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TMI Blog2006 (11) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... allegation that intra-State sales taking place in the State were being shown as inter-State sale and on enquiry, a scam came to the notice of the department - In TITAGHUR PAPER MILLS CO. LIMITED. AND ANOTHER VERSUS STATE OF ORISSA AND ANOTHER [ 1983 (4) TMI 49 - SUPREME COURT] , the assessee filed a writ petition against the order of assessment treating the transaction of intra-State sales claimed by the assessee to be inter-State sales as taxable and disallowing deduction claimed by the assessee. The writ petition was dismissed by the High Court on the ground of availability of alternative remedy and the decision was upheld by the honourable Supreme Court. Though the general rule is that this court does not entertain a writ petition when an alternative remedy is available, but such a rule is not an absolute bar and in an appropriate case, inspite of availability of alternative remedy, this court is not debarred from entertaining writ petition where on undisputed facts, an authority is shown to have assumed jurisdiction which it does not possess. Article 226 of the Constitution of India, as such, does not debar entertainment of writ petitions but it is a self-imposed limitation put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the assessee that the cast iron castings carried by it were not cast iron liable to tax at the first stage, could not be held to be requiring no adjudication or frivolous or mala fide - question answered in favour of the petitioner and assumption of jurisdiction by the check-post officer is held to be without jurisdiction. Whether the impugned order dated February 28, 2005, annexure P 6, is ante-dated inasmuch as it refers to release of goods on March 1, 2005 and its effect? - HELD THAT:- The order annexure P 6 and order annexure R 1 are different orders and order annexure P 6 carries a reference to release of goods on March 1, 2005, though purported to have been passed on February 28, 2005. The same is obviously ante-dated. Explanation for the discrepancy does not appeal to us. We, however, do not express any final view in the matter and direct that matter be looked into by the Financial Commissioner-cum-Secretary, Government of Punjab, Department of Excise and Taxation, respondent No. 1 and such decision may be taken as may be considered appropriate. The writ petition is allowed and impugned order, annexure P 6 dated February 28, 2005 is set aside with no order as to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the said order which is annexed as annexure P 6. 8. It has been submitted that the order declaring that the petitioner had attempted to evade tax was patently erroneous and uncalled for. It is pointed out that if the goods were claimed as declared goods , the petitioner is benefited as the rate of tax on the declared goods is four per cent as against the tax on general goods being 8.8 per cent attracted as per petitioner's declaration. It is further pointed out that the power to detain goods under the scheme of the statute cannot be exercised as a substitute for assessment, being summary power and also the provision being stringent inasmuch as 30 per cent of the value of the goods is provided as penalty as against two times of the tax, as penalty in the course of regular assessment. It is pointed out that in jurisdiction for imposing penalty at the check-post, the assessee is required to bring evidence at the check-post as against leading evidence before the Assessing Authority at the place of business of the assessee itself in case of regular assessment proceedings. It is further pointed out that the jurisdiction at the check-post should be exercised only in case of clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the provisions of the Andhra Pradesh General Sales Tax Act, 1957 on the allegation that intra-State sales taking place in the State were being shown as inter-State sale and on enquiry, a scam came to the notice of the department. The High Court upheld the validity of the statutory provisions following judgment of the honourable Supreme Court in Bishamber Dayal Chandra Mohan v. State of U.P. AIR 1982 SC 33 and other judgments and on facts, did not find any ground to quash the show cause notice. 13. In Leukoplast (India) Ltd. [1997] 105 STC 318 (SC), the assessee filed a writ petition challenging the decision of the Assessing Authority holding that products of the assessee like zinc oxide, adhesive plaster, etc., were not drugs and medicines which were exempted from tax. Writ petition was allowed. The honourable Supreme Court held that the question whether products of the assessee were drugs and medicines could not be straightaway answered and required determination of several facts and in such a situation, the writ petition could not have been entertained. 14. In Titaghur Paper Mills [1983] 53 STC 315 (SC); AIR 1983 SC 603, the assessee filed a writ petition against the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field. . . . 20.. Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. 17. For the reasons given in the later part of this judgment holding that the jurisdiction assumed by respondent No. 2 in passing the impugned order, annexure P 6 was without any legal basis and in the facts and circumstances of the case, we are of he view that writ petition is not liable to be dismissed on account of availability of alternative remedy. Therefore, we overrule preliminary objection raised on behalf of the State. Re: Question No. 2 18. Admitted facts, as noticed in the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared goods included cast iron castings . The assessee claimed that cast iron castings were being treated as declared goods prior to the judgment of the honourable Supreme Court in Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47, but after the said judgment, a circular was issued that cast iron castings were not to be treated as declared goods . 