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TMI Blog2001 (3) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation of transportation of goods without requisite documents and by the impugned order, he imposed penalty of Rs. 2,45,000 on the ground of contravention of the provisions of section 37 of the Act. 3.. Shri K.L. Goyal argued that the first proviso to section 37(6), which has been added by Haryana Act No. 12 of 2000, should be declared ultra vires to the legislative power of the State because subject-matter of the said proviso falls under entry 92 of List I of the Seventh Schedule to the Constitution of India and not under entry 54 of List II. He further argued that the impugned provision should be declared violative of article 19(1)(g) because it affects the petitioner's right to carry on its trade and business without hindrance. He submitted that even though the statutory presumption created by virtue of the impugned provision is rebuttable, the authorities constituted under the Act have treated it to be irrebuttable and in all the cases, heavy penalties are being imposed without examining the explanation offered by the dealer and/or transporters for unintentional contravention of the provisions of section 37. 4. We have given serious thought to the arguments of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other person in-charge of the goods carrier or of the goods. (4) The owner or person in-charge of the goods or goods carrier, entering or leaving the limits of the State, shall furnish a copy of goods receipt, documents as referred to in sub-section (2), or a declaration containing such particulars, in such form obtained from such authority, in the manner as may be prescribed, of the goods carried by him or in such carrier, as the case may be, before the officer in-charge of the check-post or barrier and shall produce the copy of the said goods receipt, documents or declaration duly verified and returned to him by the officer in-charge of the check-post or barrier before any other officer as mentioned in sub-section (2): Provided that where the owner or person in-charge of the goods or the driver or other person in-charge of the goods carrier bound for any place outside the State passes through the State, such owner or person in-charge of the goods or the driver or other person in-charge of such carrier shall in the prescribed manner furnish, in duplicate, to the officer in-charge of the check-post or barrier of his entry into the State, a declaration in the prescribed form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the owner of the goods furnishing to his satisfaction a security, in the prescribed form and manner, for an amount not less than fifteen percentum and not more than thirty percentum of the value of the goods: Provided that such officer may, if he deems fit, having regard to the nature of the carrier or the goods and other relevant matters, allow such goods to be transported, on the owner of the goods or his representative or the driver or other person in-charge of the goods carrier, executing, in a prescribed manner, a bond with or without sureties for securing the amount due as security: Provided further that such officer may, if he deems fit, having regard to the nature of the goods and the goods carrier, and other relevant matters, hand over the goods on superdari to any person for safe custody, on payment of such charges for the custody, as may be prescribed, which shall be recovered from the owner of the goods. Provided further that where the owner or person in-charge of the goods or the driver or other person in-charge of the goods or carrier bound from a place inside the State to any other place inside the State has to pass through another State, such owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. Sub-section (1) of section 37 empowers the State Government to issue notification for establishment of check-post or the erection of a barrier or both at appropriate places in the State. Sub-section (2) lays down that the owner or in-charge of goods vehicle shall carry with him a goods carrier record, a trip sheet or log-book along with the prescribed challan or cash memorandum or bill in respect of the goods meant for the purpose of trade and produce the same before an officer in-charge of the check-post or barrier or any other officer of the department not below the rank of Assistant Excise and Taxation Officer, as the State Government may, by notification, appoint for checking the goods carrier at any other place. Sub-section (3) requires the driver of the vehicle, owner/in-charge of the goods to stop the vehicle and keep it stationary for a reasonable time and allow the officer in-charge of the check-post/barrier to check the contents of the vehicle by breaking open the package or packages, if necessary, and inspect all records relating to the goods carried. Sub-section (4) imposes a duty on the owner or person in-charge of the goods or goods carrier entering or leaving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in-charge of the goods or the driver or person-in-charge of the goods carrier, in which the goods are being carried, then the penalty can be imposed on the person in-charge of the goods or the goods carrier or the driver. First proviso to sub-section (6) of section 37 lays down that non-production of challan, duly filled in, as referred to in sub-section (2) of section 37 before an officer not below the rank of Assistant Excise and Taxation Officer or such other officer, as the State Government may, by notification appoint for checking goods carrier at any place, will be a sufficient reason to believe that the person transporting the goods is attempting to evade the tax under the Act. Second proviso to sub-section (6) of section 37 embodies the rules of natural justice. It lays down that no penalty shall be imposed unless the owner of the goods or his representative or person in-charge of the goods or the goods carrier or the driver has been given a reasonable opportunity of hearing. 