TaxTMI 
TaxTMI 
1984 (12) TMI 273
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....ndia Limited which is a public limited company engaged in the business of goods transport as a public carrier within the meaning of the Carriers Act of 1865. The petitioner prays for the issue of a writ of certiorari or any other appropriate writ to call for the records relating to notice Rc. No. B3/62/84 dated 9th March, 1984 issued by the second respondent herein, i.e., the Commercial Tax Officer, Lad Bazar Circle, Hyderabad, and to quash the same. The case put forward by the petitioner-corporation is that it is having a long standing in the business of transport for over 25 years. It has a network of offices throughout the country and operates large fleet of goods transport vehicles. The petitioner-corporation receives consignments from various parties for purposes of transport from one place to another in the country and in the course of their business they receive goods from respondents Nos. 4 to 9 herein, who are reputed tyre manufacturers for transportation of their material to different places in India. Silvaasa is a Union territory forming part of Dadra and Nagar Haveli and is located on the coast of Gujarat. There has been no incidence of sales tax on a variety of g....
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....attract demurrage. If the consignments remained unclaimed for a period of 90 days, a notice of non-clearance is issued to the consignor, followed by a second reminder after 120 days. Thereafter if the consignment still remains unclaimed or undelivered it is transferred to the "unclaimed property section" for disposal to realise the freight and demurrage. This, in brief, is the procedure followed by the petitioner-corporation for the delivery of goods to the consignees and for realisation of freight and demurrage from the consignor or the consignees, as the case may be. The head office of the petitioner's corporation is situated at Chelpura Mahaboob-Ki-Mehnoi, Hyderabad. On 29th December, 1983 the third respondent, i.e., the Asst. Commercial Tax Officer, Lad Bazar-1, made a surprise check of the head office of the petitioner-corporation and issued detention orders directing. the petitioner-corporation not to release 583 tyres of various brands covered by 150 L. Rs. until further orders. It was also directed by the respondent No. 3 that the petitioner-corporation shall direct the consignees, if any, to the office of the third respondent for further investigation of the matter. ....
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....es available to the petitioner-corporation to agitate its claim, if any. It is equally clear beyond any doubt that the respondents 4 to 9 who are reputed tyre manufacturing companies having their manufacturing units at various places in India are trying to take advantage of the tax-free locality of Silvaasa. These tyre manufacturing companies, having their offices throughout the country, have been reportedly moving their goods to Silvaasa from where they are despatching the goods to various States in India. Moreover, even though the tyre companies have got their own local branch offices with godowns at Hyderabad and other places in the State of Andhra Pradesh, the goods despatched to these places are not being stocked in the godowns of the tyre companies but continue to remain in the godowns of the transport companies. The deliveries to various persons are effected from the godowns of the transport companies themselves. Thus, by putting up a facade to show that the sales have already taken place at Silvaasa which is a tax-free area, those companies are evading the payment of sales tax on goods. It is stated by respondents 1 to 3 that a major portion of these transactions are fictit....
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....he Act. In the show cause notice as well as in the counteraffidavit it is stated that the enquiries revealed that ascertainment of goods has taken place at Hyderabad only. The petitioner-corporation has transgressed its limits as a carrier and delivered the goods which have not been identified to persons who have come to purchase such goods. In short, the allegation against the petitioner-corporation is that they are delivering the goods to unidentified consignees from among a lumpsum of tyres which have been brought from Silvaasa and which have not been earmarked to any particular consignee as such at the point of departure in Silvaasa. The petitioners are not delivering the consignments to the consignees merely on payment of freight charges but are indulging in actual sale of the tyres in Hyderabad, Andhra Pradesh, to persons who are coming forward to purchase the same from their godowns. Another significant point to be noted is that even though considerable delay has already occurred in the delivery of goods, the petitioner-corporation has not taken any action for the realisation of demurrage from the consignors or from the consignees. The respondents 1 to 3 came to know that af....
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....us brands covered by 150 L. Rs. until further orders to the Transport Corporation of India Limited and also directed the said corporation to send the consignees to the office of respondent No. 3, Lad Bazar-1, Hyderabad, with relevant documents so that the goods may be released to them, if they produce valid documents. On 10th February, 1984 when the A.C.T.O., Lad Bazar-1, Hyderabad, again visited the godown of the petitioner-corporation 391 L. Rs. relating to 1211 truck tyres of various brands including those found on 29th December, 1983 were found not supported with valid documents, about the identity of the consignees, etc., and therefore, detention order in respect of the said 1211 truck tyres also was issued with the direction to the petitionercorporation to send the consignees to the office of the 3rd respondent herein, as and when they approach the office of the petitioner. Uptill now few consignees have come forward to claim the goods covered by the documents in their possession. A large bulk of the tyres is still lying unclaimed in the godowns of the petitioner-corporation. This factor itself goes to show that the transactions are not genuine and have been manipulated with ....