22. In Bengal Iron Corporation's case [1993] 90 STC 47 (SC), it was observed as under: It is thus clear that 'cast iron' is different from 'cast iron castings' manufactured by the appellant. 'Cast iron' is purchased by the appellant and from that 'cast iron', he manufactures several goods like man-hole covers, bends, cast iron pipes, etc. In other words 'cast iron' used in item (iv) of section 14 of the Central Act is the material out of which the petitioner's products are manufactured. Position remains the same, even if the appellant purchases iron and mixes it with carbon and silicon thereby deriving 'cast iron' and then pours it into different moulds. In sum, 'cast iron' is different from the cast iron pipes, manhole covers, bends, etc., manufactured and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, relevant provisions whereof are extracted below: Establishment of check-posts or barriers and inspection of goods in transit. (1) If with a view to preventing or checking evasion of tax under this Act, the State Government considers it necessary so to do, it may by notification, direct the establishment of a check post or information collection centre or both at such place or places, as may be specified in the notification. (2) The owner or person-in-charge of a goods vehicle shall carry with him a goods vehicle record, a trip sheet or a log book, as the case may be, and a goods receipt and a sale bill of sale or a cash memo, or delivery note containing such particulars as may be prescribed, in respect of such goods meant for the purpose of trade as are being carried in the goods vehicle and produce a copy of each of the aforesaid documents to an officer-in-charge of a check-post or information collection centre or any other Officer not below the rank of an Excise and Taxation Commissioner checking the vehicle at any place: Provided that a dealer selling the goods from within the State or outside the State in the course of inter-State trade or commerce, shall also furnish a decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y eight hours the aforesaid copy to the Officer-in-charge of the check post or information collection centre at the point of its exit from the State, failing which, he shall be liable to pay a penalty to be imposed by the officer-in-charge of the check post or information collection centre not exceeding two thousand rupees or twenty per cent of the value of the goods, whichever is greater. Provided further that no penalty shall be imposed unless the person concerned has been given a reasonable opportunity of being heard. (5) At every station of transport of goods, bus stand or any other station or place of loading or unloading of goods, when so required by Commissioner or any other person appointed to assist him under sub-section (1) of section 3, the driver or the owner of the goods vehicle or the employee of transport company or goods booking agency, shall produce for examination, transport receipts and all other documents and account books concerning the goods carried, transported, loaded, unloaded, consigned or received for transport maintained by him in the prescribed manner. The Commissioner or the person so appointed shall, for the purpose of examining that such transport re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucting enquiry, serve a notice on the consignor or the consignee of the goods detained under clause (i) of sub-section (6), and give him an opportunity of being heard and if, after the enquiry, such officer finds that there has been an attempt to avoid or evade the tax due or likely to be due under this Act, he shall, by order, impose on the consignor or consignee of the goods, a penalty, which shall not be less than twenty per cent and not more than thirty per cent of the value of the goods and in case he finds otherwise, he shall order the release of the goods and the vehicle, if not already released, after recording reasons in writing and shall decide the matter finally within a period of fourteen days from the commencement of the enquiry proceedings. (iii) The officer referred to in clause (ii), before conducting the enquiry, shall serve a notice on the consignor or the consignee of the goods, detained under clause (ii) of sub-section (6) and give him an opportunity of being heard and if, after the enquiry, such officer is satisfied that the documents as required under sub-section (2) and sub-section (4), were not furnished at the information collection centre or the check post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Treasury and no claim for balance amount of sale proceeds will be entertained from any other person. (9) The officer detaining the goods shall issue to the owner of the goods or his representative or the driver or the person-in-charge of the goods vehicle or receipt specifying the description and quantity of goods so detained and obtain an acknowledgement from such person or if such person refuses to give an acknowledgement, then record the fact of refusal in the presence of the two witnesses. (10) If the order of detention of goods under sub-section (6) or of imposition of penalty under sub-section (4) or sub-section (7) or order under sub-section (8), is in the meantime set aside or modified in appeal or other