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CASE NO.:

Appeal (civil) 8182 of 1995

PETITIONER:

STATE OF WEST BENGAL AND ANR.

RESPONDENT:

E.I.T.A. INDIA LTD. AND ORS.

DATE OF JUDGMENT: 05/03/2003

BENCH:

SYED SHAH MOHAMMED QUADRI & ASHOK BHAN

JUDGMENT:

JUDGMENT

2003(2) SCR 668

The Judgment of the Court was delivered by SYED SHAH MOHAMMED QUADRI, J.

Civil Appeal Nos. 5863-64/1997, 5865-66/1997 and 5534/1997 :

These appeals from various orders of the West Bengal Taxation Tribunal (for

short, 'the Tribunal) raise a common question as to the constitutional

validity of provisions, mentioned hereunder, of the West Bengal Sales Tax

Act, 1994 [West Bengal Act XV1X of 1994] (for short, 'the Act') and the

Rules made thereunder. The Act came into force on March 23, 1995. It

repealed the Bengal Finance (Sales Tax) Act, 1941 which was then in force.

The respondents challenged the constitutional validity of the following

provisions of the Act: (i) Section 2(6); (ii) Explanation to sub-section

(1), sub-section (5), (7), (8), (10), (11) and (12) of Section 11; (iii)

sub-section (4) of Section 14; and (iv) Rules 172, 173, 174, 188 and 189 of

the West Bengal Sales Tax Rules, 1995 (for short, 'the Rules'). The

Tribunal held:

"that section 2(6) of the 1994 Act is valid and constitutional with a rider

that until the manner of disclosure of name and address of the consignor or

consignee is prescribed in terms of this judgment, the provision as to

disclosure of those particulars shall remain suspended. Observations have

also been made in the body of the judgment regarding the extent of

responsibility of a transporter in furnishing the required documents and

disclosing the required particulars. The Explanation below sub-section (1)

of Section 11 is declared to be unreasonable and ultra vires the

Constitution. The said Explanation is, therefore, struck down. As per

paragraphs 20 and 21 of this judgment, parts of sub-section (5) of Section

11 and sub-section (4) of Section 14 are declared as invalid and

unconstitutional to the extent they apply to a transporter. Sub-sections

(7) and (8) of section 11 and the words 'for the purpose of sub-section (7)

and sub-section (8)' in clause (ii) of section 11(5) are struck down as

invalid and unconstitutional and beyond the competence of the State

Legislature. Sub-sections (10), (11) and (12) of Section 11 are also

declared unconstitutional insofar as they are applicable to transporters.

Rules 172. 173 and 174 of the 1995 Rules are struck down-for the reasons

already stated. Forms 28 and 31 prescribed under the 1995 Rules are struck

down in so far as they relate to advance tax or security in lieu thereof

with reference to a transporter. Form 32 prescribed under those rules is

valid. Rules 188 and 189 of the said Rules are valid subject to

observations in this judgment in respect of transporters."

Mr. B. Sen, learned senior counsel appearing for the appellants-State, has

contended that having upheld the constitutional validity of Section 2(6)

which clearly provides the particulars to be declared by the transporter,

there was no valid reason why the Tribunal should suspend the operation of

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the section so that portion of the order needs to be set aside. It is

submitted that the Tribunal erred in striking down the impugned provisions

of the Act on the ground of lack of legislative competence ignoring the

fact that the legislature has ancillary power to enact provisions to

prevent evasion of tax. The learned counsel has argued that the Tribunal is

clearly wrong in declaring Explanation below Section 11(1) of the Act as

arbitrary, unreasonable so unconstitutional.

In examining the constitutional validity of the impugned provisions of a

statute, it will be useful to bear in mind the following well-settled

propositions. If a legislation is found to lack in legislative competence

or is found to be in contravention of any provision of Part III or any

other provision of the Constitution, the impugned legislation cannot escape

the vice of unconstitutionality [See: Keshavananda Bharti v. State of

Kerala, AIR (1973) SC 1643 and also State of Andhra Pradesh and Ors. v.

Macdowell & Co., [1996] 3 SCC 709]. A challenge to any statutory provision

on the ground of the classification being discriminatory and violative of

Article 14 of the Constitution, can be successfully met on the principle of

reasonable classification having nexus to the object of the Act sought to

be achieved; [See: State of Bombay v. F.N. Sahara, [1951] SCR 682 and

Budhan Choudhary and Ors. v. State of Bihar, [1955] 1 SCR 1045]. However,

the legislature enjoys a greater latitude for classification in the field

of taxation [See: M/s. Steelworth Ltd v. State of Assam, [1962] Suppl. 2

SCR 589; Gopal Narain v. State of Uttar Pradesh and Anr., AIR (1964) SC

370; and Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh and Ors.,

AIR (1980) SC 286]. No legislation can be declared to be illegal, much less

unconstitutional on the ground of being unreasonable or harsh on the anvil

of Article 14 of the Constitution, except, of course, when it fails to

clear the test of arbitrariness and discrimination which would render it

violative of Article 14 of the Constitution. [See : M/s. Steelworth Ltd.

and Macdowell & Co. (supra)].

