AI Drafter 
TaxTMI 
TaxTMI 
1965 (2) TMI 85
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....carry with him a document called a bill of sale or a delivery note containing the prescribed particulars and produce the same before the officer in charge of the check post or barrier or any other officer empowered by the State Government. In the case of goods entering or leaving the State limits, such person was further required to give a declaration in the prescribed form. Sub-section (3) required him to stop his vehicle at every check post or barrier or at any other place when so required by the officer empowered by the State Government, to enable the officer to inspect the goods carried in the vehicle and the records relating thereto. Sub-sections (4) and (5) declared that the officer in question shall have the power to seize and confiscate goods not covered by the documents mentioned above or in the case of goods moving across the State limits, if the declaration mentioned above is false. A proviso stated that before taking action for confiscation of goods the officer shall give the person affected an opportunity of being heard and make an enquiry in the manner prescribed. Sub-section (6) gave the option to the owner of the goods or the person in charge of the goods to pay in ....
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.... enquiry was conducted. He further stated that the Commercial Tax Inspector had in fact come to his shop on 17th February, 1964, and satisfied himself about the existence of the relevant documents and also the fact that the purchase had been entered in the books of account of the petitioner on 15th February, 1964, itself. He has produced the invoice and the way bill as annexures to his petition. The petitioner appealed to the Deputy Commissioner of Commercial Taxes. It was dismissed on 13th May, 1964, as not maintainable. That order is also one of the annexures to the petition. The petitioners in the other six writ petitions are owners or operators of lorries or goods vehicles operating within the District of Bangalore. The facts of their cases are all similar and may be summarised as follows: They state that their lorries are used mostly for transport of bricks, jelly, size stones and boulders and sand and mud, all used for building purposes in Bangalore. They state that check posts under section 28-A have been established at old Mysore Road, Bellary Road Hosur Road, Tumkur Road, and Mysore Road, and that at every check post their lorries are being stopped and goods not covered....
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.... in charge of check post or barrier or any other officer as may be empowered by the State Government in this behalf. The owner or person in charge of a goods vehicle or boat entering the State limits or leaving the State limits shall also give a declaration containing such particulars, as may be prescribed, of the goods carried in the goods vehicle or boat, as the case may be, before the officer in charge of the check post or barrier or the officer empowered as aforesaid and give one copy of the declaration to such officer and keep one copy with him. (3) At every check post or barrier, or at any other place when so required by any officer empowered by the State Government in this behalf, the driver or any other person in charge of a goods vehicle or boat shall stop the vehicle or boat, as the case may be, and keep it stationary as long as may be required by the officer in charge of the check post or barrier or the officer empowered as aforesaid, to examine the contents in the vehicle or boat and inspect all records relating to the goods carried, which are in the possession of such driver or other person in charge, who shall, if so required, give him his name and address a....
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....ale or purchase of goods other than newspapers subject to the provisions of Entry 92-A of List I. Entry 92-A of List I empowers the Parliament to legislate on the subject of tax on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce. With reference to the said entries, the argument on behalf of the petitioners in Writ Petitions 1665 to 1670 of 1964 is that their activity does not involve any act of sale or purchase of goods at all and that therefore any attempt to regulate or control such activity is outside the scope of Entry 54. They state that they are neither dealers within the meaning of the Sales Tax Act nor assessees to sales tax. The section, without in any manner controlling the activities of such dealers or obliging them to comply with its requirements, has, according to the petitioners, sought to control their activity which has nothing to do with either the levy or collection of tax under the Mysore Sales Tax Act. On behalf of the petitioner in Writ Petition 1375 of 1964, a more elaborate argument has been addressed on this point. It is stated that because the provisions of ....
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....should be clear that there is no intention whatever to affect, control or tax transactions in the course of inter-State trade, or impose a tax not exigible under the statute-for example, in respect of exempted goods; the mere fact that the goods cross the State border does not, he points out, indicate that the goods are necessarily the subject of a transaction in the course of interState trade; they may well be goods the turnover in respect of which is subject to tax under the State Act; all that is intended by the section is the collection of information to facilitate the identification of the transaction or the liability or otherwise of a dealer within the State or of a dealer liable to pay tax under the State Act. He repudiates the suggestion that there is any attempt at all to impose tax under the impugned section, or that either the confiscation or payment in lieu of confiscation can at all be regarded as a tax or additional tax under the State Act. According to him, it is in the nature of a penalty, not tax, intended to make the entire machinery to prevent evasion of tax set up under section 28-A effective in its operation. There is no law, he states, which prohibits the levy....