7.. We may now refer to some decisions in which the ambit and scope of various entries included in the three Lists of the Seventh Schedule has been considered. In one of the earliest decisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the context of an argument that "auction sale" does not fall within the scope of Bengal Finance (Sales Tax) Act, 1941. While rejecting the plea of the petitioner, their Lordships of the Supreme Court held as under: "We find ourselves unable to agree with the above observations. An auction sale in view of the provisions of section 4 read with section 64 of the Sale of Goods Act would have to be considered to be a sale for the purpose of the Sale of Goods Act. There is nothing in entry 48 which restricts the power of the Legislature in the matter of the imposition of the sales tax to the levy of such tax on the owner of the goods on whose behalf they are sold or the purchaser only. Where the transaction is one of sale of goods as known to law, the power of the Legislature to impose a tax thereon, in our view, is plenary and unrestricted subject only to any limitation which might have been imposed by the Government of India Act or the Constitution [see J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 (SC)]. In view of the wide amplitude of the power of the State or Provincial Legislature to impose tax on transactions of sale of goods, it would, in our opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions as may be necessary to effectuate the law; particularly, in the case of a taxing statute, it is open to the Legislature to enact provisions which would check evasion of tax. It is under this power to check evasion that provision for search and seizure is made in many taxing statutes. The Legislature has therefore power to provide for search and seizure in connection with taxation laws in order that evasion may be checked. The provisions of section 41(2) and (3) of the Madras General Sales Tax Act, 1959, are reasonable restrictions on the fundamental right to hold property and to carry on trade under article 19(1)(f) and (g) of the Constitution and are protected by clauses (5) and (6) of article 19. Though sub-section (2) of section 41 of the Madras General Sales Tax Act, 1959, does not in terms provide for search, the power of search is implicit in the sub-section with reference both to the accounts, etc., maintained by the dealer and the goods in the possession of the dealer. But the main part of sub-section (2) does not give to the officer any power of inspecting the residential premises of the dealer and it cannot therefore be read as giving the power of search of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts, etc., seized should be retained only so long as may be necessary for their examination and for any enquiry or proceeding under the Act, and (iv) that such accounts should not be kept for more than 30 days at a time except with the permission of the next higher authority, are sufficient safeguards, and the restriction under sub-section (3), if any, on the right to hold property and the right to carry on trade, must be held to be a reasonable restriction." 10.. In the Check-post Officer, Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1 a Constitution Bench of the Supreme Court considered the challenge to the vires of section 42(3) of the Madras General Sales Tax Act, 1959, under which the Check Post Officer was empowered to confiscate the goods and levy penalty in lieu of confiscation if the driver did not carry with him the documents specified in the section. Some of the observations made in that case, which have been heavily relied upon by the learned counsel for the petitioners are reproduced below: "Entry 54 of List II of the Seventh Schedule to the Constitution authorises the State Legislature to legislate in respect of taxes on the sale or purchase of goods. A l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udges Bench of the Supreme Court examined the constitutional validity of sections 37(1)(a) and 46(2) of the Bombay Sales Tax Act, 1959 (as applicable to the State of Gujarat), under which the State was empowered to forfeit any sum collected by way of tax in contravention of section 46 of the Act. The High Court of Gujarat had struck down the provision by holding that the State did not have the power to enact such a law. The Supreme Court reversed the judgment of the High Court and held that the two provisions were not ultra vires to the powers of the State Legislature inasmuch as the same fell within the range of ancillary or incidental power of the State Legislature under entry 54 read with entry 64 of List II of the Seventh Schedule to the Constitution of India. Their Lordships further held that it is permissible for the State Legislature to enact that sums collected by the dealers by way of sales tax, but are not exigible under the State Law and prohibited by, should be forfeited to the public exchequer punitively. 