Check-gate tax collection upheld for evasion prevention, but provisional sums require assessment before final retention.

Rule 94(4)(a) and section 16A permit check-gate collection of tax where the officer records a reasonable apprehension of evasion and acts within the statutory limits; the provision was treated as intra vires and the ad hoc collection at the check gate was upheld on the facts. Amounts collected at the check gate are provisional and cannot be finally retained without a lawful assessment or other authorised adjustment; in the absence of any subsequent assessment order, the State was not entitled to retain the sums collected. Refund was made conditional on proof that the goods actually crossed the exit check gate and reached the outside-State destination.

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Issues: (i) Whether rule 94(4)(a) of the Orissa Sales Tax Rules, 1947, and the collection of tax at the check gate under section 16A of the Orissa Sales Tax Act, 1947, were valid when the authority acted on apprehension of evasion of tax; (ii) Whether the tax collected at the check gate could be retained without a valid assessment order and whether the petitioners were entitled to refund.

Issue (i): Whether rule 94(4)(a) of the Orissa Sales Tax Rules, 1947, and the collection of tax at the check gate under section 16A of the Orissa Sales Tax Act, 1947, were valid when the authority acted on apprehension of evasion of tax.

Analysis: The statutory scheme permits establishment of check-posts and collection of tax where there is a reasonable apprehension of evasion, provided the officer records reasons and acts within the limits of the power conferred by the Act and the Rules. A mere movement of goods in transit does not by itself amount to a completed sale, but the provisions operate to prevent evasion and are not unconstitutional merely because they authorise ad hoc collection at the check gate. On the facts, the materials in the counter-affidavit and departmental reports furnished a basis for apprehension of evasion.

Conclusion: Rule 94(4)(a) was held to be intra vires, and the collection at the check gate was upheld as a valid exercise of power under the Act and the Rules.

Issue (ii): Whether the tax collected at the check gate could be retained without a valid assessment order and whether the petitioners were entitled to refund.

Analysis: Amounts collected at the check gate are only provisional in nature and must be adjusted against a lawful assessment or set off in accordance with the Act. In the absence of any subsequent assessment order, the State could not retain the sums collected from the petitioners. Refund was, however, made conditional on proof that the goods had in fact crossed the border exit check gate and reached the outside-State destination.

Conclusion: The amounts collected were directed to be refundable, subject to production of evidence establishing that the fish had actually crossed the exit check gate.

Final Conclusion: The challenge to the validity of the check-post provision failed, but the petitioners obtained relief against retention of the collected tax in the absence of assessment, with refund made dependent on proof of actual inter-State transit.

Ratio Decidendi: Statutory check-post collection to prevent tax evasion is valid when founded on recorded reasonable apprehension, but money collected on that basis cannot be finally retained without assessment or lawful adjustment.

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