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.... principal irrespective of the quantum of turnover shall apply and get himself registered as a dealer under section 12 of the A.P.G.S.T. Act. The petitioner-corporation has violated the provisions of the A.P.G.S.T. Act and the Rules and has rendered itself liable for action under section 30 read with section 7(a) of the A.P.G.S.T. Act of 1957. The show cause notice is, therefore, issued to the petitioner-corporation asking them to explain as to why penal action should not be taken against them for violation of the provisions of the A.P.G.S.T. Act and the Rules made thereunder for failure to get themselves registered as dealers under the provisions of the A.P.G.S.T. Act and for acting as an agent of the non-resident principal in the State of Andhra Pradesh. The petitioner-corporation is requested in the show cause notice to file their written objections, if any, against the gross turnover assessment made against them and file their written objections, if any, within 7 days from the date of receipt of the said show cause notice. It is against this show cause notice that the petitioner-corporation has filed this writ petition seeking a writ of certiorari for quashing the same. It w....
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....issued proceedings directing the Transport Corporation of India Limited not to release the goods. On 14th February, 1984 the A.C.T.O. issued orders directing the carriers not to deliver 1211 tyres and bundles of tubes and flaps in their godown to the consignees until they get release orders from him. In spite of repeated requests, the goods have not been released and as a result of this action of the respondents, goods worth about Rs. 35 lakhs sent to 31 buyers are lying in the godown of the Transport Corporation of India Limited incurring heavy demurrage. Similar action has been taken by the respondents in detaining petitioner's tyres and tubes at other places, viz., Nellore, Warrangal, Visakhapatnam, Guntakal and Cuddpah, where 300 tyres are lying in the godown of the Transport Corporation of India Limited. The petitioner, therefore, challenges the order of detention which has been passed by the respondents herein as being illegal and high-handed and it is also alleged that no sale has taken place in the State of Andhra Pradesh and hence the question of evasion of sales tax due to the sales tax authorities does not arise. It is also contended that the transactions between Silvaas....
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....ioned in W.P. Nos. 6460 and 14063 of 1984. W.P. No. 14069 of 1984: This writ petition has been filed by the Dunlop India Limited for issue of a writ of mandamus or any other appropriate writ declaring as unconstitutional and illegal, the action of the first respondent in detaining 90 tyres, 34 tubes and 4 flaps worth about Rs. 2,90,000 in the first week of January, 1984 at the godown of the Transport Corporation of India Limited at Warrangal. It is obvious that the grounds raised in all these four writ petitions are the same and the legal contentions also which have been raised against the power of the respondents 1 to 3 for detention and confiscation of goods can also be dealt with in a common judgment. W.P. No. 6623 of 1984: In this writ petition filed by J.K. Industries a writ of mandamus or any other appropriate writ is prayed for declaring as unconstitutional and illegal, the action of the respondents 1 and 2 in detaining Truck No. G.R.R. 3984 together with goods, i.e., 220 tyres and 220 tubes from 5th March, 1984 to 14th March, 1984 at Madnoor Check Post, Nizamabad District, and for detention of the goods from 14th March, 1984 in the godown of M/s. Freight Carrier....
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....ection (6) of section 28 of the A.P.G.S.T. Act shall also be declared to be illegal and unconstitutional for the reasons mentioned in the judgment of the Supreme Court. Before considering the decision of the Division Bench in (Kotha Rama Doss v. Deputy Commercial Tax Officer) W.P. No. 3515 of 1970 (printed at page 53 infra) and the relevant case law on the subject it would be pertinent to examine the relevant provisions of the A.P.G.S.T. Act which have a bearing on the matter. The two sections with which we are primarily concerned in this case are sections 28 and 29 of the A.P.G.S.T. Act. Section 28 of the A.P.G.S.T. Act is the section which deals with the powers of the authorities to order production of accounts and powers of entry, inspection, etc. Section 28(6) of the A.P.G.S.T. Act reads as follows: "28. (6) Any such officer shall have power to seize and confiscate any goods which are found in any office, shop, godown, vehicle, vessel or any other place of business or any building or place of the dealer, but not accounted for by the dealer in his accounts, registers and other documents maintained in the course of his business: Provided that before taking action for the co....
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....lating to the goods carried, which are in the possession of such driver or other person in charge, for the purpose of ascertaining whether there has been any sale or purchase of the goods carried and in case there was sale or purchase of the goods carried, whether such sale or purchase is liable to tax under this Act, and if so- (a) whether such tax has been paid; or (b) whether the sale or purchase of the goods carried has, for the purpose of the payment of tax under this Act, been properly accounted for in the bills of sale, or delivery notes or such other documents as may be prescribed." The basic difference of sections 28 and 29 of the A.P.G.S.T. Act is evident from a mere reading of the said two sections, that section 28 of the Act is concerned with the powers to order production of accounts and power of entry, seizure and confiscation of the goods at the premises of the dealer or at any other place where the dealer is storing the goods. On the other hand the whole ambit of section 29 of the Act is about the inspection of goods at the check posts while in transit. It would be pertinent to contrast the provisions of section 42 of the Madras General Sales Tax Act which ....