12.. In Dunlop India Limited v. State of Punjab [1972] 30 STC 597 (P H) a learned single Judge declared that section 14-B(8) of the Punjab General Sales Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions were considered by Bal Raj Tuli, J., and the Division Bench to fall within the principles laid down in K.P. Abdulla's case [1971] 27 STC 1 (SC). But the position is quite different now. The new provision for the levy of penalty [amended section 14-B(7)] is no longer based on any assumption that the goods were transported after sale within the State. Its present basis is the attempt to evade tax and it prescribes a condition precedent to the levy of penalty. The condition precedent is that the authorised officer should record a finding that there has been an attempt to evade the tax due under the Act. It cannot possibly be disputed that the prevention of evasion of sales tax is a power incidental or ancillary to the levy of sales tax and falls within entry 54 of List II of Schedule VII of the Constitution. Section 14-B(7), which provides for detention of goods and levy of penalty if there has been an attempt to evade the tax due under the Act, cannot, therefore, be held to be without constitutional sanction. it is further to be noticed that the goods which are to be detained are also specified in section 14-B(6) as the goods meant for trade and not covered by proper and genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of entry 54 of List II of the Seventh Schedule to the Constitution and infringed freedom of trade, commerce and intercourse guaranteed under article 301 of the Constitution and further they impose unreasonable restrictions on the freedom of trade guaranteed under article 19(1)(g) of the Constitution. The Supreme Court rejected the challenge and affirmed the decision of the Allahabad High Court with the following observations: "Section 28-B as inserted in 1973 in U.P. Sales Tax Act and rule 87 as inserted in 1974 in U.P. Sales Tax Rules are introduced to check evasion of tax and to provide a machinery for levying tax from persons (transporters) 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 provision to enable them to show that they are in fact not liable to pay any tax. Thus the said provisions are not unconstitutional. The provisions are not unreasonable and the State Legislature is competent to legislate them. ........................... A statutory provision which creates a rebuttable presumption as regards the proof of a set of circumstances which would make a transaction l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruing entries of Lists I, II and III of the Seventh Schedule to the Constitution, the widest possible construction according to their ordinary meaning must be put upon the words used therein so that the entries may have effect in their widest amplitude. (ii) The legislative entries do not merely enunciate powers. They specify a field and, therefore, widest import and significance should be attached to them. (iii) The power to legislate on a specified topic includes the power to legislate in respect of matters which may be fairly comprehended therein. In other words, the power to legislate on a particular topic includes the power to legislate on ancillary and incidental matters, but not on matters which do not have reasonable or proximate connection with the topic of legislation. (iv) The power of the State Legislature to impose tax on transaction of sale or purchase of goods includes the power to legislate on such incidental and ancillary matters, which may be necessary to effectuate the purpose of the law. (v) The power to enact law for prevention of the evasion of sales tax and to provide for search and seizure is incidental or ancillary to the levy of sales tax and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIII of the Constitution. 19.. In Sodhi Transport Co.'s case [1986] 62 STC 381 (SC), a similar provision contained in section 28-B of the Uttar Pradesh Sales Tax Act, 1948 read with rule 87 of the Uttar Pradesh Sales Tax Rules, 1948 was upheld by the Supreme Court with the observation that "a statutory provision which creates a rebuttable presumption as regards the proof of a set of circumstances which would make a transaction liable to tax with the object of preventing evasion of the tax cannot be considered as conferring on the authority concerned the power to levy a tax which the Legislature cannot otherwise levy. A rebuttable presumption which is clearly a rule of evidence has the effect of shifting the burden of proof and it is hard to see how it is unconstitutional when the person concerned has the opportunity to displace the presumption by leading evidence". 20.. By applying the ratio of the decision of Sodhi Transport Co.'s case [1986] 62 STC 381 (SC), we hold that the impugned proviso neither violates the petitioner's fundamental right to freedom of trade or business nor it impedes the freedom of trade and commerce. 21.. The petitioner's challenge to the order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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