Inasmuch as the expression 'casual trader', defined in sub-section (6) of

Section 2 of the Act is of great significance it will be apt to read it

here :

"2. Definitions- In this Act, unless the context otherwise requires,-

6. 'casual trader' means a person, other than a registered dealer, who has

no fixed place of business in West Bengal and who,-

(a) as a consignor or consignee, brings into West Bengal any goods,

other than those specified in Schedule I or Schedule IV or those notified

under sub-section (2) of section 10, from any place outside West Bengal for

sale in West Bengal, or

(b) procures goods, other than those specified in Schedule I or Schedule

IV, otherwise than by way of purchase from a person other than a registered

dealer, for sale in West Bengal, or

(c) purchases any goods, other than those specified in Schedule I or

Schedule IV, in West Bengal from any person, other than a registered

dealer, for purposes other than his personal use or consumption of such

goods in West Bengal, any includes, whether he has a fixed place of

business in West Bengal or not,--

(i) a transporter as defined in clause (a) of the Explanation of Section

72, and who while carrying such goods in his goods vehicle fails to

disclose the name and address on the consignor or consignee in West Bengal

or fails to furnish copy of invoice, challan, transport receipt or

consignment note or document of like nature in respect of such goods, or

(ii) an owner or lessee of a warehouse where such goods are stored and who

fails to disclose the name and address of the owner of such goods or fails

to satisfy the Commissioner that such goods are for his personal use or

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consumption, and who, for such failure, shall be deemed to have brought

such goods as specified in sub-clause (a) or procured such goods as

specified in sub-clause (b) or purchased such goods in sub-clause (c), as

the case may be on his own account."

A perusal of the definition of the expression "casual trader" shows that it

has three parts. The first part defines the expression to mean a person,

other than a registered dealer, not having a fixed place of business in

West Bengal and who : (a) either as a consignor or as a consignee, brings

into West Bengal any goods other than those specified in Schedule I or

Schedule IV or 'those notified under sub-section (2) of Section 10

(hereinafter referred to as "the excluded goods") from any place outside

West Bengal for sale in West Bengal, or (b) procures goods, other than the

excluded goods, otherwise than by way of purchase from a person other than

a registered dealer for sale in West Bengal, or (c) purchases any goods,

other than the excluded goods, in West Bengal from any person, other than a

registered dealer, for purposes other than his personal use or consumption

of such goods in West Bengal. The second part takes in its fold a person,

whether he has a fixed place of business in West Bengal or not, who is (i)

a transporter, as defined in clause (a) of the Explanation to Section 72,

and while carrying such goods in his goods vehicle, fails: (a) to disclose

the name and address of the consignor or consignee in West Bengal, or (b)

to furnish a copy of invoice, challan, transport receipt or consignment

note or document of like nature in respect of such goods; or (ii) an owner

or lessee of a warehouse where such goods are stored and fails (a) to

disclose the name and address of the owner of such goods, or (b) to satisfy

the Commissioner that such goods are for his personal use or consumption.

And the third part contains a statutory presumption to the effect that such

a transporter or an owner or lessee of a warehouse, who fails to fulfil the

obligations mentioned above, is deemed to have brought such goods as

specified in clauses (a) or (b) or (c), as the case may be, in the first

part of the definition, on his own account.

A 'transporter' is defined in Explanation (a) to Section 72, which reads as

follows:

" 'transporter' means the owner, or any person having possession or

control, of a goods vehicle who transports on account of any other person

for hire or on his own account any goods from one place to another, and

includes any person whose name is entered in the permit granted under the

Motor Vehicles Act, 1988 (59 of 1988), as the holder thereof, the driver or

any other person in charge of such vehicle."

It is seen that the explanation defined the terms 'transporter' to mean the

owner or any person having possession or control of a goods vehicle who

transports on account of any other person for hire or on his own account

any goods from one place to another; it includes any person whose name is

entered in the permit granted under the Motor Vehicles Act, 1988 and the

holder thereof, the driver or any other person in charge of such vehicle.