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....ales Tax Act of 1959 clearly reveals the point that under that section also the power of seizure and confiscation to be exercised is at the check-post or barrier set up by the Government. The provisions of section 42(1) and (2) of the Madras General Sales Tax Act are pari materia in all respects with section 29(1) and (2) of the A.P.G.S.T. Act. Similarly the provisions of section 42(3) of the Madras General Sales Tax Act deal with the power of seizure and confiscation of goods which are in transit in any vehicle or boat which are not covered by valid documents are comparable with the provisions of section 29(3) of the A.P.G.S.T. Act. Section 29(6) of the A.P.G.S.T. Act deals with the question of detention of goods in case the tax directed to be paid or the security directed to be furnished under sub-section (3) is not paid or not furnished. In that event under section 29(7) of the A.P.G.S.T. Act, in case the goods detained under section 29(6) are subject to speedy and natural decay or in case of the goods are not claimed by any one within the prescribed period, the concerned officer shall, subject to such conditions as may be prescribed, sell such goods in open auction and remit th....
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....ement of articles 14 and 19(1)(g) of the Constitution of India. It was held by the Division Bench of this Court that the power to levy tax includes all incidental powers to prevent the evasion of such tax. The power to seize and confiscate goods is only by way of punishment or penalty which is intended to operate as the most effective deterrent against tax-evaders and it is therefore ancillary or incidental to the power to levy tax on the sale of goods and falls within the ambit and scope of the legislative power, conferred on the State Legislature under entry 54 of List II of the Seventh Schedule of the Constitution of India. So long as the steps or measures taken by the State Legislature are directed towards the achievement of the object of prevention of evasion of tax, they come within the scope of ancillary powers irrespective of the question whether it may be necessary or not for the Legislature to impose a drastic provision or only a lenient punishment. Therefore section 28(6) and section 29(3) of the Andhra Pradesh General Sales Tax Act, 1957 were held to be not ultra vires the State Legislature. It was further observed that the procedure laid down under the Andhra Prades....
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....ry 54 of List 11 of the Seventh Schedule of the Constitution of India and hence intra vires. In this context it was necessary to define precise limits of the decision of the Supreme Court in Check Post Officer v. K.P. Abdulla and Bros.'s case [1971] 27 STC 1 (SC). It was held that under the Orissa Sales Tax Act of 1947, unless there has been a sale the incidence of taxation would not arise and there would be no confiscation of goods, which are not liable to payment of tax. In other words the confiscation of goods carried in a vehicle under the Orissa Act could be made only in cases of sale of the said goods under the scheme of the Orissa Act. Therefore, the mischief which was contemplated by the Supreme Court in Check Post Officer's case [1971] 27 STC 1 (SC) wherein it was held that even a person carrying his own goods as personal luggage from one State to another for his own consumption and if he is unable to produce the documents specified in clauses (i), (ii) and (iii) of sub-section (3) of section 42 of the Madras General Sales Tax Act of 1959, stands in danger of having his goods forfeited, cannot exist under the Orissa Act. In this view of the matter, section 16-A of the Oris....
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.... officer not below the rank of an Assistant Excise and Taxation Officer shall have the power to seize the goods in respect of which the declaration is false, provided the officer acting under sub-section (6) or sub-section (8) may, before or after such seizure, give to the person affected an option to pay, in lieu of seizure and in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater. These sub-sections, which have been briefly referred to above underwent amendments in 1960, 1963, 1965 and 1974, and after the amendments it has been provided under sub-section (6) that if the officer-in-charge of the check post or barrier or other officer, as mentioned in sub-section (2), has reasons to suspect that the goods under transport are meant for trade and are not covered by proper and genuine documents as mentioned in sub-section (2) or sub-section (4), as the case may be, or that the person transporting the goods is attempting to evade payment of tax, he may, for reasons to be recorded in writing, and after hearing the said person, order the unloading and detention of the goods for such period as may....
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....f the vehicle is not carrying with him the documents specified therein is not a provision which is ancillary or incidental to the power to tax sale of goods under entry 54 of List II of the Seventh Schedule of the Constitution of India. The first and foremost thing to be noted in this regard is that section 42(3) of the Madras General Sales Tax Act of 1959 is primarily concerned with the power of seizure and detention of the goods by the Check Post Officer at the check posts. The section cannot be allowed to traverse beyond its own limits and construed as investing the authorities with the power of seizure and confiscation of goods anywhere else, except at the check posts. Secondly, the seizure of the goods even at the check posts or barriers is to be made only when the driver of the vehicle is not carrying with him the documents specified in that section. Viewed from this angle, the provisions of sections 28 and 29 of the A.P.G.S.T. Act clearly reveal the fact that in any case section 28 of the Act is not the concerned section, with regard to the power of the Check Post Officers to effect seizure or confiscation of the goods. It is only under section 29 of the Act that such a powe....
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.... prevent evasion of sales tax and other dues. The abovementioned dictum of the Supreme Court throws light on the question of the setting up of the barriers and check posts and incidentally high lights the fact that the power of seizure and confiscation is a necessary measure, with which the authorities concerned must be armed to enable them to discharge their duties expeditiously and effectively, so that there may not be any evasion of sales tax or other dues by the persons concerned. It is well known that millions of tonnes of goods are transported from one State to another or within a State through roadways. The question, therefore, is how to control effectively the sale of these merchandise rolling down the highways of India and to recover the sales tax and other amounts from the persons in charge of such consignment of goods in the interests of public revenue. It goes without saying that the public interests by way of recovery of the necessary amount of sales tax due from the traders or from other persons, as the case may be, is inextricably bound up with the functioning of well-oiled and efficient machinery, devised by the State Governments or such other authorities, as may be....
