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TMI Blog2000 (8) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... in the particulars of the documents or some of the documents were not being accompanying the goods, notices for levying penalty under section 78(5) of the Act were issued. 4.. Section 78(5) of the Act specifically provides that the in-charge of the check-post or the officer empowered under sub-section (3), after having given the person in-charge of the goods a reasonable opportunity of being heard and after having held such enquiry as he may deem fit, shall impose on him for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to thirty per cent of the value of such goods. 5.. It has been contended by the learned counsel appearing for the petitioners that provisions of section 78(5) of the Act are ultra vires because they are beyond the scope of entry 54 of List II of the Seventh Schedule appended to the Constitution. Entry 54 authorises the State Government to levy tax on sale or purchase of goods. A carrier or transporter who carries on goods sold by the dealer is not in any sense reasonably and proximately connected with the sale t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on State of Haryana v. Sant Lal [1993] 91 STC 321 (SC). 6.. Mr. S.M. Mehta, the learned Advocate-General urged that entries contained in the Lists appended to the Seventh Schedule to the Constitution only provide for the topics for which the respective Legislatures may legislate the law. He has contended that widest amplitude should be given to the language of the entries and each general word and the area of legislation should be held to extend to all ancillary or subsidiary matters, which can reasonably and fairly be said to be comprehended and which makes the law effective. It was pointed out by Mr. Mehta that the language of the impugned provision itself suggests that to check and prevent avoidance or evasion of tax, this provision has been enacted. He has submitted that power to levy tax inheres in the power to make a provision for preventing or checking the avoidance or evasion of tax, which may be resorted by a tax-payer. Eliciting requisite information from the person in possession of the goods about the consignor and the consignee are only required to effectuate the levy of sales tax under the Act, which may be said to be avoided or evaded by surreptitiou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Seventh Schedule appended to the Constitution only provide broad topics, over which the concerned Legislature can legislate and they cannot be read in a mechanical and pedantic manner so as to limit the powers of the Legislature to enact covering entire field of topic and it extends to provide for all matters which are ancillary or incidental for the purpose of effecting the substantive legislation. 12.. In United Provinces v. Mst. Atiqa Begum AIR 1941 FC 16, Gwyer, C.J., speaking for the court stated: ".........I think however that none of the items in the lists is to be read in a narrow or restricted sense, and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it....." 13.. In Navinchandra Mafatlal v. Commissioner of Income-tax, Bombay [1954] 26 ITR 758 (SC); AIR 1955 SC 58, while considering the definition of "income" under the Indian Income-tax and Excess Profits Tax (Amendment) Act, 1947, the court held: "It should be remembered that the question before us relates to the correct interpretation of a word appearing in a Constitution Act which, as has been said, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive field have been bounded with what can be fairly and reasonably comprehended in it. 17.. The principle is too well-settled that where a person is obligated in any manner by the Legislature in connection with levy and collection of tax, the decision of Legislature on casting such obligation is not final and the court would examine to see whether there was a direct and intimate connection or nexus between the person so chosen and the taxable event. 18.. In Resch v. Federal Commissioner of Taxation [1942-43] 66 CLR 198, Dixon, J., speaking for the court said: "Where the main or substantial subject of the tax has thus been ascertained, then the question whether particular provisions directed at defining or widening the area or incidence of the tax or the liability to it or preventing avoidance or evasion or facilitating collection have in truth introduced a new or second subject must be determined by considering their natural connection with or relevance to the main subject." 19. In Atiabari Tea Co. Ltd. v. State of Assam and Khayerbari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232, provisions of the Assam Taxation (on Goods carried by Roads or Inland Waterways) Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law must, however, be read subject to the condition that even tax statutes have to satisfy the test of reasonableness prescribed by clause (6) of article 19, and the fundamental right of equality before law guaranteed by article 14 as well as the test prescribed by article 301." The court went on to say: "It may be conceded that when the Legislature constructs machinery for the recovery of the taxes which is within its competence to impose, the said machinery should have some rational or intelligent connection with the tax. In the absence of a rational nexus between the producer and the tax on goods carried, it may be open to a citizen to contend that the tax is not one justified by entry 56." 21.. This question also fell for consideration before the Supreme Court in R. Abdul Quader Co. v. Sales Tax Officer [1964] 15 STC 403; AIR 1964 SC 922, wherein Wanchoo, J., speaking for the courts, said: "These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which in the present case, is a tax on sale or purchase of goods." 