A combined reading of the definitions of 'casual trader' and 'transporter'

discloses that they are aimed at preventing any possible evasion of tax

payable under the Act by spreading a very wide net. A comparison of the

definition of 'casual trader' in the Act with the definition of the said

expression in the Bengal Finance (Sales Tax) Act, 1941 (for short, 'the

1941 Act') shows that there is no material difference between the two. Two

categories of persons are included within the meaning of 'casual trader';

the first is the transporter who while carrying the goods fails to disclose

the name and address of the consignor or the consignee in West Bengal or

having so declared the names, fails to furnish a copy of the invoice,

challan, transport receipt or consignment note or document of like nature

in respect of such goods. Every prudent bona fide transporter is expected

to know the particulars of the consignor of the goods for transportation

and of the consignee to whom the goods have to be delivered in West Bengal.

Similarly, every reasonable transporter is expected to have copy of the

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challan, transport receipt or consignment note or document of like nature

in respect of goods which are being transported. The requirement to furnish

these particulars cannot, therefore, be treated as requiring the

transporter to furnish information which is beyond his capacity or control.

So also a prudent and reasonable owner or lessee of a warehouse where such

goods are stored is expected to know the name and address of the owner of

such goods and requiring him to furnish those particulars cannot be said to

be either oppressive, irrelevant or arbitrary. As an alternative to non-

disclosure of the name and address of the owner of the goods stored in the

warehouse, such an owner or lessee is required to satisfy the Commissioner

that such goods are for his personal use or consumption. A person in

possession of the goods must have stored them for and on behalf of the

owner thereof or as his own goods for his personal use or consumption. The

information required to be furnished by the owner or the lessee of a

warehouse will normally be within his knowledge and, at any rate, ought to

be within the knowledge of a reasonable owner or the lessee of a warehouse.

In any event, after the Act came into force, such a person is expected to

know and collect necessary particulars and information so there can be no

legitimate excuse for non-compliance of the statutory requirements. It is

only in the event of failure to furnish such information that the

definition creates a fiction deeming such a transporter of goods or owner

or lessee of a warehouse as a consignor or a consignee who, has brought the

goods from any place outside West Bengal for sale in West Bengal, or has

procured the goods, otherwise than by way of purchase, from any person,

other than the registered dealer, for sale in the West Bengal, or has

purchased such goods in West Bengal from any person, other than the

registered dealer, for purposes other than his personal use of consumption

of such goods in West Bengal, as the case may be. For the purpose of

furnishing the particulars under the afore-mentioned provision, neither any

special proforma is necessary nor any machinery is required to effectuate

the section. It is, therefore, difficult to uphold the reasoning of the

Tribunal to justify suspension of the said provision for want of machinery

provisions. In this regard, the Tribunal referred to the Explanation to

Section 2(l)(a)(i) of the 1941 Act, which had also been suspended by it in

an earlier proceeding. In the appeal against the said order, in Civil

Appeal No. 8180 of 1995, we have held that keeping that provision under

suspension for want of a machinery was uncalled for and was illegal. We

reiterate the same view in regard to Section 2(6) of the Act. We record the

candid concession of Mr. Yashank Adhyaru, learned senior counsel for the

respondents, that it will not be possible to support the reasoning and the

conclusion of the Tribunal on this aspect.

We shall now advert to various provisions of Section 11 which are brought

under challenge. Inasmuch as almost entire Section 11 is under challenge,

it is quoted here :

"11. Liability to pay tax on sales by casual trader - (1) Notwithstanding

anything contained elsewhere in this Act, a casual trader shall be liable

to pay tax on all his sales in West Bengal of goods, other than those

specified in Schedule I or Schedule IV or those notified under sub-section

(2) of Section 10, brought by him into West Bengal from any place outside

West Bengal, or on all his sales in West Bengal of goods, other than those

specified in Schedule I or Schedule IV, procured by him otherwise than by

way of purchase from a person other than a registered dealer.

Provided that no tax shall be levied on sales of goods which are effected

on or after the date on which he becomes liable to pay tax under Section 9

or sub-section (3) of Section 27 and is registered under Section 26 or

Section 27.

Explanation - Where a transporter, or an owner or a lessee of a warehouse,

deemed to be a casual trader in respect of any goods referred to in sub-

section (1), is found to have disposed of such goods the disposal of such

goods shall be deemed to have been made by way of sale by him in West

Bengal, unless he proves it otherwise with satisfactory evidence.

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(2) The tax payable under this section by a casual trader shall be levied

at the rate referred to in clause (a), clause (b), clause (d), clause (e),

clause (0, clause (g) or clause (h), as the case may be, of sub-section (1)

of Section 17.

(3) The tax payable under this section shall, notwithstanding anything

contained in section 46, be determined, collected and recovered in such

manner and by such authority as may be prescribed and shall be paid by such

time as may be prescribed.