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....ts maintained in the course of his business. Hence, it is clear that the question of inconvenience that may be caused to some of the genuine transporters of goods who may be transporting their own personal luggage as visualised by the Supreme Court in the Check Post Officer's case [1971] 27 STC 1 (SC) cannot, by the very nature of things, exist under a situation which may come within the catch of section 28(6) of the A.P.G.S.T. Act. On a similar reasoning, the Orissa High Court in Kamal Kumar Goyal v. State of Orissa [1975] 35 STC 343 have distinguished the provisions of section 16-A of the Orissa Sales Tax Act and rule 94 of the Rules made thereunder and held that the facts existing in the Check Post Officer's case [1971] 27 STC 1 (SC) decided by the Supreme Court, do not exist in that case, and therefore, there could be no question of preventing the mischief which the Supreme Court has pointed out in its decision. For all the reasons stated above, we are inclined to take the view that the decision in W.P. No. 3515 of 1970 (Kotha Rama Doss v. Deputy Commercial Tax Officer) (printed at page 53 infra) cannot be taken to have struck down the provisions of section 28(6) of the A.P.....
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....emedies available to the petitioner, in this case, even after the determination of the matter by the authorities concerned. Moreover, we have discussed in detail the legality of the power of seizure and confiscation exercised under section 28(6) and section 29 of the A.P.G.S.T. Act and are of the view that the powers so exercised are neither illegal nor unconstitutional and do not suffer from any legal infirmity. Taking into consideration the facts and circumstances of the case and the principle of law applicable, we dismiss W.P. No. 5560 of 1984, but in the circumstances of the case, there will be no order as to costs. The common question that has been raised in W.P. Nos. 6460, 14063, 14086, 6623 and 14069 of 1984 is that the orders of detention, issued by the authorities in these cases, are illegal and unconstitutional. We have already taken the view that the decision in W.P. No. 3515 of 1970 (Kotha Rama Doss v. Deputy Commercial Tax Officer) (printed at page 53 infra) cannot be taken to have any bearing on the issue when the goods are detained under section 28(6) of the A.P.G.S.T. Act. That decision is primarily based upon the case in Check Post Officer v. K.P. Abdulla and Br....
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....on the parcel clerk of the railways, directing that the goods shall not be delivered to the consignee except on his order in writing. The petitioner says that he is incurring an expenditure of Rs. 500 for the 32 vehicles every day payable on account of demurrage. However, on authorisation by the partner who was engaged in business on behalf of the petitioner, a chartered accountant of the petitioner executed a bond, as directed by the D.C.T.O. and he was allowed to take delivery of the goods from the railway station. This delivery was allowed, after payment of Rs. 5,640 towards the demurrage charges to the railways. The consignment of 32 luna two wheeler motor cycles has been delivered to the said chartered accountant and is now in his custody, as per the bond executed by him on 10th May, 1984. While the batch of 32 luna two wheeler motor cycles is still lying with the chartered accountant, on 15th April, 1984 the respondents passed seizure orders with allegations against the petitioner and directed the chartered accountant to deliver all the 32 luna two wheeler motor cycles to him, within 24 hours. The order dated 15th April, 1984 is passed under section 28(6) of the A.P.G.S.T.....
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.... any of the respondents' officials nor he has made any representations for the release of the seized goods. It is stated in the counter-affidavit that the petitioner is liable for tax on the sale of the said vehicles and is also liable for penalty and that he cannot question the orders of seizure, passed by the respondents, which has been passed to ensure the recovery of tax due on the said vehicles. Moreover, it is also submitted that there is no substance in the assertion made by the petitioner that a new person starting business need not take registration under the A.P.G.S.T. Act. The petitioner has indulged in shady deals and is manipulating in such a manner that his identity or the identity of the consignee is not revealed. In view of the benami transactions indulged by the petitioner it is prayed that the writ petition may be dismissed with costs and also to declare the order dated 15th October, 1984 as valid and binding on the petitioner. The facts in this case clearly reveal the point that the petitioner has been trading in the goods while, at the same time, remaining in the background. He does not figure in any of the documents relating to the transactions of 32 luna tw....
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....e delivered to the petitioner without his permission. On 1st September, 1984 the respondent visited the transport company again and served a confiscation order and took away the goods. The confiscated goods were to be put to auction on 25th October, 1984. It is the case of the petitioner that the order and proceedings dated 1st September, 1984 had been passed by the respondent under section 28(6) of the A.P.G.S.T. Act, which has been struck down as being ultra vires of the powers of the respondent in W.P. No. 3515 of 1970 (Kotha Rama Doss v. Deputy Commercial Tax Officer) (printed at page 53 infra) and also in (1984) 11 STL 44 (Ajay Trading Co. v. Commercial Tax Officer) (printed at page 56 infra), dated 24th February, 1984. Sometime in the second week of August, 1984 after his return from Nagpur the petitioner made a representation to the respondent with necessary documents, i.e., (1) purchase cash bills of Palasa dealers, (2) lorry receipts and consignee copies, and (3) declarations by the sellers about the payment of sales tax by them and requested for release of the goods, He also issued telegrams to the Commissioner, Deputy Commissioner and Commercial Tax Officer to the sam....