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....slative entries in the various Lists in the Seventh Schedule. These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which in the present case, is a tax 'on sale or purchase of goods'. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental". That persons who are not directly liable to pay the tax in question may also have their activities reasonably restricted with a view to prevent the principal persons liable to tax from evading payment of tax is also clear from another decision of the Supreme Court reported in Chaturbhai v. Union of India(3), in which their Lordships upheld the competence of the Central Excises and Salt Act, 1944, and the rules made thereunder which required various persons who may not be liable themselves to pay excise duty to furnish information, submit returns, etc., and make them liable for penalties, confiscation, etc., for contravention, pointing out that the various provisions of the Act and the rules were essentially connected with the levying and collection of excise d....
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.... turnover of the dealer who has dealt with them or who may at a subsequent date deal with them in the course of his trade, nor is it a fee which may rightly be regarded as a payment really in the nature of a tax. Obviously it is in the nature of a punishment for contravention of the section rendering the goods liable for confiscation. Whether one looks upon confiscation itself as the primary punishment or the payment as the primary punishment and confiscation only an effective way of enforcing the said payment, there can be no doubt that what the section purports to do is to punish a person for failure to obey it and not to impose on him a tax in respect of his turnover. But, Mr. Srinivasan, relying upon a ruling of the Supreme Court in C.A. Abraham v. Income-tax Officer, Kottayam[1964] 41 I.T.R. 425; A.I.R. 1961 S.C. 609. , contends that what is levied by the section is penalty and that the penalty should be regarded as an additional tax. In that case, their Lordships dealt with section 44 of the Income-tax Act of 1922 and the nature of penalty imposed under section 28 of that Act against the partners of a firm who had discontinued their business by virtue of section 44. After poi....
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....ready cited. We do not think that the ruling supports the contention of Mr. Srinivasan. Dealing with section 11 of the Hyderabad General Sales Tax Act (corresponding to section 13 of the Mysore Act), their Lordships pointed out that when the statute itself proceeds on the basis that the amount collected by the dealers from consumers was not tax exigible under the statute, the Legislature cannot in the exercise of powers described as ancillary or incidental direct payment of such amounts to the Government as if it were a tax. This is what their Lordships observed at page 924 of the reports: "But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent o....
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.... fully explained by the Supreme Court in Atiabari Tea Company Limited v. State of Assam[1961] 1 S.C.R. 809; A.I.R. 1961 S.C. 232., Automobile Transport Limited v. State of RajasthanA.I.R. 1962 S.C. 1406. and Khyerbari Tea Company Limited v. State of AssamA.I.R. 1964 S.C. 925. In the first-mentioned case, their Lordships pointed out that restrictions on the freedom of movement which are prohibited by Article 301 are such restrictions as directly and immediately restrict or impede the free flow or movement of trade, and made the following incidental observations in regard to Articles 302 and 304(b): "Incidentally we may observe that the difference in the provisions contained in Article 302 and Article 304(b) would prima facie seem to suggest that where Parliament exercises its power under Article 302 and passes a law imposing restrictions on the freedom of trade in the public interest, whether or not the given law is in the public interest may not be justiciable, and in that sense Parliament is given the sole power to decide what restrictions can be imposed in public interest as authorised by Article 302. On the other hand, Article 304(b) requires not only that the law shou....
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....mposed by it are reasonable. We now proceed to examine that question. We might first consider the argument addressed by Mr. Narasaiah on the basis of Article 14 of the Constitution which, though presented as an apparently independent argument, has some bearing on the question of reasonableness also. It will be noticed that though the impugned section refers to boats also, the only vehicles used for transport by road or land which are dealt with by it are goods vehicles. Mr. Narasaiah states that by selecting goods vehicles alone for being dealt with while several other types of vehicles are also used for transport of goods, the section must be held to discriminate against goods vehicles alone and in favour of every other type of vehicles and that therefore there has been a violation of the fundamental right of equality before the law guaranteed by Article 14. It is further contended that if the setting up of check posts or barriers in any selected place by the State Government proceeds upon the opinion that there is widespread evasion of tax in that place or locality, which makes it necessary to check or inspect goods in the course of transport, then it is unreasonable to provid....
