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TMI Blog2002 (5) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase in the State by a dealer who is, liable to tax under Section 5, Schedule I of the KGST Act. The first petitioner's sales being to local dealers within the State, no tax is payable by the first petitioner on the purchase turnover of rubber. On 27.12.1995, the first petitioner purchased 9 tonnes of rubber sheets from cultivators and growers situated at Kandanje, Karimbala, Kadapana near Ethadkka, as per purchase bill Nos. 4434 to 4485 dated 27.12.1995 and was transporting the same to the first petitioner's business place in Kanhagad. The transportation was supported by delivery note in Form No. 26 bearing serial No. AB 885105 dated 27.12.1995. The goods were being transported in lorry No. KL 14-5304 belonging to H. Anantha Kamath. A similar quantity of 9 tonnes, which was purchased as per purchase Bill No. 4486 to 4537 dated 27.12.1995 from Chalakkode, Madathadkka, Bykunje in the Ethadkka area was also being transported as per delivery note No. AB 885106 dated 22.7. 1995 end the copies of purchase bills referred to above in lorry No. KL 19-6114 belonging to H. Sathish Kamath. Thus, according to the first petitioner, the purchase and transportation of raw rubber shee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st II of the Seventh Schedule to the Constitution of India gives power to the State Legislature to levy tax on the sale of goods. But the provision for confiscation of the goods and the vehicles transporting the goods cannot be characterised as an ancillary and/or incidental provision. It is further stated that Section 29A of the KGST Act provides for sufficient safeguards for checking evasion of tax and for protecting the interests of the revenue. The provisions in Section 30 C of the KGST Act inserted by the Finance Act, 1994 are unconstitutional and arbitrary, Section 30C of the KGST Act provides for confiscation of the vehicles and the goods only in the case of transport of certain goods, viz., coffee, rubber, cardamom, ginger, pepper, arecanut, cashewnut or iron and steel. There is no rhyme or reason for such discrimination with reference to these types of goods only. The dealers in these types of goods are chosen for discriminatory treatment compared to the dealers in other types of goods. Even the provisions of Section 29A are very stringent which can prejudicially affect the free flow of trade, commerce and industry. There was no question of clandestine transport of rubber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the offence of smuggling and produce it, without any unreasonabledelay, before such officer authorised by the Government, by notification in the Gazette, not being below the rank of an Inspecting Assistant Commissioner (hereinafter referred to as the authorised officer). (2) Where the authorised officer is satisfied that an offence under Sub-section (1) has been committed in respect of the goods produced before him under that Sub-section, he may order confiscation of the goods so seized together with the vehicle or vessel used in committing such offence. Provided that the authorised officer may release the goods and the vehicle or vessel confiscated under this Sub-section to the person from whom it was confiscated if the owner of the goods or the vehicle or the vessel or the person in charge of the goods or the vessel or the vehicle furnishes to the satisfaction of such officer cash security or bank guarantee from a Nationalised Bank or a Scheduled Bank for the value of the goods and the vehicle or the vessel as the case may be, as estimated by such officer in such manner as may be prescribed. (3) No order under Sub-section (2) shall be passed, unless the person from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lay within the ambit of Section 30C of the KGST Act and how this can be compromised with the rest of the provisions. Learned Government Pleader submitted that there is no ambiguity in using the word 'smuggling'. 10. In this connection, it is pertinent to note that the introduction of Section 29(4) and (5) of the KGST Act enabled the Authorities to detain, seize or confiscate the goods, which are being transported by a vehicle or vessel and not covered by a bill of sale or delivery note or way bill or certificate of ownership and where the vehicle or vessel enters or leaves the State limits without the declaration referred to in Clause (b) of Sub-section (2) also. Section 29 Clauses (3) to (5) of the KGST Act and Sub-rules (3) to (12) of Rule 35 of the KGST Rules were challenged before this Court and the judgment of this Court was reported in Yogesh Trading Co. v. The Intelligence Officer of Sales Tax, Cannanore Anr., (1970) 26 STC 45. Dealing with the question of its validity, the Full Bench of this Court held that Clauses (3) to (5) of Section 29 of the KGST Act and Clauses (3) to (12) of Rule 5 of the KGST Rules are not valid and unconstitutional. Regarding the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. Assuming that is so, we have still to see whether Sub-section (4) of Section 41 of the Act can be upheld read along with the second proviso thereof . It was then found that there was repugnancy between the provisions and therefore Clause (a) of the second proviso repugnant to the entire scheme of the Act was struck down. The matter again came before the Supreme Court in The Check Post Officer, Coimbatore and Ors. v. K.R. Abdulla Bros., (1971) 27 STC 1. In that decision, the Supreme Court held as follows: 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 legislative entry does not merely enunciate powers; It specifies a field of legislation and the widest import and significance should be attached to it. Power to legislate on a specified topic includes power to legislate in respect of matters which may fairly and reasonably be said to be comprehended therein: see The United Provinces v. Mst. Atiqa Begum and Ors., (1940) FCR 110, Navinchandra Mafatlal v. The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1959, which is as follows: (1) If the Government consider that