement of timber outside the State while upholding the prohibition on the ground of it being a declaration an essential duty under the Tamil Nadu Essential Articles Control and Requisitioning (Temporary Powers) Act (29 of 1949) observed that: "The matter may be different where total prohibition has been imposed on the movement of goods or articles from one State to another which have not been declared to be essential commodities or articles. In those cases the State, which has imposed such ban, has to satisfy the court that in spite of total prohibition it amounts only to regulation of the trade in such articles or that even if it was a restriction it was reasonable within the meaning of article 304(b) of the Constitution and has been imposed by law as required by article 304(b). Sometimes it is being said that many artific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from outside. If a Legislature at any stage of imposition of tax gives preference and does not subject locally manufactured goods to the same rigours to which goods manufactured outside the State and brought into the State, are subjected, it would be clearly violative of article 304(a). Article 304(a) does not make any distinction between the law which falls in the category of restrictive or regulatory. The preference of local goods over the imported can be manifested at any stage of imposition and levy of tax by subjecting it to such conditions to which local goods are not subjected to. If the substance of taxing law is to give preferential treatment to local goods over the imported goods, it transgresses the limits of article 304(a). Moreover, article 303 which prohibits making of any law by Parliament or State Legislature, provide only one exception and that is to meet the situation arising out of scarcity of any goods in any part of the country. According to it, while export of goods from scarce State to outside may be prohibited, but no such differentiation can be made in the framing of law in the matter of inflow of any goods from other State within that State and such la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the hands of the State. Article 19(1)(g) guarantees freedom of trade, subject to reasonable restrictions. Part XIII makes trade, commerce and intercourse throughout the territory of India free, imposing limitation on the exercise of legislative power, whether by the State or the Union, except to the extent provided under articles 302 to 304. Articles 303 and 304(a) as noticed above, prohibit Union as well as the State within the sphere of their respective legislative power to make any law which discriminates between the goods manufactured in one State and the goods manufactured in another State. That is to say, it is a specie of provision against discrimination guaranteed in its magnificient amplitude under article 14 cutting at the roots of all arbitrariness and unreasonableness. To the extent article 19 ensures freedom of trade for the individual and article 301 ensures free trade, commerce and intercourse, throughout the territory of India, there are tones of overlapping in the field of their respective operations, apart from the fact that article 19(1)(g) confers a fundamental right to the citizen of the country, article 301 confers a justiciable right as distinct from funda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the reply, which relates to this differential treatment given to cement for treating it differently from other commodities in the matter of subjecting to the rigours of impugned rules 62-A(2) to (6) and forms prescribed therein. It cannot be said nor any such case has been made out that cement or dealers in cement have any particular feature or special tendency in respect of evasion of tax for their being dealt with within the State after import than dealing with other commodities imported in the State of Gujarat from outside Gujarat. The law is well-settled that a classification in order to be reasonable must be shown to be founded on reasonable criteria having rational nexus to the purpose sought to be achieved. We are conscious of the fact that in the matter of taxing statute the State has wide discretionary power in chosing the commodity to be taxed and prescribing rates but not beyond the part of article 14 and the test of reasonableness. Present is not the case of taxing cement at different rate. In fact, article 304(a) prohibits prescribing different rate of tax on the same commodity on the basis of its origin. Once tax has been imposed on various commodities and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples were restated in S.P. Mittal v. Union of India AIR 1983 SC 1. If we look for the reason with reference to object for which the rules are purported to have been made, no reasonable basis for the classification appears on the face of the rule nor is deducible from the surrounding circumstances or matter of common knowledge, how the cement as a commodity on being imported, a transaction which does not attract levy of any tax within the State of Gujarat stands differently from other commodities imported within the State of Gujarat for the purpose of preventing evasion of tax, occasion of which may arise on its subsequent dealing by the importer within the State of Gujarat after it has become part of the mass of the property within the State of Gujarat. Any other commodity like cement if imported from a place outside the State of Gujarat and is dealt with in the same manner by a consumer importer or by a registered dealer imported by the same methodology as is applicable to cement, what are the special features which put cement and dealers of cement as a class by itself qua the purpose for which rule could be made and is alleged to be made by the State. If we scan surroundin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this object is not disclosed nor is discernible otherwise from surrounding circumstances. From the perusal of paras 4, 5 and 6, it is apparent that it was the situation arising from purchasers of cement having been attracted to making purchases from outside the State resulting in lesser taxable transactions in cement taking place within the State, prompted to create a device so that the local purchaser desist from purchasing cement from outside the State. To achieve that object, the impugned methodology has been adopted out of the various alternatives thought by the State. That object has nothing to do with the object of preventing evasion of tax for the purpose of which power of