Security demand from registered importers upheld as a valid anti-evasion measure under State sales tax law.

Section 7(4a)(iii) of the Bengal Finance (Sales Tax) Act, 1941 was construed to permit demand of security from any importer of notified goods, including a registered dealer and not only an unregistered person. The demand was treated as a reasonable anti-evasion measure where the dealer had given undertakings, diverted goods, and sold part of them within West Bengal, so the challenge under Articles 14, 19(1)(g) and 301 was rejected. The security requirement was also held to be within the State's legislative competence as an ancillary and incidental power under Entry 54 of List II, since the facts showed local diversion and tax-risk within the State.

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Issues: (i) whether security could be demanded from a registered dealer importing notified goods into West Bengal under section 7(4a)(iii) of the Bengal Finance (Sales Tax) Act, 1941; (ii) whether the demand for security was arbitrary or violative of Articles 14, 19(1)(g), and 301 of the Constitution of India; and (iii) whether the demand for security was beyond the legislative competence of the State.

Issue (i): whether security could be demanded from a registered dealer importing notified goods into West Bengal under section 7(4a)(iii) of the Bengal Finance (Sales Tax) Act, 1941

Analysis: The expression "any person" in section 7(4a)(iii) was held to include a registered dealer, an unregistered dealer, and even a non-dealer, so long as the person imports notified goods into West Bengal. The provision was read as a distinct security power applicable to importers of notified goods and not confined to unregistered persons. The dealer's status as a registered dealer and its regular filing of returns did not exclude the statutory power to require security where sufficient reasons existed, particularly in view of the past conduct found by the Authority.

Conclusion: Security could validly be demanded from the registered dealer under section 7(4a)(iii), and the contention that the provision was inapplicable was rejected.

Issue (ii): whether the demand for security was arbitrary or violative of Articles 14, 19(1)(g), and 301 of the Constitution of India

Analysis: The Authority found that the demand was supported by the dealer's past conduct, including violation of undertakings and sale of part of the goods in West Bengal despite declarations that the goods would be transported to Assam. In that context, the demand for reasonable security was not treated as unjust, arbitrary, or discriminatory. It was also held not to amount to an unreasonable restriction on the right to carry on trade or business, and not to constitute a direct and immediate impediment to the freedom of trade, commerce, and intercourse protected by Article 301.

Conclusion: The challenge under Articles 14, 19(1)(g), and 301 failed, and the demand for security was upheld.

Issue (iii): whether the demand for security was beyond the legislative competence of the State

Analysis: The power to demand security was treated as a machinery provision ancillary and incidental to the State's power to tax intra-State sales and to prevent evasion of tax. The earlier decisions relied upon were distinguished on the footing that, unlike a pure inter-State movement case, the present facts showed diversion and sale within West Bengal, bringing the matter within the discipline of the State sales tax law. On those facts, the security requirement was held to fall within the State's legislative competence under Entry 54 of List II of the Seventh Schedule.

Conclusion: The demand for security was within the legislative competence of the State.

Final Conclusion: The statutory power to insist on reasonable security was upheld on the facts, and the challenge to the commercial tax authorities' action failed; the requested relief had in any event become infructuous.

Ratio Decidendi: A statutory power to demand reasonable security from a person importing notified goods may validly extend to a registered dealer, and where the facts show diversion or sale within the State, such a security requirement is a permissible ancillary and incidental measure to prevent tax evasion and does not, by itself, offend Articles 14, 19(1)(g), or 301 of the Constitution of India.

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