Tax evasion prevention powers under sales tax law were upheld as within State legislative competence.

Section 16-A of the Orissa Sales Tax Act and rule 94 of the Orissa Sales Tax Rules were upheld as valid exercises of State legislative power under entry 54 of List II. The court applied the principle that a taxing entry covers ancillary and incidental measures needed to assess and collect tax, including steps to prevent evasion. It distinguished the provision from the Madras scheme previously invalidated by the Supreme Court because the Orissa law excluded confiscation of goods not liable to tax and confined the power to taxable sales. The challenge to the seizure and confiscation provisions therefore failed.

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Issues: Whether section 16-A of the Orissa Sales Tax Act and rule 94 of the Orissa Sales Tax Rules were ultra vires on the ground that the power of seizure and confiscation of goods in transit was beyond the State's legislative competence under entry 54 of List II of the Seventh Schedule of the Constitution of India.

Analysis: The provision was examined in the light of the settled principle that a taxing entry includes matters ancillary and incidental to the levy and collection of tax, including measures to prevent evasion. The confiscation power under the Orissa enactment was distinguished from the Madras provision considered by the Supreme Court, because the Orissa law specifically barred confiscation in respect of goods not liable to tax. Confiscation was therefore linked only to taxable sales, and the mischief that had led to invalidation in the earlier decision was absent.

Conclusion: Section 16-A of the Orissa Sales Tax Act and rule 94 of the Orissa Sales Tax Rules were held to be intra vires and within the legislative competence of the State; the challenge failed.

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