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TMI Blog2015 (11) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be seen as one that is incidental or ancillary to the power of the State Legislature to enact a legislation for levy of tax on sale or purchase of goods. The challenge against the validity of the said provision on this ground must necessarily fail. Provisions of section 49 of the KVAT Act, cannot be struck down as unreasonable, arbitrary or violative of article 301 of the Constitution of India. The provision provides ample safeguards for ensuring compliance with the rules of natural justice and also ensures that the person proceeded against is given ample opportunity to show cause against the proposed detention and subsequent confiscation. The defects that had been pointed out in the erstwhile provisions of section 30C of the KGST Act were removed by the Legislature while enacting the new provision under section 49 of the KVAT Act. The prescription with regard to the value of the goods, for the purposes of attracting the definition of smuggling, has also been provided under rule 66 of the KVAT Rules. In that view of the matter, when the scheme envisaged in section 49 of the KVAT Act is considered in its entirety, it cannot be said that it falls foul of the Constitutional p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent it restricts the free-movement of goods in the course of trade and commerce. 2. A counter-affidavit has been filed on behalf of the respondents wherein the circumstances leading to the detention of the vehicle and the goods have been narrated. As regards the challenge to the validity of the legislation, it is the contention of the State that the impugned provision is one that is intended to check evasion of tax in respect of notified commodities and, in that respect, it is one that would be incidental or ancillary to the power of the State Legislature to enact a law for the levy of tax on sale or purchase of goods. It is also pointed out that exhibit P13 order is appealable under the terms of the Act and, in so far as the petitioner has not availed of the alternate remedy under the statute, the writ petition is to be dismissed on that ground. 3. I have heard Sri Abraham, the learned counsel for the petitioner as well as learned Government Pleader Smt. Lilly for the respondent. Inasmuch as there is a challenge in the writ petition against the constitutional validity of the provisions of section 49 of the KVAT Act, I also considered it appropriate to appoint advocate S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner or person-incharge of the vehicle or vessel files an option to pay in lieu of seizure and detention, a [redemption fee] equal to thrice the amount of tax due at the rate applicable to the goods liable to seizure and detention and twice the tax due or an amount of ₹ 50,000 whichever is higher for the release of the vehicle or vessel in lieu of detention: Provided further that if the owner of the vehicle produces the documents specified in sub-section (3) of section 46 and the owner of the goods proves the bona fides of the transport of goods within seven days of the seizure and detention the officer shall release the goods and the vehicle. (4) Notwithstanding anything contained in the foregoing provisions, if the owner or person-in-charge of the notified goods or the owner or person-in-charge of the vehicle fails to prove the genuineness of the transport of the notified goods or to remit the redemption fee as specified in second proviso to sub-section (3), within thirty days from the seizure and detention of goods and the authorised officer has reason to believe that the owner or the person-in-charge of the vehicle or the driver has transported the notified goods t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner and the Deputy Commissioner may pass such orders thereon as he thinks fit: Provided that the Deputy Commissioner may admit an application for revision preferred after the expiry of the said period if he is satisfied that the applicant had sufficient cause for not filing the revision petition within the said period. (7) Any person aggrieved by an order under sub-section (6) may, within thirty days from the date of communication to him of such order, file a revision in such manner and in such form as may be prescribed and accompanied by a fee of rupees five hundred before the Commissioner and the decision of the Commissioner shall be final: Provided that the Commissioner may admit an application for revision filed after the expiry of the said period if it is satisfied that the applicant had sufficient cause for not filing the application within the said period. (8) Where an order of confiscation under this section has become final in respect of any goods/vessel such goods vehicle or vessels as the case may be shall vest in the Government free from all encumbrances. (8A) Notwithstanding anything contained in this Act, the goods so confiscated under this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court had held that the power to confiscate goods was not ancillary or incidental to the power to levy tax and hence, the provision that authorised the confiscation and detention of goods could not be legally sustained as part of a legislation that was enacted to levy tax on the sale or purchase of goods. It must, at once, be noticed that the said decision of the Supreme Court was dealing with a legislation where, the power to detain and confiscate goods was available in respect of any goods that were seen transported across the check-post, irrespective of whether the said transportation was in connection with a transaction of sale or not. It was in that context that the Supreme Court held the provision as arbitrary and unreasonable, in that it enabled the authorities under the legislation concerned to detain and confiscate any goods irrespective of whether they were covered by a transaction of