22.. In that case, the court was considering section 11(2) of the Hyderabad General Sales Tax Act, 1940, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to protect the public, enacted section 46 in the Bombay Sales Tax Act, 1959, which provided that nothing shall be collected by way of tax in respect of sales of any goods exempted under section 5 and no registered dealer shall exact by way of tax any sum exceeding what is payable under the Act. One who is not a registered dealer cannot collect any sum by way of tax from any other person. Section 63(1)(h) of the Bombay Act made it an offence to contravene the provisions of section 46 and makes the dealer liable to punishment of imprisonment with or without fine. Section 37(1) authorised imposition of penalty departmentally for contravention of section 46. It provides that if any person collects tax in contravention of the provisions of section 46, he shall be liable to pay in addition to any tax, for which he may be liable, a penalty of an amount not exceeding Rs. 2,000 and in addition any sum collected by the person by way of tax in contravention of section 46 shall be forfeited to the State Government. The respondents had all collected from their customers amounts qua sales tax which came within the coils of section 46. The tax officials, imposed penalties and forfeited the sums c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coimbatore v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC); AIR 1971 SC 792, the court was considering the provisions of the Madras General Sales Tax Act, 1959, which provided for setting up of a check-post or the erection of a barrier at the places to be notified and for checking up of the vehicles by stopping the same at the check-post. Here italicised. The further requirement of the provision was to obligate the transporter carrying goods also carrying specified documents, failure to produce such specified documents entailed seizure or confiscation of goods in consequence. Such power of confiscation without relating the goods in respect of which liability to pay tax within Madras State has arisen was found to be ultra vires and not falling within the ambit of ancillary and incidental matter. The court said: "A taxing entry therefore confers power upon the Legislature to legislate for matters ancillary or incidental including provisions for preventing evasion of tax. Sub-sections (1) and (2) of section 42 are intended to set up machinery for preventing evasion of sales tax. But, in our judgment, the power to confiscate goods carried in a vehicle cannot be said to be fairly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income of the appellant out of concealed sales. Adopting ten per cent as the rate of profit, the turnover in this regard was determined to be rupees one lakh. The above amount of rupees one lakh was added to the turnover in computing the gross turnover of the appellant. In doing so the assessing authority rejected the plea of the assessee that rupees ten thousand represented the amount gifted by Kanji Deosi to his wife before marriage in order to obtain her consent to the second marriage in 1941. The assessee-firm went up in appeal and again raised the contention that the amount of rupees ten thousand had been given by Kanji Deosi, partner of the appellant-firm, to his wife to obtain her consent for his second marriage in 1941. It was stated that the above amount had been lying with her, and had been deposited by her during the year in question with the firm. The appellate authority rejected this explanation. The same view was taken in second appeal by the Board of Revenue. At the instance of the assessee, the question about raising presumption that the amount represented profit arising out of undisclosed turnover was referred to High Court. The High Court, too held against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicle has to obtain in the prescribed manner a transit pass from the officer in-charge of the first check post or barrier after his entry into the State and deliver it to the officer in-charge of the check-post or barrier before the exit from the State. If he fails to do so, it shall be presumed that the goods carried thereby have been sold within the State by the owner or person in-charge of the vehicle. Such presumption when drawn against the owner or the person in-charge of the vehicle and he is held to have sold the goods inside the State of Uttar Pradesh all the liabilities under the Act which arise in the case of a person who sells goods inside the State would arise. Rule 87 provides that a person who wishes to get a transit pass shall make an application in form No. XXXIV to the officer in-charge of the check post concerned. It also provides for the issue of the transit pass in triplicate and for inspection of the documents, consignments and goods to ensure that the statements made are true. The Supreme Court held: "In our opinion a statutory provision which creates a rebuttable presumption as regards the proof of a set of circumstances which would make a transaction liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion between the transaction of sale and the clearing or forwarding agent, 'dalal' or person transporting goods before the State Legislature can, in exercise of the power to levy sales tax, enact legislation concerning him. We are not satisfied that there is such close and direct connection between the transaction of sale of goods by a dealer and the clearing or forwarding agent or 'dalal' who books or receives such goods or a person who transports such goods within the meaning of the said section 38." 