prescribing documents to be carried along with goods have been conferred on the State. The provisions in question are not only confined to "cement" but are further confined to import of cement. It is not in dispute that the transactions under which transport of cement is made subject to rules do not by itself involve any evasion of tax with which State of Gujarat is concerned. The only justification that is stated is that after the import of cement, it becomes assimilated with the mass of property of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measures vis-a-vis article 301 had expressed clearly: "Such measures cannot be challenged as interfering with the freedom guaranteed by article 301 unless they are shown to be colourable measures to restrict the free flow of trade, commerce and intercourse." In Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1199 the court found that the purpose was disclosed in the notification itself. Therefore, the court held that in view of the clear declaration in the notification itself, there was nothing to hold further enquiry about the colourable nature of the exercise of the powers and distinguished the decision in Bagrecha's case [1971] 27 STC 4 (SC); (1971) 1 SCC 59 wherein the purpose was not disclosed for the notification and the court was left to find out the purpose for issuing notification from the surrounding circumstances. Fortunately, the purpose has been disclosed in the return in the present case which led to issuance of the notification. The notification was clearly not issued for the purpose for which the power has been conferred but for some other purpose which may have a commendation from the geographical or regional point of view but cannot be related for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of power vide Cooley's Constitutional Limitations, Volume 1, page 379. A distinction, however, exists between a Legislature which is legally omnipotent like the British Parliament and the laws promulgated by it which could not be challenged on the ground of incompetency, and a Legislature which enjoys only a limited or a qualified jurisdiction." In enunciating the principle, the court approved what Duff, J., has said in Attorney-General for Ontario v. Reciprocal Insurers 1924 AC 328: "Where the law-making authority is of a limited or qualified character, it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the Legislature is really doing. " Thus, it was made clear that in the case of legislative Act enacted by Legislature itself where the Legislature has a limited jurisdiction as distinct from being legally omnipotent like the British Parliament that enquiry must always be as to the principal nature and character of the challenged legislation and it is the result of such investigation and not the form alone that determines whether or not it relates to the subject which is within the power of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restrictions as are in the public interest and not any other authority. The learned counsel for the petitioner, for this purpose, relied on a decision of the apex Court in the case of State of Mysore v. H. Sanjeeviah AIR 1967 SC 1189. Having carefully scrutinised the contention, we are unable to accept this contention. Their Lordships in the case of State of Tamil Nadu v. Hind Stones AIR 1981 SC 711 considering the Sanjeeviah's case AIR 1967 SC 1189 held as under: "......A statutory rule, while ever subordinate to the parent statute, is otherwise, to be treated as part of the statute and as effective. 'Rules made under the statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction or obligation'." Regarding Sanjeeviah's case AIR 1967 SC 1189, the court said: that was a case where by reference to section 77 of the Mysore Forest Act which declared the effect of the rules it was held that the rules when made did not become part of the Act. That was apparently because of the specific provisions of section 77 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the scooter could be moved from Kanpur in the State of Uttar Pradesh to Jaipur in the State of Rajasthan, it was, therefore, clear that the movement of goods in the instant case from one State to another was the result of covenant or an incident of contract of sale and the sale was an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, and a provision which was made by the Act or by the Rules which sought to prevent evasion of liability to pay intra-State sale or purchase tax would be within the competence of the Legislature or the authority competent to make the Rules but the State Legislature had no power to legislate for the levy of tax on the transaction which are carried in the course of inter-State trade or commerce". Words in Hindi are transliterated in English. In this connection, it may also be noticed that after the aforesaid judgment, the State Government made certain amendments in the impugned rule and ultimately as a result of agreement during the pendency of special appeal before the Division Bench, the petitioners withdrew the petition itself and the judgment was set aside as a result of such withdrawal (State v. Miss Alka Agarwal 1988 RTJS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality or legitimacy of the rate structure of taxation provided in other States under the existing law relating to the Central sales tax. Firstly, that is an action which is not under challenge before us. Secondly, the recommendation of the commission of 1953-54 is not of any relevance in so far as the question of rate structure that can prevail under the Central Sales Tax Act is concerned. That can be decided only with reference to the provisions of the Central Sales Tax Act. If the provisions of that Act authorise the State Government to act in any particular manner, the fact that such provision was not recommended by the Taxation Inquiry Commission cannot be of any help. Said report has no bearing on the merit of the question raised before us, namely, whether the State of Gujarat in exercise of the powers conferred under section 59-A could provide special procedure for carriage of goods through the territory of Gujarat, in the case of its import for one commodity only within the framework of the parent statute and the provisions of the Constitution. The recommendation relied on by the learned counsel for the Revenue in support of his contention that the taxation commission recomm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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