Confiscation power in transit goods under sales tax law invalid for operating before the taxable event.

Section 42(3) of the Madras General Sales Tax Act, 1959, which allowed seizure and confiscation of goods in transit with an option to pay penalty, was held unconstitutional because the power was not ancillary or incidental to the sales tax levy. The provision was treated as substantially in pari materia with an earlier invalidated confiscation provision and as repugnant to the scheme of the Act, since it could operate before the taxable event occurred and thereby support recovery before tax liability arose. The fact that the goods were intercepted in transit and suspected of evasion did not cure the defect; constitutional validity depended on the language and effect of the provision itself.

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Issues: Whether section 42(3) of the Madras General Sales Tax Act, 1959, authorising seizure and confiscation of goods in transit with an option to pay penalty in lieu of confiscation, was constitutionally valid.

Analysis: The provision was held to be substantially in pari materia with section 41(4), which had already been invalidated on the ground that the power to confiscate goods was not ancillary or incidental to the power to levy sales tax. The earlier decision of the Court, affirmed by the Supreme Court on a different reasoning, had treated the vice in the provision as its repugnancy to the scheme of the Act, because it enabled recovery of tax even before the taxable event occurred. The factual finding that the goods were under transport and that the officer suspected evasion did not cure the defect, since legislative competence had to be tested from the language and effect of the provision itself. The Court also held that the difference between goods searched in a dealer's premises and goods intercepted in transit was immaterial for this purpose.

Conclusion: Section 42(3) of the Madras General Sales Tax Act, 1959 was unconstitutional and invalid.

Ratio Decidendi: A statutory power to seize and confiscate goods in aid of sales tax collection is invalid where, in substance, it is not ancillary or incidental to the taxing power and is repugnant to the scheme of the sales tax law by operating before the taxable event.

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