proceedings, the officer detaining the goods and imposing the penalty, as the case may be, shall also pass consequential orders for giving effect to the orders in such appeal or other proceedings, as the case may be. (11) No dealer or any person including a carrier of goods or agent of a transport company or booking agency, acting on behalf of a dealer, shall take delivery of, or transport from any station, airport or any other place, whether of similar nature or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of penalty is penal in character and unless the filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. If the view canvassed on behalf of the Revenue were accepted, the result would be that even if the assessee raises a bona fide contention that a particular item is not liable to be included in the taxable turnover, he would have to show it as forming part of the taxable turnover in his return and pay tax upon it on pain of being held liable for penalty in case his contention is ultimately found by the court to be not acceptable. That surely could never have been intended by the Legislature. 30. In Automobile Products of India Limited v. State of Karnataka [1991] 81 STC 414 (Karn), dealing with the jurisdiction of the Check-post Officer, it was observed as under: Assuming for a moment that indeed the documents carried by the vehicle in question did disclose a sale between the seller in Bombay, manufacturer of the vehicles, and M/s. South India Automotive Limited at Bangalore who had to take delivery of those scooters, then the information so gathered by the Check-post Officer could at best be utilised to bring to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods are meant for personal consumption, it is apparent that the same are not required to be covered by a way-bill. Coming to the question of the way-bill being defective or incomplete, we would like to emphasise that great scrutiny is called for in this regard because of the argument advanced by Shri Patnaik for the department that if the way-bill is found defective or incomplete, the same would raise the presumption of an effort on the part of the persons concerned to avoid payment of tax which would clothe the officersin-charge with the powers of detaining the goods inasmuch as the power has been conferred not only to check evasion of tax but also to prevent evasion. We have spoken about the need of a greater scrutiny because as has been found by us in the present case itself, the two defects pointed out in form No. VI-B did not really exist and so there was no scope for the officer-in-charge of the check-post to entertain a reasonable belief that the goods were being transported clandestinely with a view to avoid payment of tax. Once the way-bill is found free from defect and is complete, the question of detention of goods can arise only if there be evasion of tax. As to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was filed challenging the said order. A division Bench of the Orissa High Court allowed the writ petition. Pasayat, J. (as his Lordship then was, now honourable Supreme Court Judge), observed: 5. Undoubtedly check-posts have been established to put a check on clandestine activities and attempts to evade tax. However, such action by the check-post officer cannot be taken on mere presumption or surmises. Even for coming to a conclusion that there is likelihood and/or possibility of evasion of tax, there must be some foundation for entertaining such a view. Where the purchaser is a registered dealer and details of registration have been given normally the goods should not be detained unless good reasons exist therefor. When in the way-bill details of registration under the Act and/or Central Act are indicated, normally there would be no justification for the checkpost officer to entertain a belief about possibility or likelihood of evasion. In the case of registered dealers it would not be difficult for the Revenue to ensure proper levy of tax at the time of assessment. The check-post officer can forward information gathered to the concerned assessing officer, so that the correctnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; otiose, which cannot be done. 34. The judgment of the High Court which is also reproduced therein shows the relevant facts which are that the assessee challenged jurisdiction of the Check-post Officer to determine valuation of goods in transit. It was observed as under: . . . If the check-post authority prima facie, believe from undervaluation of the goods that the same was done with a view to evade the payment of tax, the goods can be detained. Of course, it does not depend upon the ipse dixit of the check-post authority. It must be on cogent materials to come to the conclusion that there was an attempt to evade tax. The goods are to be detained not for under-valuation, but only when there was an attempt to evade the tax. From undervaluation of the goods, unless there is cogent explanation from the side of the owner of the goods, an inference can be drawn that undervaluation was done in the documents to evade the tax. No doubt, the owner of the goods can explain the under-valuation of the goods. The check-post authority is not supposed to decide conclusively as to what was the correct valuation of the goods. The power to detain the goods in transit can be exercised only when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of tax and while levying the penalty the assessing authority must record the finding in this regard. In the case of Sri Mewa Lal and Sons v. Commissioner of Trade Tax reported in [2002] STI 79; [2002] UPTC 165, this court cancelled the penalty