31.. From the discussion made hereinabove, it can fairly be stated that entries in the Lists contained in Seventh Schedule appended to the Constitution prescribing legislative fields must be construed with widest amplitude and within its scope must include the power of Legislature on all ancillary and incidental matters comprehended within it with reasonable and proximate connection with the principal object of the legislation. In the case of entry 54 authorising levy of tax on the sale or purchase of goods if any provision is aimed at preventing or checking evasion of substantive levy, to make levy and its collection effective such provision falls within the ambit of incidental and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly clear that a law which is inconsistent with any of the provisions of Part III is void. It cannot be denied that a law providing for levy and collection of taxes is a law within the meaning of Part III of the Constitution, and therefore, it must stand the test laid down by article 13 of the Constitution. The 'law' in article 265 of the Constitution must be a valid law. A law to be valid must not only be one passed by the Legislature in exercise of a power conferred on it, but must also be one that does not infringe the fundamental rights declared by the Constitution." 37.. Gajendragadkar, C.J., speaking for six members of the 7 member Bench constituted to answer the reference made to the court under article 143, Constitution of India AIR 1965 SC 745 (In re under article 143, Constitution of India) said: "Our Legislatures have undoubtedly plenary powers, but these powers are controlled by the basic concepts of the written Constitution itself and can be exercised within the legislative fields allotted to their jurisdiction by the three Lists under the Seventh Schedule; but beyond the Lists, the Legislatures cannot travel. They can no doubt exercise their plenary legislative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and arbitrariness are sworn enemies; one belongs to the rule of law in a republic while the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of article 14, and if it affects any matter relating to public employment, it is also violative of article 16. Articles 14 and 16 strike at arbitrariness in State action and ensure fairness and equality of treatment." 40.. The court restated with added emphasis and the wide and positivistic reach of article 14 in its requirement of reasonableness and fair play in all State actions in Maneka Gandhi v. Union of India AIR 1978 SC 597, while considering the inter-play of fundamental rights guaranteed under different articles of faith in Part III of the Constitution, particularly articles 21, 19 and 14, the majority view opined that a law requiring to lay down procedure for depriving a person of his personal liberty, has to stand the test of one or more of fundamental rights conferred under article 19 'ex h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution." Touchstone of reasonableness to test the constitutional validity of a taxing statute made by Parliament within its authority was accepted by the apex Court in Indian Express Newspapers (Bombay) Private Ltd. v. Union of India [1986] 159 ITR 856 (SC); (1985) 1 SCC 641. The question arose about levy of tax on newspapers. The notification issued by Central Government was challenged on various grounds including that it violates freedom of expression under article 19(1)(g), freedom of trade under article 19(1)(a) and that it is arbitrary and unreasonable so as to violate equality before law guaranteed under article 14 of the Constitution. The court reasoned that newspaper industry enjoys two of fundamental rights guaranteed under article 19, viz., freedom of expression under article 19(1)(a) and freedom to enjoy any profession, occupation or trade, industry or business guaranteed under article 19(1)(g). The court laid that though tax is leviable on newspaper industry, and so long as it is within reasonable limits so as does not transgress the limits of reasonableness under clause (2) and does not impede the freedom of expression and to carry on trade unreasonably within tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion and the extent of restrictions but also circumstances under which and the manner in which their imposition has been authorised. 44.. Patanjali Sastri, C.J., speaking for the Constitution Bench in State of Madras v. V.G. Row AIR 1952 SC 196 said: "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." Thus, the court laid bare the principle that extent of imposition must bear relation to purpose of such statute and a disproportionate imposition may fall outside the purview of reasonableness. 45.. The court reiterated the principle while quoting the above principle with approval in Mohd. Faruk v. State of Madhya Pradesh AIR 1970 SC 93 that in order to satisfy the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the impugned law will afflict the validity of law. 48.. In State of Haryana v. Sant Lal [1993] 91 STC 321 (SC), while the court examined in the context of putting any person under an obligation to furnish such information and particulars which he comes to possession in the course of his business, and to subject to him to a penal consequence of such breach of obligation in legitimate legislative measures, yet was cautious to add that subjection to consequence be only to a reasonable penalty. Thus, reasonableness of penalty in relation to obligation imposed was again reiterated by the apex Court in a provision of the like shade with which we are concerned in this case. We shall be referring to the said case in ensuing discussion. 