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....ration of motor vehicles. That Act also contains the definition of the term "goods vehicle" in clause (8) of section 2 which reads as follows: "'Goods vehicle' means any motor vehicle constructed or adapted for use for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods solely or in addition to passengers." Rule 187 of the Mysore Motor Vehicles and Road Traffic Rules framed under the Motor Vehicles Act requires that every driver of a goods vehicle shall keep, and every holder of a goods vehicle permit shall cause to be kept, in English or in Kannada, a record in Form No. 33 (appended to the said Rules) which shall give, in respect of each day on which the driver was employed in driving, the information prescribed in the form. Reference to a trip sheet is found in rule 257 of the same Rules which states"The driver or conductor of every public service vehicle shall maintain trip sheets serially numbered in a bound book in Form 39 or 40 in English or in Kannada." Form 39 has to be used in the case of a stage carriage and Form 40 in the case of a contract carriage, both of which are categories of motor vehicles carrying pa....
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....ion to bring them to account in the books may be detected when goods which are the subject of such transactions of sale or purchase are transported from place to place. Mr. Advocate-General also says that the majority of goods which are transported by road are transported by lorries or goods vehicles in view of the fact that such transport is both convenient as well as speedy. He adds that the transport by goods vehicles or lorries is becoming more and more popular and may be expected to grow in proportion and popularity with the growth of trade and commerce. It is with these considerations, according to Mr. Advocate-General, that the checking of lorries in the manner envisaged by section 28-A of the Act has been decided upon as one of the important steps for checking evasion on the expectation that it will reduce to a considerable extent the omission on the part of dealers duly to account for all goods dealt with by them in the course of their trade with a view to evade payment of tax. There is, therefore, he says, an intelligible criterion for classifying lorries or goods vehicles separately for the purpose of check and inspection under the section and excluding the rest of the v....
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....on' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word 'reasonable' implies intelligent care and deliberation, that is the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in Article 19(1)(g) and the social control permitted by clause (6) of Article 19, it must be held to be wanting in that quality." In State of Madras v. V.G. Row A.I.R. 1952 S.C. 196., there occurs the following oft-quoted statement of principle by Patanjali Sastri, C.J.: "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied the....
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....sked us to regard subsections (2) and (3) as containing what may be called the substantive part of the matter and the remaining sub-sections as containing the procedural part thereof. Such analysis, in our opinion, may be accepted as a reasonable and convenient basis for the discussion of arguments and examination of the principal point of enquiry, viz., the reasonableness or otherwise of the restriction. Proceeding on this basis, the argument on behalf of the petitioners has been that unreasonableness attaches both to the substantive as well as to the procedural parts of the section, as against which the contention of the Advocate-General on behalf of the State has been that the complaint of unreasonableness is scarcely possible in respect of the substantive part of the section and that if such were the position, the procedural part of the section, which merely states the consequences of contravening the substantive part and which are necessary for making the substantive part effective, cannot also be attacked as unreasonable. The further contention on behalf of the petitioners is that even if it should be possible to regard the substantive part as reasonable, the procedural pa....
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....bricks, they state that they have to transport them from kilns and that the owner of the kilns does not keep any establishment, office or even a clerk at the kilns with the result that there is no person available to issue either a bill of sale or a delivery note. They further state that the business of manufacturing bricks is carried on only for a period of about three months in a year and that ordinarily the persons left in charge of the kilns are illiterate coolies who will not sign any documents. In the matter of jelly, size stones and boulders, the position, they state, is worse. They have to be removed by transporters like the petitioners from the quarries direct. They state that the work of quarrying is generally assigned to different piece-workers by the person who has obtained the right to quarry by payment of royalty, and that each such pieceworker gathers just about Rs. 10 or Rs. 15 worth of material per day and leaves it in charge of illiterate workers who refuse to sign documents. The position in regard to sand and mud is said to be the worst. It is stated that places wherefrom such materials are loaded into lorries and transported, belonging either to Government or pr....