on the ground that in the penalty order there was no finding of any attempt to evade the tax. Similar view was taken in the case of Bharat Plywood Products Pvt. Ltd. v. Commissioner of Sales Tax reported in [1990] 79 STC 400 (All); [1989] UPTC 1067. I have perused the order of penalty. The Sales Tax Officer could not make out any case of an attempt to evade the payment of tax. The levy of penalty only on the ground that from the document, the claim of the applicant under section 6(2)(b) was not established is not justified. Tribunal has also not made out any case of an attempt to evade the payment of tax and has upheld the order of the penalty only on the ground that the applicant could not make out a case that the transaction was under section 6(2)(b) of the Central Sales Tax Act. In the present case, it was found that the applicant had made declaration of goods voluntary at the check-post in form XXXV and other documents were al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggage and when no tax will be attracted. It was observed in para 4: . . . 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 the assumption that goods carried in a vehicle from one State to another must be presumed to be transported after sale within the State is unwarranted. In any event power conferred by sub-section (3) to seize and confiscate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge, Shambhu Barrier, District Patiala [1977] 40 STC 238 (P H) and Amrit Banaspati Company Ltd. v. State of Punjab [2001] 122 STC 323 (P H). The said judgment also primarily deal with the validity of the provision, which is not the issue raised, however the same is concluded by the judgements of the honourable Supreme Court referred to above. 42. In State of Haryana v. Sant Lal [1993] 91 STC 321 (SC); [1993] 4 SCC 380, provisions of section 38 of the Haryana General Sales Tax Act, 1973 were held to be unconstitutional as therein, every clearing and forwarding agent or person transporting goods was required to furnish information in respect of consignments to the assessing authority. It was held that presumption of evasion of tax could not be raised against such an agent. 43. In Tripura Goods Transport Association v. Commissioner of Taxes [1999] 112 STC 609 (SC); AIR 1999 SC 719, provisions of Tripura Sales Tax Act, 1976 and Rules framed thereunder requiring transporters to obtain certificate of registration and to maintain accounts and also making a declaration in prescribed form, were upheld on the ground that the said provisions were incidental to evasion of tax. 44. In Saral Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e general public. They should be reasonable both from the substantive as well as the procedural standpoint. . . 50. Dealing with the exercise of power of search and seizure under the Customs Act, 1962, this court observed in C.W.P. No. 6022 of 2005, Mapsa Tapes Private Limited v. Union of India decided on April 28, 2006(1): It is well-settled that power of search and seizure has to be conceded in the larger interest of the society and to check evasion of tax. The same has been upheld by the honourable Supreme Court in M.P. Sharma v. Satish Chandra AIR 1954 SC 300. It was observed at pages 306-307: Reported in [2006] 201 ELT 7 (P H) 'A power of search and seizure is in any system of jurisprudence an overriding power of the state for the protection of social security and that power is necessarily regulated by law. When the Constitution makers have thought fit not to subject such regulation to constitutional limitations by recognition of a fundamental right to privacy, analogous to the American Fourth Amendment, we have no justification to import it, into a totally different fundamental right, by some process of strained construction. Nor is it legitimate to assume that the consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f privacy must also be right and just and fair and not arbitrary, fanciful or oppressive. If the procedure prescribed does not satisfy the requirement of article 14 it would be no procedure at all within the meaning of article 21.' In the same decision, issue of right of privacy, has also been dealt with in paras 17 to 39. In the said decision, development in law after judgment of honourable the Supreme Court in M. P. Sharma AIR 1954 SC 300 has also been discussed, particularly in the light of subsequent judgments in Kharak Singh v. State of U. P. AIR 1963 SC 1295 and Govind v. State of M. P. AIR 1975 SC 1378 and it was concluded that right of the State has to be exercised on reasonable basis or on reasonable material. It was further observed in para 33 of judgment in Canara Bank: 33. Intrusion into privacy may be by (1) legislative provisions, (2) administrative/executive orders, and (3) judicial orders. The legislative intrusions must be tested on the touchstone of reasonableness as guaranteed by the Constitution and for that purpose the court can go into the proportionality of the intrusion vis-a-vis the purpose sought to be achieved. (2) So far as administrative or executiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994 SC 787, dealing with the question of accountability of a public authority while exercising its power, it was observed as under: 11. . . . The authority empowered to function under a statute while exercising power discharges public duty. It has to act to subserve general welfare and common good. In discharging this duty honestly and bona fide, loss may accrue to any person. And he may claim compensation which may in circumstances be payable. But where the duty is performed capriciously or the exercise of power results in harassment and agony then the responsibility to pay the loss determined should be whose? In a modern society no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matters which require immediate attention linger on and the man in the street is made to run from one end to other with no result. The culture of window clearance appears to be totally dead. Even in ordinary matters a common man who has neither the political backing nor the financial strength to match the inaction in public oriented departments gets frustrated and it erodes the credibility in the system. Public administration, no doubt involves a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and the like, or overseas aid, or compensating victims of crime (see for example, R v. Secretary of State for the Home Department, ex parte Fire Brigades Union [1995] 2 WLR 1). 