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.... perishable commodity it was felt necessary to sell the commodity in public auction on 25th October, 1984 by issuing an auction notice dated 9th October, 1984. It was only on 29th August, 1984 a telegram and a notice were received from an Advocate alleging that the seizure of goods is illegal and informing the respondent that a writ petition is going to be filed in the High Court of A.P., and demand the auction sale proposed to be held on 25th October, 1984 may be stopped. A letter dated 22nd October, 1984 was addressed to the said Advocate to appear before the authorities concerned which was served on him on 25th October, 1984. Evidently, no one has appeared before the officers concerned to facilitate a proper investigation of the matter. Nevertheless, on 25th October, 1984 a letter was received by the respondent from the Advocate on behalf of the petitioner informing them that the auction proceedings were stayed by the High Court in this writ petition, i.e., W.P. No. 14540 of 1984. The further contention of the respondent in this writ petition is that the dealer in Palasa in Srikakulam District generally claiming exemption on the ground that they have made the purchase in the ....
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....n Srikakulam District, Andhra Pradesh, have been considered by them. It is not the case of the respondent that these are fake certificates issued to hoodwink the authorities or to cheat the State Government in the matter of recovery of sales tax due by the petitioner. In the absence of any such finding by the authorities, the consignment of goods cannot be seized or confiscated and put up for sale by public auction. If the taxes have already been paid on the said goods at the first selling point in Srikakulam District within Andhra Pradesh, they cannot be subjected to any further taxation by the authorities concerned. The alleged impersonation by the petitioner of the name and style of M/s. Shivnath Sunderlal and the use of a fictitious registration number by the petitioner are matters which cannot be taken into consideration for the purpose of this writ petition which is directed against an order of seizure passed under section 28(6) of the A.P.G.S.T. Act on the ground that the sales tax at the point of first purchase has not been paid by the petitioner. The petitioner has produced the certificates issued by the vendors in Srikakulam District stating that the goods have already su....
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....ned branch offices in Silvaasa; they transfer their goods, i.e., tyres, from the place of manufacture all the way to their branch offices at Silvaasa. They are treated as branch to branch transfers. At Silvaasa, it is shown that the tyres are sold to various consignees, mostly transport companies, in Andhra Pradesh. Tyres are transported in bulk quantities in the lorries of the petitioner, to Hyderabad. They are unloaded in the godown of the petitioner, but for months together the alleged consignees do not take delivery of goods; the petitioner does not collect demurrage charges, which it ought to in the normal course, for such delays. Enquiries reveal that the so-called consignees are not real consumers. They do not require tyres in such bulk quantities for their own purposes; indeed tyres are really sold to tyre traders in Andhra Pradesh. Even where some goods were, released to the alleged consignees, they did not take delivery of goods for a long time, till they were detained. Ascertainment of goods takes place only at the time of the delivery. The tyres of each consignee are not ascertained at Silvaasa, where the sale is said to have taken place, but only at Hyderabad. Investig....
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....posed against it. At any rate, the show cause notice raises several mixed questions of fact and law, which require an enquiry into facts; hence writ petition is not the proper remedy. Even in public interest, it is desirable that, if any racket is going on resulting in huge loss of public revenue, it is fully investigated. There is no question of harassment in such a case. It cannot also be said that the facts alleged in the show cause notice, if proved, do not warrant the action proposed. Fullest particulars are given; investigation is still in progress; more and more facts are coming to light; naturally all of them would be supplied to the petitioner, if they are sought to be relied upon against it. There would be an enquiry, where the petitioner would be given due opportunity to meet and rebut all the allegations levelled against it. There is, therefore, no ground for interference at this stage. The writ petition is liable to fail accordingly. Writ Petitions Nos. 6460,14063 and 14069 of 1984 are filed by Dunlop India Ltd., and W.P. No. 6623 of 1984 is filed by J.K. Industries Ltd., another manufacturer of tyres. Their case, in short, is that they had sold and consig....
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....iled on behalf of respondents 1 and 2, it is stated that their counter-affidavit in W.P. No. 5560 of 1984 may be read as part and parcel of this counter-affidavit. It is further submitted: even though all the tyre companies are having their local branch offices and godowns at Hyderabad, the goods are not stocked in their godowns, but are being stocked in the godowns of transport companies and deliveries are being effected therefrom, thus trying to evade local tax liability. A large number of tyre manufacturers have opened their offices at Silvaasa and despatched large quantities of tyres, in the names of various consumers before 1st January, 1984; the enquiries revealed that a major portion of these transactions are not bona fide and genuine; the so, called consignees are not real purchasers; in many cases, on enquiry, they denied having placed any order or having purchased any tyres. Several instances are given of consignees in whose names the goods were despatched but who have denied having placed any order, or having ever purchased any tyres at Silvaasa. The tyre companies have not insisted upon any payment whatsoever, or even a token advance, while selling and despatching the g....