with a view to prevent or check evasion of tax under this Act in any place or places in the State, it is necessary so to do, they may, by ,notification, direct the setting up of a check post or the erection of a barrier or both, at such place or places as may be notified. (2) At every check post or barrier mentioned in Sub-section (1), or at any other place when so required by any officer empowered by the Government in this behalf, the driver or any other person in charge of any vehicle or boat shall stop the vehicle or boat, as the case may be, and keep it stationary as long as may reasonably be necessary, and allow the officer in charge of the check post or barrier, or the officer empowered as aforesaid, to examine the contents in the vehicle or boat and inspect all records, relating to the goods carried, which are in the possession of such driver, or other person in charge, who shall, if so required, give his name and address and the name and address of the owner of the vehicle or boat as well as those of the consignor and the consignee of the goods. (3) The officer in charge of the check post or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be unwarranted and, therefore, the power to seize and confiscate was struck down and was held not to be ancillary or incidental with the power to legislate for levy of sales tax. 13. Learned Government Pleader brought to our notice the decision in State of Mysore v. K. Mohamed Ismail, AIR 1958 Mysore 143, wherein it was held as follows: When the Legislature of a State has the competence to make a law pertaining to taxes on sales or purchases, it has also the competence to provide punishments in that law for the non-compliance or contravention of the provisions of that law and may also for the purpose of the enforcement of that law vest jurisdiction in Courts . Another decision brought to our notice is K.S. Papanna Anr. v. Deputy Commercial Tax Officer, Guntakal Ors., (1967) 29 STC 506. The Andhra Pradesh High Court in that decision held that the power to seize and confiscate goods is only by way of punishment or penalty which is intended to operate as the most effective deterrent against tax-evaders and it is therefore ancillary or incidental to the power to levy tax on the sale of goods and falls within the ambit and scope of the legislative power conferred on the State Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whether Sections 29(3), (4) and (5) as originally enacted, were not violative of the aforementioned Articles. The High Court had struck down Rule 35, which followed upon Section 29. That Rule has been replaced by Rule 35-A, which follows upon Section 29-A. We note the contention of learned counsel for the State that Section 29 was valid because its validity is covered by two decisions of this Court but it is not a question that need detain us, having regard to the circumstances aforementioned . Thus, we find that because of the introduction of Section 29A, the Supreme Court did not go into the merits of the case. It also noted that the power of confiscation was not included in the amendment. We extracted the above judgment because one of the arguments of the counsel for the petitioners is that the Supreme Court had understood that the power of confiscation was not included. 14. Now we come to the question of Section 30C of the KGST Act. Section 30C merely says that where an officer not below the rank of a Sales Tax Officer has reason to believe that a vehicle or vessel is used for smuggling coffee, rubber, cardamom, ginger, pepper, arecanut, cashewnut or iron and stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el is liable for confiscation. What documents are relevant and necessary to be maintained and produced in an enquiry under Section 30C is nowhere stated in the Section. The Section also does not say the absence of what all documents accompanying the goods, would make the transportation of goods an activity of smuggling. 16. On the other hand, in paragraph 8 of the counter affidavit filed by the State what is stated is as follows: It is true that the word smuggling is not defined in the Act. It is settled principle of law that if a word is not defined in a statute it's ordinary dictionary meaning shall be applied. Meaning assigned to the word in common parlance or commercial parlance also can be applied if situation so warrants. The Lexcon Webstor's Dictionary of the English Language gives the meaning of the word smuggle as follows: to import or export (goods liable to customs duty) without paying duty to convey secretly in defiance of the law or of prohibition . The shorter Oxford English Dictionary gives the meaning of the same word as follows: to convey goods clandestinely into or out of a country or district in order to avoid payment of legal duties or in contraven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorised Officer feels that offence has been committed, confiscation can be made. Going by the decision in Check Post Officer v. K.P. Abdulla and Ors., (1971) 27 STC 1, we are of the view that Section 30C of the KGST Act is arbitrary and unconstitutional and liable to be struck down. 18. In K.P. Abdulla's case, the Supreme Court has clearly stated that the power of confiscation is not incidental or ancillary. Even though that was given on an interpretation of Section 42 of the Madras General Sales Tax Act, according to us, Section 30C of the KGST Act gives very wide and arbitrary power by not defining the word smuggling . It is left to the subjective satisfaction of the Authorised Officer to find out whether an offence of smuggling has been committed. Even if the quantity is small or even if the liability for tax is minimum, the Authorised Officer can exercise the power of confiscation not only on the goods, but also the vehicle. Further, the reason stated for invoking the power of confiscation of specified goods shows that the intention appears to be not to regulate the tax evasion, but for other reasons. Taking into consideration all the above, we hold that Section 30C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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