(4) No person shall, except in accordance with the restrictions and

conditions provided in sub-section (5), bring into West Bengal any goods,

other than those specified in Schedule I or Schedule IV or those notified

under sub-section (2) of Section 10.

(5) Every person transporting in a road vehicle,-

(a) goods, other than those specified in Schedule I or Schedule IV or those

notified under sub-section (2) of Section 10, brought by him into West

Bengal, or

(b) goods, other than those specified in Schedule I or Schedule IV,

procured by him otherwise than by way of purchase from a person, other than

a registered dealer, shall, on interception by any person appointed under

sub-section (1) of Section 3 and authorised by the Commissioner in this

behalf (hereinafter referred to in this section as the authorised officer)

stop the vehicle and produce, on demand, before such authorised officer

invoice, challan, transport receipt, consignment note or document of like

nature in respect of such goods and shall also furnish the name, address

and number of the certificate of registration of the consignor or

consignee, if registered, and thereafter,-

(i) if it appears to the authorised officer that such goods are being

transported by a person who is not a casual trader liable to pay tax under

this section, he shall immediately allow movement of such vehicle, or

(ii) if it appears to the authorised officer that the goods are being

transported by a casual trader or by some person on his behalf, he may

detain such vehicle ordinarily for a period not exceeding twenty-four hours

for the purposes of sub-section (7) and sub-section (8).

(6) For the purposes of this section or section 14, the owner or lessee

of a warehouse where goods are stored, shall furnish, on demand, before the

Commissioner or the authorised officer.-

(a) if he is the owner of such goods, the invoice, challan or other

documents in support of the manner of securing such goods, or

(b) if he declares that the goods are being stored by another person,

name and address of the person who has stored the goods and evidence in

support of occupancy of the warehouse by that person.

and in the event of failure to furnish such particulars or evidence within

a reasonable time, the authorised officer may seal such warehouse for a

period ordinarily not exceeding twenty-four hours from the time of enquiry

or search for the purposes of sub-section (7) and sub-section (8).

(7) if the Commissioner or any person appointed under sub-section (1) of

Section 3 to assist him is satisfied that a casual trader may become liable

to pay tax under sub-section (1) in respect of any goods, he may, in order

to secure payment of tax that may become due upon determination of tax

under sub-section (3) and for reasons to be recorded in writing, demand

from such casual trader an amount in advance equivalent to the amount of

tax that may become due from him after determination, or security for an

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equivalent amount, after taking into consideration the saleable value of

such goods.

(8) The amount in advance equivalent to the amount of tax that may become

due from a causal trader after determination after taking into

consideration the saleable value of the goods as aforesaid shall, on demand

under sub-section (4), be paid by him in advance and shall be adjusted with

the amount of tax due from him; and the security, if any, for the

equivalent amount shall, on demand, be furnished by him, and shall be

refunded to him, in such manner and on such terms and conditions as may be

prescribed.

(9) For the purposes of this section, if-

(a) production and inspection of accounts, registers and documents and

seizure thereof,

(b) entry, search and sealing of warehouse.

(c) interception, detention and search of any road vehicle, and

(d) seizure of any goods, are required by the authorised officer, the

provision of section 65, section 66, section 67, section 69 and section 70

shall apply mutatis mutandis.

(10) Where the Commissioner or the authorised officer has reason to

believe that a person transporting goods has contravened the restrictions

and conditions provided in sub-section (4) or section (5) or an owner or a

lessee of a warehouse fails to comply with the conditions provided in sub-

section (6), and if such person, owner or lessee, as the case may be, fails

to comply with the provisions of sub-section (8), the Commissioner or the

authorised officer, as the case may be, shall seize the goods with

containers or other packing materials, if any.

(11) Where the goods are seized by the Commissioner or the authorised

officer under sub-section (10), he may, by an order in writing impose upon

the owner of such goods, where particulars of the owner of such goods are

available and the owner is a casual trader, or upon the person from whom

goods are seized after giving such owner or person, as the case may be, a

reasonable opportunity of being heard, a penalty of a sum not exceeding

twenty-five per cent of the value of goods so seized, and for the purposes

of sub-section (1), sub-section (2) and sub-section (3) of section 71 shall

apply mutatis mutandis.

(12) If the penalty is not paid, the seized goods may be sold in open

auction and sale proceeds thereof shall be applied in the manner, and

subject to the conditions, provided in sub-section (4), sub-section (5),

sub-section (6), sub-section (7), and sub-section (8) of Section 71 as may

be applicable for the purpose of this section."