49.. These decisions do establish that in examining validity of a statute, reasonableness of such measures is a vital test. A citizen cannot be compelled to exercise his fundamental rights and freedoms under conditions and inhibition which are unreasonable, that makes the law oppressive. 50.. Here it would be apposite to notice the provisions of section 78 of the Act with reference to which these petitions have been filed. Section 78 of the Act rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge of the vehicle or carrier or of the goods not to part with the goods in any manner including by retransporting or rebooking, till a verification is done or an enquiry is made, which shall not take more than seven days; (b) seize the goods for reasons to be recorded in writing and shall give a receipt of the goods to the person from whose possession or control they are seized; (c) release the goods seized in clause (b) to the owner of the goods or to anybody else duly authorised by such owner, during the course of the proceeding if the adequate security of the amount equal to the estimated value of the goods is furnished. (5) The in-charge of the check-post or the officer empowered under subsection (3), after having given the person in-charge of the goods a reasonable opportunity of being heard and after having held such enquiry as he may deem fit, shall impose on him for possession or movement of goods, whether seized or not, in violation of the provisions of clause (a) of sub-section (2) or for submission of false or forged documents or declaration, a penalty equal to the amount of five times of the tax leviable on such goods or thirty per cent of the value of such good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (5), it shall be presumed that the goods so transported have been sold in the State of Rajasthan by him and he shall be deemed to be a dealer for those goods under this Act. (12) The provisions of this Act shall, for the purpose of levy, collection and assessment of tax, determination of interest, payment and recovery of tax and interest, appeal, review or revision, apply to the transporter deemed to be a dealer under sub-section (11)." 51.. A close look at the above provision unbares the scheme of obligating certain persons to carry out certain obligations. With what object this provision has been made? Who are the persons obligated? What are the obligations cast? What are the consequences that follow and befall persons obligated? Answer to these will help finding the nexus between the provision and the subject and also between the consequences for such breach of obligation with power to levy tax on sale or purchase of goods so that the provision can be tested on the altar of twin tests, viz., (1) Whether it is within the ambit and scope of ancillary and incidental matter to the subject on which State could legislate under entry 54; and (2) Whether it satisfies t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court observed as under: "A taxing entry therefore confers power upon the Legislature to legislate for matters ancillary or incidental including provisions for preventing evasion of tax. Sub-sections (1) and (2) of section 42 are intended to set up machinery for preventing evasion of sales tax. But, in our judgment, the power to confiscate goods carried in a vehicle cannot be said to be fairly and reasonably comprehended in the power to legislate in respect of taxes on sale or purchase of goods. By sub-section (3) the officer in-charge of the check-post or barrier has the power to seize and confiscate any goods which are being carried in any vehicle if they are not covered by the documents specified in the three sub-clauses. Sub-section (3) assumes that all goods carried in a vehicle near a check-post are goods which have been sold within the State of Madras and in respect of which liability to pay sales tax has arisen, and authorises the Check Post Officer, unless the specified documents are produced at the check-post or the barrier, to seize and confiscate the goods and to give an option to the person affected to pay penalty in lieu of confiscation. A provision so enacted on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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." 58.. We may discern that like U.P. Act, Rajasthan Act of 1994 though provided for setting up of check-posts for inspection and verification of goods in movement within the State of Rajasthan for preventing and checking evasion and avoidance of tax, yet unlike U.P. Act such power is irrespective of their connection with any sale of such goods within the State anterior or exterior to such movement. The U.P. Sales Tax Act specifically related the setting up of check-posts to sale of goods within the State after their import and it further enacted section 28-B which was under consideration before the court. Section 28-B provided for transit of goods by road through the State and issue of transit pass. It envisaged that when a vehicle coming from any place outside the State passes through the State, the driver or other person in-charge of such vehicle shall obtain in the prescribed manner a transit pass from the officer in-charge of the first check-post or barrier after his entry into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of goods coming from outside and destinated outside State but did not find exit within reasonable time but applies to all goods including goods moving within the State on breach of any of the provisions of clause (2)(d) or for production of documents which are forged or fraudulent. Whether raising such a presumption in the absence of any material about its retention within the State territory, while it is still in possession of transporter, who is not connected in any sense with taxable event of sale, is a question which needs