54. In Tata Cellular v. Union of India AIR 1996 SC 11, dealing with the question of judicial review, the honourable Supreme Court observed: 86. Judicial quest in administrative matters has been to find the right balance between the administrative discretion to decide matters whether contractual or political in nature or issues of social policy; thus they are not essentially justiciable and the need to remedy any unfairness. Such an unfairness is set right by judicial review. . . . 93.. The duty of the court is to confine itself to the question of legality. Its concern should be: 1.. Whether a decision-making authority exceeded its powers? 2.. Committed an error of law, 3.. Committed a breach of the rules of natural justice, 4.. Reached a decision which no reasonable tribunal would have reached or, 5.. Abused its powers. . . . 98.. At this stage, the Supreme Court Practice 1993, volume 1, pages 849-850, may be quoted: '4. Wednesbury principle A decision of a public authority will be liable to be quashe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the matter. See Healey v. Minister of Health [1955] 1 QB 221. But nevertheless, the courts will, if called upon, act in a supervisory capacity. They will see that the decision-making body acts fairly. See Inre H K. (An Infant) [1967] 1 QB 617 at 630 and Reg. v. Gaming Board for Great Britain, ex parte Beniam and Khaida [1970] 2 QB 417. The courts will ensure that the body acts in accordance with the law. If a question arises on the interpretation of words, the courts will decide it by declaring what is the correct interpretation. See Punton v. Ministry of Pensions and National Insurance [1963] 1 WLR 186. And if the decision-making body has gone wrong in its interpretation they can set its order aside. See Ashbridge Investment Ltd. v. Minister of Housing and Local Government [1965] 1 WLR 1320. (I know of some expressions to the contrary but they are not correct). If the decisionmaking body is influenced by considerations which ought not to influence it; or fails to take into account matters which it ought to take into account, the court will interfere. See, Padfield v. Minister of Agriculture, Fisheries and Food 1968 AC 997. If the decision-making body comes to its decision on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this court under article 32 or the High Courts under article 226 and can be validly scrutinised on the touchstone of the constitutional mandates. 56. Questions still remains if all documents are carried and there is neither any concealment nor any mis-declaration but a bona fide contention is raised which requires adjudication, can an inference of attempt at evasion be raised? 57. Resume of case-law referred to above leads to the conclusion that exercise of power at the check-post should have nexus with attempt at evasion. The power conferred on a check-post officer is a drastic power necessary to check attempts at evasion but the same cannot be exercised arbitrarily. Wherever the action of check-post officer smacks of arbitrariness, the power of judicial review is available with this court under article 226 of the Constitution of India even if alternative remedy of appeal is available. Whether exercise of power in a given situation was called for or not, is a question which has to be decided from case to case and no principle of universal application could be laid down. If no inference of attempt at evasion can be drawn, exercise of power will not be called for. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attempt at evasion. (3) In an appropriate case, the writ court may examine the exercise of power and interfere if exercise of power is found to be arbitrary, mala fide and without nexus with attempt at evasion on the face of it. (4) If there are disputed questions and there is reasonable nexus of exercise of power with attempt at evasion, writ petition against imposition of penalty at the check-post cannot be entertained. (5) Where relevant documents are duly produced but a bona fide plea against taxability is raised and there is neither mis-declaration nor concealment, exercise of power of imposing penalty at the checkpost on the ground of attempt at evasion may not be called for. 61. In the present case, contention raised by the assessee that the cast iron castings carried by it were not cast iron liable to tax at the first stage, could not be held to be requiring no adjudication or frivolous or mala fide. It is not relevant as to what is the interpretation finally taken on this subject and we do not express any conclusive opinion at this stage but having not concealed any information, having furnished all the information, having placed reliance on the judgments of the honourabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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