sale or purchase. The said decision of the Supreme Court has been distinguished in a line of decisions that followed. It may be useful to refer to a few of them for the purposes of deciding the instant case. In Tripura Goods Transport Association v. Commissioner of Taxes [1999] 112 STC 609 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any dealer under a false name, can despatch his taxable goods to another person through a transporter escaping his sales tax liability on such goods. It cannot be denied that some such dealers and transporters do indulge in such illegal practices. This fact is brought in through the counter-affidavit filed by the respondents-State that some such consignments are booked with consignee as self, without disclosing the name, registration number and address of the consignee in the appropriate column of form XXIV. Incorrect, incomplete declaration in such forms, if not made punishable, would defeat the very purpose of enacting these provisions and would help such clandestine dealers to escape the liability of tax. So each of these provisions are brought in to help the authorities to check the evasion of tax. 6. It will be apparent from a perusal of the above findings of the Supreme Court that the court also dealt with the contention that the provisions of the Act were ultra vires article 301 of the Constitution of India and held it to be not so. In State of Rajasthan v. D. P. Metals [2001] 124 STC 611 (SC), which was another case relating to the imposition of penalty on transporters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recovered from the clearing and forwarding agents in the form of penalty under section 57(2), the same falls outside the ancillary or incidental powers of the State Legislature under entry 54 of List II as the levy under the Act is on sale and purchase of goods and as there is no nexus between such sale or purchase of goods and the clearing and forwarding agents, sections 57 and 58 and especially the penalty provisions fall outside such ancillary powers. As stated above, the said Act provides not only for levy of tax on sale and purchase of goods but also provides for computation of tax, incidence of tax, recovery of tax, assessment and reassessment. The impugned provision of section 57(1) and section 58(1) operate in aid of sections 27, 28 and 29 of the Act: To illustrate, the sale price is net of cost of freight or installation. The dealer in his return is entitled to show such expense as deduction. The Commissioner is entitled to verify the claim for deduction. If the assessing authority has reason to believe in the course of assessment under section 27 or reassessment under section 28 that deduction claimed is excessive, it can call for information from the clearing and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selves party to the episode of such fictitious transactions for the sole purpose of evasion of tax by the dealers purchasing and selling such goods. 7. It will be clear from a perusal of the aforementioned judgments that the provisions of section 49 of the KVAT Act, which are essentially for the purposes of ensuring that there is no activity of smuggling, and thereby an attempted evasion of tax that is due under the KVAT Act, in respect of notified goods, is in the nature of a machinery provision under a legislation that is intended to levy a tax on the sale or purchase of goods. The said provision is intended to ensure that the charge is effective and that no amount, that is due under the Act, escapes an assessment to tax under the Act. Being in the nature of a machinery provision that is intended to further the objects of main enactment, the provision itself has to be seen as one that is incidental or ancillary to the power of the State Legislature to enact a legislation for levy of tax on sale or purchase of goods. The challenge against the validity of the said provision on this ground must necessarily fail. 8. There is yet another aspect of the matter that requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges have been overruled by events-selflimitation can be seen to be the path to judicial wisdom and institutional prestige and stability.' The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; that exact wisdom and nice adaption of remedy are not always possible and that 'judgment is largely a prophecy based on meager and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and, therefore, it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States of Supreme Court in Secretary of Agriculture v. Central Reig Refining Company [1950] 94 L.Ed. 381, be conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latitude in devising ways and means of fiscal or regulatory measures, and the court should not, unless compelled by the statute or by the Constitution, encroach into this field, or invalidate such law. 9. Applying the aforesaid tests laid down by the various decisions of the Supreme Court, it is clear that in the instant case, the provisions of section 49 of the KVAT Act, cannot be struck down as unreasonable, arbitrary or violative of article 301 of the Constitution of India. The provision provides ample safeguards for ensuring compliance with the rules of natural justice and also ensures that the person proceeded against is given ample opportunity to show cause against the proposed detention and subsequent confiscation. The defects that had been pointed out in the erstwhile provisions of section 30C of the KGST Act were removed by the Legislature while enacting the new provision under section 49 of the KVAT Act. The prescription with regard to the value of the goods, for the purposes of attracting the definition of smuggling, has also been provided under rule 66 of the KVAT Rules. In that view of the matter, when the scheme envisaged in section 49 of the KVAT Act is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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