consideration in the light of obligation cast, and any reasonable inference flowing from the existing materials about connection of the transporter with the transaction that may have taken place within the State in the light of principles enunciated by the Supreme Court in connection with different nature of obligation cast on transporter under various enactment as discussed above with particular reference to K.P. Abdulla's case [1971] 27 STC 1 (SC); AIR 1971 SC 792, wherein the court did not countenance raising a presumption of sale of goods by transporters to hold him responsible for taxing provision merely for non-furnishing information. Since this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enact legislation concerning him. We are not satisfied that there is such close and direct connection between the transaction of sale of goods by a dealer and the clearing or forwarding agent or 'dalal' who books or receives such goods or a person who transports such goods within the meaning of the said section 38." 62.. It may be noticed that in Sant Lal's case [1993] 91 STC 321 (SC), also the court was concerned with the obligation for divulging information by the dalals, forwarding agents, clearing agents or the transporters about the transaction with which they were not concerned and the court was not considering about divulging informations merely in respect of details of goods in their possession and about the consignor and the consignee of such goods about whom the requisite information would be in possession of transporter. This case makes it clear that there has to be a reasonable and proximate nexus between the person obligated to keep and give information about the transaction of sale about which information was required to be divulged and the event of sale attracting liability to be taxed. As a transporter has no connection with transaction of sale and he merely carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et themselves registered, maintain accounts of goods transported and to furnish declaration forms relating to consignments were challenged. The Gauhati High Court upheld the validity of those provisions on the ground of legislative competence. The penalty prescribed for failure to discharge such obligations was an offence punishable with simple imprisonment, which could extend to six months or with a fine which may extend to Rs. 1,000 in addition to tax recoverable. 67.. The relevant provisions of sections 36A and 38B of the Tripura Sales Tax Act are as under: "Section 36A: Maintenance of accounts by carriers.-(1) Notwithstanding anything contained in any other Act, any transporter, carrier or transporting agent operating its transport business in Tripura, shall maintain proper account of goods transported to or outside Tripura through it in the manner prescribed and shall on demand by the Commissioner be liable to furnish in the prescribed manner such information as the Commissioner may require relating to the transportation of such goods and shall also be bound to produce books of accounts for inspection and examination by the Commissioner." "Section 38B: For carrying out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competence of the State Legislature." 70.. The aforesaid observations clearly indicate that the provision which requires a transporter to furnish such informations which is true and bona fide "about the goods" transported through him, expected reasonably to be in his possession and did not relate to "transaction of goods " was for securing such evidence from the carrier which in the course of his business will be with him, viz., the details of goods transported, the identity and whereabouts of the consignor and consignee to whom such goods are destinated. Seeking such evidence from a person who is otherwise a witness of the facts, if called upon during the enquiry, makes the proximate nexus between the person obligated and the obligation cast to the levy and collection of tax. Hence such a provision of collecting in advance evidence from a witness, was held to be in furtherance of the prevention or checking tax avoidance or evasion. If such nexus is established, the provision cannot be held to be transgressing the limits of legislative powers under entry 54 of List II of the Seventh Schedule of the Constitution. In the aforesaid case, the court was considering the provision of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol over such goods and is also in possession of certain basic informations about the source from which the goods have emanated in transit. Thus, an obligation is cast on the transporter or the carrier to the goods in movement as is apparent from sub-section (2) of section 78 of the Act referred to above. Section 78 by itself does not cast any obligation on the dealer who brings into existence taxing event within the State on which tax on sales become payable as such. The obligation cast on the transporter/carrier firstly is to carry with him a goods vehicles record, challans and bilties, bills of sale or despatch memos and prescribed declaration forms. The second obligation cast is to stop the vehicle or carrier at every check-post set up under sub-section (1) and the third obligation cast is to produce all the documents including prescribed declaration forms relating to the goods before the in-charge of the checkpost. The fourth obligation cast is to allow the inspection of the goods by the in-charge of the check-post or any other person authorised by such in-charge. Obviously all these obligations have been cast on the driver or the person in-charge of the vehicle or carrier or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later in this discussion. The goods in movement are such goods which have