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....atter; that, during the course of investigation, it came to light that the transport Corporation of India Ltd. (petitioner in W.P. No. 5560 of 1984) has acted as an agent of the non-resident principal, and has sold the goods without reporting the turnover to the department and hence, the goods become unaccounted goods and are liable for seizure under section 28(6) of the Act, to prevent evasion of tax. The question, therefore, squarely arose whether sub-section (6) of section 28 of the A.P.G.S.T. Act is ultra vires the powers of the State Legislature, and whether the decision of this Court in W.P. No. 3515 of 1970 dated 10th November, 1971 (Kotha Rama Doss v. Deputy Commercial Tax Officer) (printed at page 53 infra), is correct and should be followed? If the power of seizure is good, then the power to detain pending the formation of satisfaction to seize must necessarily be conceded as preliminary to, or incidental to the power of seizure. The expression "dealer" is defined in clause (e) of section 2 of the Act. In so far as it is relevant, the definition reads as follows: "(e) 'dealer' means any person who carries on the business of buying, selling, supplying or distribut....
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....a receipt for the same. The accounts, registers and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act..........." Sub-section (4) says that, for the purposes of sub-section (2) or sub-section (3), any such officer shall have the power to enter and search, any office, shop, godown, vessel, vehicle or any other place of business or any building or place where such officer has reason to believe that the dealer keeps or is keeping any goods, accounts, registers or other documents of his business. Sub-section (5) empowers such officer to break open any box or receptacle in which any goods, accounts, registers or other documents of the dealer may be kept. Then occurs sub-section (6), which reads as follows: "(6) Any such officer shall have power to seize and confiscate any goods which are found in any office, shop, godown, vehicle, vessel or any other place of business or any building or place of the dealer, but not accounted for by the dealer in his accounts, registers and other documents maintained in the course of his business: Provided that, before taking action f....
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.... there is evasion or an attempt to evade tax thereon in any manner whatsoever. If the owner is not ascertained even after an enquiry, the officer shall order confiscation of the goods. A copy of the order of confiscation shall be served on the owner of the goods if he is ascertainable." Sub-rule (6) says that, if on enquiry under sub-rule (4), it is considered by the officer that the confiscation is not warranted, or if the order of confiscation passed by him is set aside in appeal or revision, he shall return such goods to the owner, and if they have been sold meanwhile, their cash value. Reference may also be made to section 29 of the Act, which provides for establishment of check posts or barriers, and inspection of goods, while in transit. It empowers the State Government, or the Commissioner of Commercial Taxes, to set up check posts or barriers at such place or places as they may notify. The driver or any other person in charge of a goods vehicle is obliged to stop the vehicle at such check post and keep it stationary as long as may reasonably be necessary, and allow the officer in charge of the check post or barrier, to examine the contents in the vehicle and inspect a....
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.... 19(1)(f) and (g). It was held that section 28(6) providing for confiscation of goods is a regulatory provision designed to prevent whether actual or attempted evasion of tax, and is a class by itself and therefore, not violative of article 14. It was also held that the power of seizure and confiscation is incidental and ancillary to the power to levy tax and is in the nature of a punishment and that, it bears no relation to the actual evasion of tax. It was observed that the power of confiscation is subject to appeal and revision and is not unguided; that, the confiscation is by way of imposition of penalty and that, this power is different from the power to levy penalty, conferred by section 14 of the A.P.G.S.T. Act. In Commissioner of Commercial Taxes v. R.S. Jhaver [1967] 20 STC 453 (SC) arising under the Madras General Sales Tax Act, the validity of sub-sections (2) and (3) of section 41 of the Madras General Sales Tax Act, 1959 was upheld as constituting reasonable restrictions on the fundamental right, guaranteed by article 19(1)(f) and (g) of the Constitution. It was held that, the provision for search and seizure is incidental and ancillary to the power of taxation. No ....
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.... No. 3515 of 1970 was followed by this Court in W.P. No. 3849 of 1984 (Ajay Trading Co. v. Commercial Tax Officer) (printed at page 56 infra), against which the department approached the Supreme Court in S.L.P. No. 3090 of 1984 and that, the Supreme Court has granted special leave to appeal and has also stayed the release of the goods. Be that as it may, I shall now examine the precise ratio of the decision in Abdulla's case [1971] 27 STC 1 (SC). That case arose under the Madras General Sales Tax Act. Sub-sections (1), (2) and (3) of section 42 read, at the relevant time, as follows: "42. (1) If the Government consider that with a view to prevent or check evasion of tax under this Act in any place or places in the State, it is necessary so to do, they may, by notification, direct the setting up of a check post or the erection of a barrier or both, at such place or places as may be notified. (2) At every check post or barrier mentioned in sub-section (1), or at any other place when so required by any officer empowered by the Government in this behalf, the driver or any other person in charge of any vehicle or boat shall stop the vehicle or boat, as the case may be, and keep....
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....the three sub-clauses. Sub-section (3) assumes that all goods carried in a vehicle near a check post are goods which have been sold within the State of Madras and in respect of which liability to pay sales tax has arisen, and authorises the Check Post Officer, unless the specified documents are produced at the check post or the barrier, to seize and confiscate the goods and to give an option to the person affected to pay penalty in lieu of confiscation. A provision so enacted on the assumption that goods carried in a vehicle from one State to another must be presumed to be transported after sale within the State is unwarranted. In any event, power conferred by sub-section (3) to seize and confiscate and to levy penalty in respect of all goods which are carried in a vehicle whether the goods are sold or not is not incidental or ancillary to the power to levy sales tax. A person carrying his own goods even as personal luggage from one State to another or for consumption, because he is unable to produce the documents specified in clauses (i), (ii) and (iii) of sub-section (3) of section 42, stands in danger of having his goods forfeited. Power under sub-section (3) of section 42 canno....