Section 11 is a charging section in respect of all sales of a 'casual

trader'. Sub-section (1) thereof opens with a non-obstante clause, gives it

over-riding effect over other provisions of the Act and mandates that a

casual trader shall be liable to pay tax on all his sales in West Bengal of

goods, other than the excluded goods, brought by him into West Bengal from

any place outside West Bengal or on all his sales in West Bengal of goods

procured by him otherwise than by way of purchase from a person other than

a registered dealer. The proviso is not relevant for our purpose.

The Explanation to sub-section (1) says that where a transporter or an

owner or a lessee of a warehouse, deemed to be a casual trader in respect

of any goods referred to in sub-section (1), is found to have disposed of

such goods, the disposal of such goods shall be deemed to have been made by

way of sale by him in West Bengal, unless he proves to the contra with

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satisfactory evidence. It is this Explanation which has been the subject-

matter of a lengthy debate. It is contended by Mr. Yashank Adhyaru that

except to the extent the provision of clause 29-A of Article 366 of the

Constitution of India provides for a deemed sale, no State Legislature can

create a fiction to treat any other transaction as sale and, therefore, the

disposal of the goods by a, casual trader cannot per se be treated as sale

of the goods and he cannot be put to onerous task of proving a negative

fact that the disposal of the goods was not by way of sale. This

contention, though attractive, lacks substance. It will be apposite to

notice here Section 4 of the Indian Evidence Act, 1872, which defines,

inter alia, the expressions "may presume" and "shall presume". The

expression 'may presume' postulates whenever it is provided by the Evidence

Act that the court may presume a fact, it will regard such fact as proved,

unless and until it is disproved, or may call for proof of it; but the

expression 'shall presume' implies, whenever the Evidence Act says that the

court 'shall presume' a fact, it shall regard such fact as proved, unless

and until it is disproved. The statutory presumption incorporated in

Explanation to sub-section (1) of Section 11 is in the nature of the second

category of presumption. The deeming provision embodied in the Explanation

does not extend the meaning of sale to every disposal of goods. It is

attracted when a transporter or an owner or a lessee of a warehouse is

unable to account for the disposal of goods; the fact of disposal of the

goods in question having been established, the statutory presumption which

is rebuttable presumption, would apply and the disposal of goods shall be

deemed to be by way of sale;-it will be open to such a person to rebut the

presumption. Raising of such rebuttable presumption is a normal legislative

practice and no invalidity can be attributed to the same. It will be wholly

misconceived, in our view, to treat the statutory presumption incorporated

in the Explanation as extending the definition of 'sale' in clause 29-A of

Article 366 of the Constitution. Indeed there can be no analogy between the

definition of deemed sale incorporated in clause 29-A of Article 366 of the

Constitution and the statutory presumption incorporated in Explanation to

sub-section (1) of Section 11. For these reasons, we cannot sustain the

finding of the Tribunal. We hold that the said Explanation is valid in law

and the challenge to its invalidity is misconceived and unsound.

In Sodhi Transport Co. and Ors v. State of Uttar Pradesh and Ors., [1986] 2

SCC 486, Section 28-B of the Uttar Pradesh Sales Tax Act, 1948 was assailed

as unconstitutional. It enacts a rebuttable presumption on the failure of a

driver or other person in charge of vehicle carrying the goods to deliver

the pass to the officer in charge of the check post or barrier before his

exit from the State. It says, "it shall be presumed" that the goods were

sold within the State. Upholding the constitutional validity of the said

provision, it was observed that as a rebuttable presumption, it had the

effect of shifting the burden of proof. The Court has pointed out that the

authority concerned before levying sales tax arrives at the conclusion by a

judicial process that the goods have been sold inside the state and in so

doing, relies upon the statutory rule of presumption contained in Section

28-B of the Act which may be rebutted by the persons against whom action is

taken under Section 28-B. The person concerned has opportunity to displace

the presumption by leading evidence, therefore, there is no

unconstitutionality in it.

It is provided in sub-section (2) that the levy of tax payable by a casual

trader shall be at the rate referred to in clauses (a), (b), (d), (e), (f),

(g) or (h), as the case may be, of sub-section (1) of Section 17. Sub-

section (3) says that the tax payable under Section 11 shall be determined,

collected and recovered in such manner and by such authority and as may be

prescribed, notwithstanding anything contained in Section 46. The mandate

contained in sub-section (4) is that no person shall bring into West Bengal

any goods (other than the excluded goods), except in accordance with the

restrictions and conditions provided in sub-section (5).