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....ansport in question and could therefore be treated as information readily available or accessible to the transporter in the way of his business. Further, the collection of information on the points noted is also necessary for the transporter's own business. The description, quantity, weight or value of the goods are all matters which are or may be of relevance for the purpose of determining the remuneration of the transporter himself. There is no doubt also that the consignor or a representative of his directly contacts the transporter or his representative and that the transporter should be informed about the name and address of the consignee for the due discharge of his obligation under the contract of transport. It is also well-known and not denied that transporters obtain documents in the nature of applications signed by consignors or their representatives and that ordinarily a document in the nature of a way bill is prepared in respect of any particular consignment or a particular group of consignments. We might also add that some of the particulars required under rule 23-B of the Mysore Sales Tax Rules are not different in nature from the particulars to be noted in the form o....
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....ng employed to transport them by some person. If that person happens to be the seller of the material, then there is no difficulty in requiring the seller to direct his men to sign against item No. 9 of the delivery note at the point of loading; if there is no such person and the seller authorises the transporter himself to attend to the loading, then the seller constitutes the transporter himself as the agent for making delivery on his behalf. If, on the other hand, the person who employs the transporter happens to be the purchaser, he would certainly be interested in getting his seller to make necessary arrangements to attend to the completion of item No. 9 of the delivery note, and in the event of the seller pleading his inability to post some person at the point of loading to deliver that material on his behalf and authorises the purchaser to make his own arrangements for the purpose, then the purchaser would have the authority on behalf of the seller to either send one of his own men to the spot or require the transporter to attend to the loading. In any view of the matter, therefore, we cannot accept the position that there is any insuperable difficulty in completing the form....
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....feature of the procedural part, it will be noticed, is the confiscation of the goods themselves. Although Mr. AdvocateGeneral insists that the said provision for confiscation is intended to make the substantive part effective for the purpose of achieving the principal object of the section, he does not and cannot deny that confiscation is a serious consequence. His contention is that we must regard it as merely a necessary consequence provided by the section for the contravention of its substantive part, and that therefore if the substantive part is held to be reasonable or not open to the attack of unreasonableness, there would the reasonableness of the consequence. He further states that in spite of the several details relied upon by the petitioners and the different approaches from which arguments on their behalf have been addressed, the weight of all their arguments leads only to one complaint, viz., that there is no rule or effective safeguard provided by the section by way of an enquiry leading to confiscation or by way of affording the aggrieved person a reasonable opportunity to show cause against confiscation. His case is that this complaint is without substance and that t....
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....nfiscation, the petitioners point out that there is firstly no apparent reason why goods exempted from tax should at all be confiscated and secondly no apparent basis for the distinction made between the amount payable in respect of taxable goods and the amount payable in respect of goods exempted from tax. The remedy provided by subsection (7) by way of recourse to a superior authority, the Deputy Commissioner, is a wholly ineffective remedy, firstly because it is obviously a discretionary remedy, that is to say, a remedy wholly dependent upon the discretion of the Deputy Commissioner and secondly because if the point for enquiry by the original authority is itself incapable of clear determination, there is no way in which the superior authority can decide whether the original authority had or had not committed any error. If, as the learned Advocate-General points out, the object of the section is no more than the collection of information and action, if any, on the basis of that information with a view to prevent evasion of tax is expected to be taken subsequently at the time of assessment to tax of dealers liable, the petitioners contend, the object of the section would be fully....
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.... entered in the documents. The ultimate purpose, according to him, is to collect true information about the goods or more accurately, true information about the dealers who are concerned with the goods in the way of their business, so that such dealers may be deterred from omitting to bring such goods into account in their books. If that much is achieved, says Mr. Advocate-General, the section does not contemplate that the goods should be confiscated. What Mr. Advocate-General has stated should, if properly understood and applied, support two inferences, viz., (1) that the absence of documents or the apparent lack of connection between the documents and the goods merely exposes the goods to the possibility of confiscation but that something more is necessary before they could be actually confiscated, and (2) that if correct information in respect of the particulars enumerated in rule 23-B is furnished even after the goods are detained for the absence of the same, the liability for confiscation disappears. Such may be a just and proper way of achieving the principal object of the section. But the question is whether the language employed in the section can bear the meaning which ....