been put in transit for transportation from one place to another place. The obligation is not dependent on the transporter being in any way connected with the taxable event, viz., transaction of sale or purchase of goods and also it operates on all goods in movement where they are subjected to any taxing event under the Act or not on such persons obligated. The obligations cast on transporter are: (i) to carry with him requisite documents which includes the goods vehicle record, challans, bilties, bills of sale or despatch memos, prescribed declaration forms. The goods vehicle record pertains to the requisite documents of the vehicle, namely, the licence, registration documents and permits, etc., for plying the vehicle. These are always required to be with vehicle. The challans and bilties in common parlance are the documents which are issued by the transporter containing terms of such transportation and for facilitating the delivery at the destination to the consignee. The bills of sale and despatch memos are the documents which usually emanate from the consignor which are otherwise required to be carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of owner of the goods or dealer liable to tax under the Act remain the same and are not affected by these provisions. 81.. Thus, with the object of preventing and checking evasion and avoidance of tax, within the State of Rajasthan, a transporter has been put under obligation to furnish informations relating to the goods in his possession to the in-charge of the check-post within the territory of the State while the goods are in movement. Sub-section (4) authorises the in-charge of the check-post to seize the goods in movement which are not supported by documents referred to in sub-section (2) for the reasons to be recorded in writing. Such seized goods can be released to the owner of the goods or to anybody else duly authorised by such owner during the course of proceedings, if adequate security of the amount equal to the estimated value of the goods is furnished. 82.. It has to be noticed that while the goods are seized which are in possession of a transporter then the goods are not to be released to the transporter but are liable to be released only to the owner or any person duly authorised by such owner. Sub-section (5) provides for imposition of penalty on the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricted to breach of provision of section 78(2)(a) as is in the case of person in-charge of goods. Penalty for furnishing false or forged documents is to be considered separately, the penalty to the same extent as is to be imposed on the person in-charge of the goods, namely, 30 per cent of the value of the goods. The vehicle in which goods are in movement also is liable to be seized under section 78(8) and such vehicle can be released to such person in-charge of the vehicle on payment of penalty imposed on him under sub-section (8) read with sub-section (5) or on furnishing such security as may be directed by such in-charge or the officer. 85.. Sub-sections (10), (11) and (12) form part of the ultimate consequence which can be fall on the transporter on finding him in collusion with the trader. In case a transporter is found to be in collusion with the trader to avoid or evade tax, the in-charge of the check-post or the officer empowered under sub-section (3) may detain the vehicle or carrier of such transporter and after affording him an opportunity of being heard and with the prior approval in writing of the Deputy Commissioner (Administration) having jurisdiction may confisca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate or likely to take place in the State are very much the part of effective procedure required for making the imposition effective. Section 94 of the Act reads as under: "94. Power to enforce evidence.-Any officer not below the rank of Assistant Commercial Taxes Officer or appellate authority or the Tax Board while exercising powers or discharging duties under any of the provisions of this Act, shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (Central Act V of 1908) when trying a suit, in respect of the following matters arising in any proceeding under the Act, namely: (a) enforcing the attendance of any person and examining him on oath or affirmation; (b) compelling the production of documents; and (c) issuing commission for examination of witness; and the proceeding before the said officer or authority shall be deemed to be a judicial proceeding within the meaning of sections 193, 196 and 228 of the Indian Penal Code (Central Act XLV of 1860)." 88.. This provision clearly postulates that a person who can depose about particular relevant fact can be enforced to give his statement as witness and a person who is in possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ancillary argument has been raised about the validity of requiring the declaration in form S.T. 18A or 18AA from the importer within the State of Rajasthan in terms of section 81 read with rule 53 to be carried along with the goods in transit by the transporter and to be furnished at the check-post at the entry in the State. This aspect of the matter need a scan through the scheme of Chapter VIII of the Act. 92.. Section 77 provides for inspection and seizure of accounts and goods kept and found at the place where dealer is carrying on business or believed to be carrying on business. For which the officers can be authorised to enter the premises and conduct inspection and search. Section 78 is a provision to check the goods in transit and for that purpose transporter is put under certain obligations as noticed above. Section 79 authorises Commissioner to establish check-post on contract basis in respect of building, stones and animals. 