A plain reading of the impugned provisions of sub-section (5) of Section

11, quoted above, shows that it incorporates the restrictions and'

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conditions, subject to which such goods can be brought into West Bengal. A

detailed procedure outlining the obligations of the transporter or procurer

of goods is laid down. The fiat contained therein is that every person

transporting in a road vehicle goods, other than the excluded goods,

brought by him into West Bengal or goods procured by him, other tham the

excluded goods, otherwise than by way of purchase, from a person other than

a registered dealer, shall stop the vehicle, on interception by any person

appointed under sub-section (1) of Section 3 and authorised by the

Commissioner in that behalf (referred to as the authorised person in this

section) and produce, on demand before that officer, invoice, challan,

transport receipt, consignment note or document of like nature in respect

of such goods and also furnish the name, address and number of certificate

of registration of the consignor or the consignee, if registered. If,

however, the consignor or the consignee is not registered, the requirement

to furnish any number of certificate of registration would be incapable of

compliance. The authorised officer has to immediately allow movement of the

vehicle on he being satisfied that such goods are being transported by a

person who is not a casual trader liable to pay tax under that section; he

is empowered to detain such vehicle for a period not exceeding twenty four

hours for the purposes of sub-section (7) and (8) of that section, only if

it appears to him that the goods are being transported by a casual trader

or by some other person on his behalf.

A careful reading of sub-section (7) makes it clear that the Commissioner

or any person appointed under sub-section (1) of Section 3 to assist him,

on being satisfied that a casual trader may become liable to pay tax under

sub-section(l) thereof in respect of any goods, may with a view to secure

payment of tax that may become due upon determination under sub-section (3)

and for reasons to be recorded in writing, demand from such casual trader

an amount in advance equivalant to the amount of tax that may become due

from him after determination, or security for an equivalent amount after

taking into consideration the saleable value of such goods. It does not

postulate payment of advance tax. What it aims is an amount in advance

equivalent to the amount of tax that may become due from a casual trader or

security for an equivalent amount depending upon the saleable value of the

goods in question. There is thus a clear nexus between the amount in

advance or security and the levy of impost on the casual trader. The

provision is meant to ensure collection of tax. Sub-section (8) provides

for payment of the amount in advance or the security, if any, referred to

in sub-section (7) by a casual trader on demand under sub-section (4) at

the time of bringing any goods, except those specified in Schedules I and

IV or those notified under Section 10(2) of the Act, for being adjusted

with the amount of tax due from him and for refund after due adjustment in

the prescribed manner.

It is, thus, clear that sub-sections (3), (4), (5), (6), (7) and (8) are

part of the same scheme aimed at prevention of evasion of tax payable under

the Act. Sub-sections (10) and (12) are consequential provisions. Sub-

section (10) empowers the Commissioner or the authorised officer to seize

the goods with containers or other packing materials, if any, when he has

reason to believe contravention of the restrictions and conditions provided

in sub-sections (4) and (5) or non-compliance of sub-section (6) and (8).

In the case of seizure of goods under sun-section (10), imposition of

penalty is authorised under sub-section (11). Sale of the seized goods in

open auction on failure to pay the penalty is dealt with in sub-section

(12). It is a common ground that these sub-sections stand or fall along

with sub-section (5), (7) and (8). We have indicated above that the

impugned sub-sections of Section 11 are enacted to prevent evasion of tax

payable under the Act. The main challenge against those provisions is on

the ground of legislative competence.

On the issue of legislative competence, we shall refer to Entry 54 of List

II of the Seventh Schedule to the Constitution which is the field of State

legislation for imposing taxes on the sale or purchases of goods, other

than newspaper. This Entry is subject to the provisions of Entry 92-A of

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List I of the Seventh Schedule to the Constitution. It is well-settled that

the State Legislature, while providing for levy of impost, has power to

provide for incidental matters, including measures for prevention of

evasion of tax.