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....The arguments on behalf of the petitioners is that if the description of the goods in the documents tallies with the goods actually carried in the vehicle and the documents also contain other particulars relating to the consignor, consignee, etc., it is impossible for the check post officer or other empowered officer to say that the goods are not covered by the documents, because the section does not empower him to examine whether the particulars are true or false as it does in the case of declaration in relation to goods crossing the State border, and that therefore the proviso cannot be read as authorising him to conduct an enquiry into a question which he is not by the express terms of the section empowered to examine. They also state that the enquiry contemplated by the section is an enquiry for the purpose of taking action for confiscation and not for detention or seizure. It is difficult to answer these contentions of the petitioners on the basis of the language employed in the section itself. The suggestion of the Advocate-General that confiscation is not contemplated or may be avoided by the furnishing of full information on all prescribed particulars even after the dete....
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....er, if satisfied that there has been no evasion of tax, may order release of the confiscated goods for reasons to be recorded in writing. Mr. Srinivasan points out that an owner who is readily available appears to be at a disadvantage. We might add that it is a matter for some doubt whether the provision for proof of what is called the bona fides of transaction by relevant records, which apparently are records other than the documents prescribed by the section, does not amount to adding something to the section. It will thus be seen that the impugned section, while providing for an enquiry, has totally failed to indicate what the point for enquiry is. If so, there is considerable force in the argument that the so-called enquiry must be regarded as a pretence. But what is of more serious consequence is that the section has failed to state in clear terms the exact circumstances in which alone so serious a penalty as actual confiscation of the goods can be ordered, while apparently suggesting or making one believe by its general tenor and objective that mere absence of documents may not be a sufficient cause for confiscation. If the exact circumstances in which confiscation can ....
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....r with advantage to a portion of the discussion in the judgment of the Supreme Court in Collector of Customs, Madras v. Nathella Sampathu Chetty[1962] 3 S.C.R. 786; A.I.R. 1962 S.C. 316. strongly relied upon by the learned Advocate-General. That case dealt with an attack on the constitutionality of section 178-A of the Sea Customs Act which enacted a rule of evidence placing the burden on the person found in possession of goods to prove that they are not smuggled goods when they are seized by an officer under the Act on a reasonable belief that they are smuggled goods. In the course of the discussion, Rajagopala Iyengar, J., points out that the burden of proof arises only on a seizure made on the reasonable belief entertained by the seizing officer that the goods are smuggled and that the facts and circumstances on which such reasonable belief is entertained are themselves open to scrutiny and examination by another superior officer who adjudges whether or not to confiscate the goods. We refer specially to this circumstances because it was obviously regarded by their Lordships of the Supreme Court as affording a reasonably strong safeguarded for the person against whom action of th....
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....n 42 of the Madras General Sales Tax Act corresponding to section 28-A of the Mysore Act, no less an authority than the Board of Revenue of Madras took the view that there was no need to issue a notice to the owner of the goods when there is no actual confiscation and sale and that the issue of notice to and collection of compounding fee from the lorry driver who was the person in charge of the goods being transported without a delivery note or bill of sale is in accordance with the provisions of the Act. The High Court rejected this view. We have already stated the facts of Writ Petition No. 1375 of 1964. The position there was that though the petitioner's clerk was travelling in the lorry and he could undoubtedly give all relevant information, the goods were seized and released only on payment of Rs. 900 in lieu of confiscation. The answer made in the counter-affidavit on behalf of the State is significant. Regarding the actual confiscation as stated in paragraph 1 of the petitioner's affidavit, the counter-affidavit states that no comments are necessary except that the documents required by the section were not available in the lorry and that consequently the officer had to t....
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.... to be struck down as unconstitutional and invalid. The next question is whether, for the said reason, sub-sections (1), (2) and (3) also become invalid. That depends upon the question whether the two sets of sub-sections are so inextricably bound together as to constitute a single comprehensive scheme with the result that sub-sections (1), (2) and (3) cannot be effective or operative in the absence of other sub-sections. Mr. Advocate-General has pointed out that even in the absence of sub-sections (4), (5), (6) and (7), the rest of the section can be operated with such effectiveness as to enable the achievement of the object of the section. In themselves, he points out, the sub-sections place an obligation upon certain persons to furnish information necessary for preventing evasion of sales tax. The provisions of rules 23-B, 23-C, sub-rules (1), (2), (2-A) of rule 23-D and subrule (1) of rule 23-E prescribe the details in that regard. Finally, there is rule 61 promulgated or made pursuant to section 38(3) which provides for imposition of a fine on conviction by a Magistrate of the First Class for any breach of rules including rules 23-B, 23-D and 23-E. Further clause (bb) of su....