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....d confiscated if it is found, after holding an enquiry, as prescribed by rule 48, that "there is an evasion or an attempt to evade the tax thereon". As rightly pointed out in the two earlier Bench decisions of this Court in Papanna v. Deputy Commercial Tax Officer, Guntakal [1967] 19 STC 506 and Kalangi Krishna Murty & Company v. Commercial Tax Officer, Guntur [1968] 22 STC 540, this provision is meant to operate as a deterrent, and as a penalty upon tax-evaders, and is conceived in the interest of preventing the evasion of tax. The idea is to make the evasion of tax highly costly and a losing proposition. It is thus a power incidental and ancillary to the substantive power of taxation, conferred by entry 54. There is no occasion for this power to be exercised against non-dealers, or against persons who store or carry their own goods, for their own consumption. Indeed, rule 45(4) provides that, in the case of a person carrying his own goods, or goods for his own consumption, and several other products such as agricultural, horticultural, dairy, poultry and other farms, no way-bill is required, as required in the case of transport of other goods. I am, therefore, unable to see how t....
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....Shri Manmohan Singh [1977] 40 STC 238 (FB) read the decision in Abdulla's case [1971] 27 STC 1 (SC) as being based upon the aforesaid assumption that all goods transported across the border of the State of Madras were transported after sale and after attracting the liability to tax; and where a provision for the levy of penalty, i.e., amended section 14-B(7) of the Punjab General Sales Tax Act, was not based upon any such assumption, the principle of the decision in Abdulla's case [1971] 27 STC 1 (SC) was held to be not applicable. Section 14-B(7), after amendment, read as follows: "(7) The officer detaining the goods shall record the statement, if any, given by the owner of the goods or his representative or the driver or other person in charge of the goods vehicle or vessel and shall require him to produce proper and genuine documents as referred to in sub-section (2) or sub-section (4), as the case may be, before him in his office on a specified date on which date the officer shall submit the proceedings along with the connected records to such officer as may be authorised in that behalf by the State Government for conducting necessary enquiry in the matter. The said officer ....
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....ises. As soon as the scheme or device is set in motion there is an attempt to evade the tax due under the Act and it will not be necessary to wait till the liability to pay the tax actually arises. If an attempt to evade tax is discovered earlier, the liability to be subjected to penalty is straightway attracted. In our view, there is no repugnancy between the provision for levy of penalty under section 14-B(7) when an attempt to evade the tax is discovered and the general scheme of the Act which provides for the levy of tax at the point of first sale within the State........" Thus, this decision establishes two propositions, viz., that, my reading of the decision in Abdulla's case [1971] 27 STC 1 (SC) is correct, and secondly, that the levy of penalty for an attempt to evade the tax is equally included within the substantive legislative power of taxation. It may be remembered that, section 28(6) read with rule 48 of the Rules, clearly provides for an enquiry, where the affected party is given a reasonable and adequate opportunity to defend himself, recording of a finding, as also the provision for appeal and revision. No doubt, the penalty is provided in both the cases, viz.....
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.... of search and seizure as incidental and ancillary to the power of taxation. With greatest respect to the learned Judges, who rendered the decision in W.P. No. 3515 of 1970 (Kotha Rama Doss v. Deputy Commercial Tax Officer) (printed at page 53 infra). I must say that the learned Judges have not even made an attempt to find out whether the Madras provision struck down by the Supreme Court, and section 28(6) of the Andhra Pradesh Act provide for the same thing, or whether there are any points of distinction. Unfortunately, the State did not carry the matter in appeal to the Supreme Court; but, the fact remains that, against a subsequent decision following the said decision, the State has gone in appeal to the Supreme Court and we are told, the Supreme Court has granted special leave to appeal and has also stayed the release of goods. Be that as it may, I am of the opinion that a decision so rendered, without taking notice of the earlier Bench decisions on the same point, which were binding upon the later Bench, and even ignoring the decision of the Supreme Court, as explained above, cannot be treated as a binding decision. It must be held to be a decision rendered per curiam, vide....
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....ned as to why the manufacturers are now coming forward to claim the goods when, according to them, the goods were already sold to third-parties in Silvaasa? These are all questions of fact, or at any rate, mixed questions of fact and law, which require an enquiry to find out the truth. The discretionary jurisdiction of this Court under article 226 of the Constitution, in my opinion, should not be used to obstruct or interdict such an enquiry. I agree with the final order proposed by my learned brother. Appendix I [The judgment of the Division Bench of the Andhra Pradesh High Court consisting of VAIDYA and SRIRAMULU, JJ., in Kotha Rama Doss v. Deputy Commercial Tax Officer, Penugonda, and Another (W.P. No. 3515 of 1970 decided on 10th November, 1971) is printed below: ] KOTHA RAMA DOSS v. DEPUTY COMMERCIAL TAX OFFICER The judgment of the Court was delivered by VAIDYA, J.-In this writ petition, the vires of section 28(6) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act") is challenged on the ground that it is outside the legislative field conferred upon the State Legislature by entry 54 of List II of the Seventh Schedu....