In M/s. Nand Lal Raj Kishan v. Commissioner of Sales Tax Delhi and Anr.,

[1962] 1 SCR 283, the validity of Section 8-A of the Bengal Finance (Sales

Tax) (Delhi Amendment) Act, 1956 was assailed in a writ petition field

under Article 32 of the Constitution. That provision enables the

Commissioner of Sales Tax to demand security from dealers for payment of

tax. The contention of the petitioner was that the section conferred

undefined, unlimited and unrestricted power to the Commissioner and that

there was no limit fixed for the amount of security. It was also urged that

no enquiry was contemplated before fixing the amount of security. The

validity of Section 8-A was upheld on the view that it did not give any

unlimited or unrestricted power to the Commissioner and that it was subject

to the condition that it must appear to him to be necessary to demand

security for the proper realisation of tax. It was observed that the power

to levy tax included the power to impose reasonable safeguards for

collecting it and, therefore, demanding security for the proper payment of

tax was neither an arbitrary condition nor an unreasonable restriction. In

our view, this judgment does not help the respondents for reasons more than

one. Firstly, Section 8-A of that Act, as it stood at that time was upheld

by the Constitution Bench as valid and secondly, in the instant case, the

impugned provisions embody ample safeguards for a transporter of goods as

also for an owner or lessee of a warehouse, enquiry is contemplated for

determination of the amount in advance or security authorised to be

demanded which, in any event, cannot be more than the amount of tax that

could be levied in respect of the goods in question on such a person. It

supports the case of the appellant. In Balaji v. Income-tax Officer,

Special Investigation Cricle, [1962] 2 SCR 983, the petitioner challenged

the provisions of Section 16(3)(a)(i) of the Income Tax Act, 1922 in this

Court under Article 32 of the Constitution of India. The petitioner and his

wife started a business in partnership and admitted their minor sons to it.

While computing the total income of the petitioner for the purpose of

assessment to income tax, the Income Tax Officer included the share of the

income of the wife and the minor sons under the said provision. It was held

that Entries in the legislative lists were not powers but fields of

legislation and that the widest possible, import and significance should be

attached to them. So interpreting, it was observed that the relevant Entry

must cover such legislation as the impugned provision intended to prevent

the evasion of tax; it is a settled proposition that in matters of

taxation, the power to legislate includes the incidental power to legislate

for evasion of tax for which the Entry provides.

In Khyerbari Tea Co. Ltd and Anr. v. The State of Assam, [1964] 5 SCR 975,

the question before the Constitution Bench was, whether the Assam Taxation

(on Goods carried by Road or on Inland Water-ways) Act [Assam Act X of

1961] was constitutionally valid. It was held that the entries in the three

lists in the Seventh Schedule must be given the widest possible

interpretation and that the power conferred on the Legislature to levy tax

must be widely construed so as to include the power to select the taxable

articles to fix the rates, to prescribe the machinery for recovery, to

prevent evasion and to prescribe the procedure for determining the amount

payable by any individual. It was added that Entry 56 of List II in giving

the Legislature the power to enact the impugned Act, required that the tax

must be levied only against the owner of the goods that were carried or

against persons who carried them. If the tax was really levied on goods

carried, the Legislature was free to prescribe the machinery for its

recovery. In that view of the matter, it was held that sub-sections (1) and

(2) of Section 3 of that impugned Act, which imposed the tax and made the

producer liable to pay the same could not, therefore, be impugned on the

ground of legislative imcompetence.

In Tripura Goods Transport Association and Anr. v. Commissioner of Taxes

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and Ors., [1999] 2 SCC 253, Sections 29, 30, 32, 36-A, 38-B and 2(b) of the

Tripura Sales Tax Act 1976 [98 of 1976] were assailed on the ground of lack

of legislative competence. Those provisions required the appellants therein

to obtain a certificate of registration and to comply with various other

formalities prescribed under the Act and the Rules made thereunder. A

learned Single Judge of the Gauhati High Court had dismissed the writ

petition. That order was upheld by the Division Bench of the High Court in

appeal. On further appeal to this Court, it was contended that being

transporters, they were not trading in sale or purchase of any goods and

therefore they could not be held to be dealers within the meaning of the

Act and as such the impugned provisions which laid certain obligation on

them were beyond the legislative competence of the State Legislature under

Entry 54 of List II of the Seventh Schedule to the Constitution. Negativing

the contention it was held that if the Legislature makes any ancillary or

subsidiary provisions which incidentally transgresses over its jurisdiction

for achieving the object of such legislation, it would be a valid piece of

legislation. The entries in a legislative list should not be read in a

narrow or pedantic sense but must be given their fullest meaning, the

widest amplitude and be held to extend to all ancillary and subsidiary

matters which can fairly and reasonably be comprehended. Thus, the

provision incorporating mechanism to seal all loopholes of escape and

casting obligation on someone to perform certain acts to achieve this

objective was held to be a valid provision.

In State of Rajasthan and Anr. v. DP Metals. [2002] 1 SCC 279, the

provisions of the Rajasthan Sales Tax Act, 1994 [22 of 1995] for levy of

penalty on person in charge of goods for non-compliance with certain

statutory provisions or for submission of false or forged documents or

declaration were questioned as being beyond the legislative competence of

the State. Rejecting the contention, it was laid down that Entry 54 of List

II of the Seventh Schedule to the Constitution has to be construed

liberally. It has been observed that the settled position in law is that

provisions to check evasion of tax are within the legislative competence of

the States under Entry 54 of List II, therefore provisions which made the

imposition of tax efficacious or to prevent evasion of tax are within the

legislative competence of the State.