93.. Under section 80 of the Act where a vehicle or carrier coming from any place outside the State and bound for any place outside the State and carrying any goods bound for any place outside the State, passes through the State, the owner, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State, such registered dealer or other person shall, unless otherwise prescribed, furnish or cause to be furnished a prescribed declaration form obtained from the prescribed authority as part of the documents specified in sub-section (2) of section 78, before the in-charge of the exit check-post of the State." 94.. Thus, section 81 of the Act principally obligates registered dealer and importer of the goods from outside State to within State for sale, use, consumption or otherwise disposal to give a declaration in the prescribed form. It also obligates such importer to get such declaration produced before the in-charge of entry check-post of the State. It is to discharge this obligation of the importer, he is required further to make it available to transporter, so that such declaration too may be produced along with other documents at the check-post. So also under sub-section (2) it obligates an exporter of taxable goods outside State of Rajasthan too to furnish a prescribed declaration to the prescribed authority as part of documents under section 78(2). 95.. Another limb of the provision concerning the chain is section 82 which requires a clearing or forwarding agent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt controversy. So far as obligation cast on the transporter and consequence to befall on him in breach thereof is provided as an ancillary to obligation of importer. On the other hand the person other than registered dealer also has to obtain the prescribed form S.T. 18AA from the prescribed authority and is subjected to fill such declaration and cause it to be carried along with other documents required under section 78(2). Form S.T. 18AA reveals it is in the form of a permit to import or bring goods declared therein within the State issued by the prescribed authority. 98.. A perusal of form S.T. 18A reveals that primarily the object of form No. S.T. 18A is to bind the importer of the goods from outside for the purposes mentioned in rule 53 in respect of the liability for payment of tax as per the law of sales tax within the State of Rajasthan. This prescribed form can only be obtained by the registered dealer, who is the importer of the goods. Obviously it has to be filled in by the declarant under his signatures. The proprietor/partner/director/karta/manager/secretary of the dealer-firm depending on whether it is a proprietory firm or partnership firm or company or HUF firm o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 22-A of the 1954 Act and section 78 of the Act of 1994 and the required information in the declaration form S.T. 18A, the court said: ".........the law does not provide that once the goods in transit are found to be unaccompanied by the requisite documents, the levy of penalty is automatic and if that were so, the provision for issuing a show cause notice to the owner or transporter will be meaningless. Notices are issued to the person likely to be affected by the order, only with a view to give him an opportunity against the proposed penalty. Such an opportunity must necessarily include the opportunity to show that no penalty is leviable." The court concluded, when the form was incomplete: "..............the substantive part of the declaration in form S.T. 18A is the requisite declaration and undoubtedly by the importer of goods as envisaged in the form about payment of tax. That undoubtedly the respondent has given and the other particulars referred in the form when are unequivocally available from all other requisite documents, about veracity of which there is no doubt, it cannot be said that such a mistake was more than a technical breach of procedural provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch documents have been prepared later on by ante-dating the same. That finding must depend upon an inquiry into the facts and not merely on the presumption, solely on the basis that documents were not accompanying the goods when the same was checked. That would be the case, in every case of breach of provisions of section 22A." 102.. Section 78 of the new Act is corresponding provision under the new Act. 103.. Looking to the nature of the obligations imposed on the transporter and the nature of connection with the goods in movement, as discussed above, we are in agreement with the opinion expressed by this Court in Mahaveer Conductors v. Assistant Commercial Taxes Officer, Ward III, Circle "C", Jodhpur [1997] 104 STC 65, that penalty is not leviable merely for non-production of any document without there being effective opportunity to the person affected to show that no penalty is imposable on him. We have already referred to the principle above that the principles of natural justice, unless the emergency of action to be taken so warrants, forms part of the concept of reasonableness of any procedure prescribed for affecting the rights of the citizen and the principle of natural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying goods in transit and deliberately not divulging information which is supposed to be with him in his possession. Sub-sections (10) and (11) provides for imposing penalty of confiscation if he is found to be in collusion with the trader to avoid payment of tax and sub-sections (11) and (12) forms part of the scheme where a transporter fails to give information as is required of him under clause (d) of section 78(2) about the consignor or the consignee of goods within such time as