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....r. Under sub-section (4), the officer has got the power to enter and search any office, shop, godown, vessel, vehicle, etc., for the purposes of sub-section (2) or sub-section (3). The power conferred by sub-section (4) has been enlarged in sub-section (5). It is argued that the power conferred by sub-section (6) of section 28 empowering the officer to seize and confiscate the goods is outside the ambit of entry 54 of List II of the Seventh Schedule to the Constitution. Entry 54 reads: "Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A of List I." It is argued that under this entry, the State Legislature has the power to tax sale or purchase of goods; and such a power will also include legislation in regard to ancillary matters, but confiscation of goods is not ancillary to the legislative power conferred under entry 54 of List II of the Seventh Schedule. Reliance is placed on a decision of the Supreme Court in Check Post Officer v. K.P. Abdulla and Bros. [1971] 27 STC 1 (SC). Their Lordships of the Supreme Court considered the provisions of subsection (3) of the Madras General Sales Tax Act, 1959 which empowered the officer....
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....ieu of confiscation. A provision so enacted on the assumption that goods carried in a vehicle from one State to another must be presumed to be transported after sale within the State is unwarranted. In any event power conferred by sub-section (3) to seize and confiscate and to levy penalty in respect of all goods which are carried in a vehicle whether the goods are sold or not is not incidental or ancillary to the power to levy sales tax." Their Lordships, therefore, struck down the provisions of section 42, subsection (3), of the Madras General Sales Tax Act, 1959. Applying the principle laid down by the Supreme Court in Abdulla's case [1971] 27 STC 1 (SC), we find that sub-section (6) of section 28 of the Act is outside the legislative power conferred by entry 54 of List II of the Seventh Schedule and cannot be said to be a power ancillary to levy tax on sale or purchase of goods. We also find that sub-section (6) takes it for granted that all goods which are found in any office, shop, godown, vessel or any other place of business or any building or place of a dealer and are not accounted for by him have escaped taxation. The sub-section does not take into account the vario....
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..../MP/182/83-84. As part of his business, which included commission agency business, the petitioner approached M/s. Malkani Transport Co., Hyderabad to take delivery of eight bags of cloves despatched by M/s. Sham International, Bombay under letter No. 45522 dated 4th February, 1984 through lorry No. MWT 5610. The transport company informed the petitioner that the goods were detained by the Commercial Tax Officer, Begum Bazar Circle, Hyderabad, the respondent herein, by his order dated 6th February, 1984. In that order it is stated that when the lorry MWT 5610 was checked by the A.C.T.O. (Intelligence) and the A.C.T.O., Begum Bazar, Hyderabad, along with other kirana stocks, eight bags of cloves were found in the lorry transported under way bill No. 30 dated 6th February, 1984 issued from Bombay. In the way bill the consignor is stated to be M/s. Sham International, Bombay and the value of the goods is noted as Rs. 71,000. The consignee's name is noted as M/s. Ajay Trading Co., Hyderabad, the petitioner herein. The address of the consignee was given as Malakpet, Hyderabad and the CST No. as HH/182/83. The consignor, M/s. Sham International gave a letter to the driver of the vehicl....
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....f the R.C. holder to pay taxes. They usually obtain the supplies of costly items like cloves, cardamom, etc., in the name of these hangover R.Cs., get them unloaded at their regular shops, sell them without accounting and evade the tax if the transport is not checked. Unless the department seizes and detains the goods pending enquiry and verification, the dealer gets away without paying taxes on the goods. The real identity of the persons behind the facade of the bogus registrations can be established only after thorough verification after seizure of the goods. If it is checked on the way, they will account for that particular transaction only and pay tax in the name on whose behalf the transport is made. Having suspected the bona fides of the transaction, I have detained 8 bags of cloves after preliminary enquiries are made." It is also averred that after obtaining the extracts of the registers of the commercial taxes check post at Sangareddy, petitioner-company was found to have transported on five occasions between 29th October, 1983 and 30th January, 1984 consignment of cloves of the value of Rs. 4,09,200. It is asserted that no businessman would lock up his funds in the goo....
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....r the alleged evasion of tax on the earlier transactions or consignments said to have been indulged in by the petitioner does not entitle the sales tax authorities to detain the present consignment. As soon as the tax payable on this consignment is paid or offered to be paid albeit under protest, the consignment in question has to be released. When the petitioner is a registered dealer and is bound to file returns and in the returns that are ultimately filed the five consignments that are mentioned in the counteraffidavit are not accounted for, it will certainly be open to the commercial tax authorities to include that turnover in the assessment order that may be passed and recover the tax and the penalty, if any. But that power is wholly different from the power to detain goods in transit, which is vested in the authority, only to enforce payment of the tax, if any, payable in respect of that particular consignment. However, for the tax alleged to be due in respect of a turnover which does not constitute a part of the present consignment, even before any assessment and demand is made, the present consignment cannot be detained. Following the judgment of the Supreme Court in Che....