From the above discussion it follows that the afore-mentioned impugned

provisions which are intended to prevent the evasion of tax payable under

the Act are within the legislative competence of the State and are intra

vires Entry 54 of List II of the Seventh Schedule to the Constitution.

Insofar as sub-sections (10) and (11) are concerned, it has already been

noted above that they stand or fall along with sub-sections (7) and (8) of

the said section. We have held above that sub-sections (7) and (8) are

valid and therefore, consequentially, no illegality can be attributed to

sub-sections (10) and (11). They have to be upheld as constitutionally

valid provisions.

The provision of the Act which remains to be considered is sub-section (4)

of Section 14. Whereas Section 11 deals with levy to tax on sales by casual

trader .Section 14 is a charging section in respect of purchases made by a

casual trader. It directs that, notwithstanding anything contained

elsewhere in the Act, a casual trader shall be liable to pay tax on every

purchase of goods, other than those specified in Schedule IV in West

Bengal. This liability is subject to the provisions of sub-section (3) of

Section 14. The purchases which are exempted are specified under the

proviso to sub-section (1). Sub-section (2) speaks of rate of tax. Sub-

section (3) deals with a situation where a casual trader makes regular

purchases. Sub-section (4) which is impugned reads as under:

"Every person transporting in a road vehicle goods, other than those

specified in Scheduled I or Schedule IV, purchased by him in West Bengal on

his own account or on behalf of any other person shall, on interception by

any person appointed under sub-section (1) of Section 3 and authorized by

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the Commissioner in this behalf (hereinafter referred to in this section as

the authorised officer), stop the road vehicle and produce on demand,

before such authorized officer, invoice, challan, transport receipt or

consignment note or document of like nature in respect of such goods and

shall also furnish the name, address and number of certificate of

registration of consignor or consignee, if registered, and thereafter,--

(a) if the authorized officer is satisfied that the person transporting

the goods is not liable to pay tax under sub-section (1), he shall

immediately allow movement of the road vehicle, or

(b) if the authorized officer is satisfied that the goods are being

transported by a casual trader or a person on behalf of a casual trader, he

may detain the road vehicle for a period ordinarily not exceeding twenty

four hours for the purposes of sub-section (6)."

A perusal of sub-section (4) shows that every person who is transporting in

a road vehicle goods, other than the excluded goods, purchased by him in

West Bengal on his own account or on behalf of any other person is

required, on interception by any person appointed under sub-section (1) of

Section 3 and authorised by the Commissioner in that behalf, (referred to

as the authorised officer in this section) to stop the vehicle and produce,

on demand, before such authorised officer invoice, challan, transport

receipt or consignment note or document of like nature in respect of such

goods; further, he is also obliged to furnish the name, address and number

of certificate of registration of the consignor or the consignee, if

registered. But if the consignor or the consignee is not registered, the

question of furnishing number of certificate of registration does not

arise. In such an event, two courses are open to the authorised officer.

The first is that if the authorised officer is satisfied that the person

transporting the goods is not liable to pay tax under sub-section (1), he

has to allow the movement of the vehicle immediately. And the second is

that, if he is satisfied that the goods are being transported by a casual

trader or a person on behalf of a casual trader he has the power to detain

the vehicle for a period not exceeding twenty four hours for the purposes

of sub-section (6) which provides for determination and collection of tax

in the manner prescribed. It requires the casual trader to pay the tax in

the prescribed form. Therefore, it follows that sub-section (4) is

concerned with the detention of the vehicle for purposes of assessment and

recovery of tax. This provision is also an anti-evasion of tax provision

and over-rides Section 46. For the reasons above-mentioned, we do not find

any illegality in sub-section (4) of Section 14 of the Act.

We may add that the impugned provisions of sub-section (5,) (7), (8) of

Section 11 and sub-section (4) of Section 14 are broadly akin to the

provisions in the Bengal Finance (Sales Tax) Act, 1941, the validity of

which was upheld by us in Civil Appeal No. 8180 of 1995 by order dated

February 25, 2003.

No separate arguments were addressed in regard to the invalidity of the

Rules. In the view we have taken in upholding the provisions of the Act,

the impugned Rules, namely Rules 172, 173, 174 and 188 and Forms 28 and 31

are also to be upheld and they are, accordingly, upheld. The orders under

challenge in regard to the declaration of the Rules as invalid are,

therefore, set aside.

For all these reasons, we are unable to sustain the orders of the Tribunal

under challenge and they are, accordingly, set aside.

The Civil Appeals are, accordingly, allowed.

No order as to costs.

Civil Appeal Nos.8182/1995 and 11649-11650/1995 :

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In view of the order passed by this Court in Civil Appeal No.8180 of 1995

on February 25, 2003, these appeals are also allowed.

No order as to costs.