Transport documentation rules to prevent tax evasion were upheld as valid regulatory measures within taxing power.

Provisions requiring transport documents and disclosure of information for goods in transit were treated as ancillary regulatory measures to prevent sales tax evasion and secure revenue under the taxing power in entry 54 of List II. The Court held that detention and penalty were authorised only where there was an attempt to evade tax, not on a mere assumption of sale, and therefore the impugned notification and permit forms were not beyond legislative competence. The document requirement was also found not to impose an unreasonable restriction on trade, since it served a public interest purpose without prohibiting transport or disposal of goods. The constitutional challenge failed and the penalty was upheld as within authority of law.

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Issues: Whether sub-sections (2a) and (3) of section 31 of the Bihar Finance Act, 1981, as amended by section 9 of the Bihar Finance Act, 1984, together with the impugned notification and permit forms, were beyond legislative competence or otherwise unconstitutional as imposing an unreasonable restriction and whether the penalty imposed pursuant to those provisions was without authority of law.

Analysis: The impugned provisions were held to operate as measures for prevention of evasion of sales tax and for securing revenue due under the Act. The requirement to carry documents and furnish information was treated as a regulatory condition ancillary to the power of taxation under entry 54 of List II of the Seventh Schedule of the Constitution of India. The Court distinguished the decision relied upon by the petitioners on the ground that the present provisions did not authorise seizure and confiscation merely on the assumption of sale, but only permitted detention and penalty where there was an attempt to evade tax. The document requirement was also held not to amount to an unreasonable restriction under article 19 because it served a public interest purpose and did not prohibit transport or disposal of goods.

Conclusion: The challenge to the vires of the impugned provisions and notification failed, the penalty was upheld as within authority of law, and the writ application was dismissed.

Ratio Decidendi: Provisions requiring transport documentation and authorising penalty for attempted tax evasion are constitutionally valid when they are ancillary to the taxing power and imposed as reasonable regulatory measures in public interest.

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