may be specified or transported the goods with forged documents is not only liable to penalty under section 78(5) of the Act but is deemed to have sold the goods within the State of Rajasthan, and is deemed to be a dealer. Then he is suggested to same liability as a dealer who has goods within the State under the Act and is subjected to same procedure including his right of remedies under the Act as are available to a dealer in connection of levy and assessment of tax. Therefore, for deliberately producing forged and false documents and not divulging informations that is in his possession under section 78(2) is distinct from mere non-carrying of documents and for being acting in collusion with the trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be impleaded, before he can be heard. Exclusion of the owner from the field of duty to inform the person affected by the order to be made by such authority, while such notice is required to be given to transporter, does not appear to be founded on any rational nexus in making difference between the procedure to be adopted before making an order vitally affecting the owner of the goods and cannot be said to be reasonable on procedural aspect of the matter. 108.. Looking to the substantive aspect of the impugned provision it is noticed that penalty prescribed is "equal to 30 per cent of the value of goods". 109.. Quantum that has been prescribed by linking it with the value of the goods and not linking with the tax sought to be avoided or evaded due to the failure in discharging such obligations by the transporter patently appears to be excessive and disproportionate to the object with which obligations have been cast on the transporter to furnish informations relating to the goods in transit. That is the clear ratio laid down in Sant Lal's case [1993] 91 STC 321 (SC) referred to above wherein the like provision authorising levy of penalty equal to 20 per cent of estimate value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation, breach of it follows with reasonable penalty for the person responsible for such breach. In absence of such specific provision, a person is liable to penalty generally provided for breach of any provisions of the Act under section 68 of the Act and therefore breach of obligations under sub-section (2) of section 78, a penalty can be levied against the person who has committed the breach of section 78(2) of the Act under that provision also. That could only effect the quantum of penalty to be imposed in the case penalty is found leviable but not liability to penalty. 113.. To summarise above discussion: A. From the aforesaid discussion, the following principles are deducible; Principles governing question of ultra vires- (i) Any legislative authority can legislate only in respect of subjects assigned to it by the respective entries in the Lists in the Seventh Schedule as to the subject-matters on which the Union or the State Legislature may legislate. (ii) The entries in the legislative Lists are only legislative heads or fields of legislation demarcating the area, over which the appropriate Legislature can operate. (iii) The rule of construction, concerning e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aces in the State for checking the goods in transit within the State or the goods that is entering the State from other States are provisions for prevention and checking the evasion and avoidance of tax that may be levied within the State and therefore related to make effective the machinery for collection of sales tax that is leviable, are within the ambit of ancillary and incidental matters to the main subject. (ii) The obligation imposed on the transporter while carrying goods must have nexus with the taxable event in order to satisfy the test of being a provision which can fairly and reasonably be comprehended within the scope of ancillary and incidental matters. Therefore, it will depend on type of obligation cast and consequences flowing. (iii) The provisions which provides for disclosing information by the transporter or carrier of the goods which includes the person in-charge of the goods while the goods in transit in relation to the goods in his possession, the consignor at whose instance the goods are put in transit and the consignee to whom the goods are consigned and which are in his possession or can reasonably be in his possession at the time of commencement of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of which may occasion a liability to tax. [Sant Lal's case [1993] 91 STC 321 (SC)]. C. Applying the aforesaid tests, our conclusion in respect of provisions under challenge are: (1) The parent provision of the section 78 so far as it requires carrying the documents mentioned under sub-section (2) by the transporter whose position ordinarily does not go beyond a witness about goods carried through them, for the purpose of divulging detailed information about the goods carried out by the transporter and about the consignor and the consignee itself at the check-post or barrier to any authorised officer under section 78 as part of machinery provision for collecting evidence about goods coming in or going out of or moving within the State, can be considered as intended to prevent and check evasion and avoidance of tax and in aid of making effective the levy which has arisen or likely to arise within the State, are provisions incidental and ancillary in aid of main subject of levy and collection of sales tax. (2) Provision as to notice before imposing penalty is not an empty formality for imposing penalty, for non-production or production of incomplete documents, but is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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