TaxTMI 
TaxTMI 
1995 (7) TMI 377
X X X X Extracts X X X X
X X X X Extracts X X X X
....9A. Inspection of goods in transit, etc.-(1) If the State Government considers that with a view to preventing evasion of tax in any place or places in the State, it is necessary to do so, it may, by notification in the Official Gazette, direct that such number of check-posts shall be set up or such number of barriers shall be erected at such places as may be specified in the notification. (2) At every check-post or barrier set up or erected under sub-section (1), the driver or any other person-in-charge of any vehicle, boat or animal shall stop the same, and keep it stationary so 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 or boat or on the animal and inspect all records relating to the goods carried in the vehicle or boat or on the animal which are in the possession of such driver or other person-in-charge who shall, if so required, give his name and address and the names and addresses of the owner of the vehicle, boat or animal as well as of the consignor and consignee of such goods; and where any of the consignors or consignees is a dealer registered under this Act or the Central Sale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n-in-charge of a vehicle, boat or animal carrying goods in a reference to the person leading the animal. (7) The officer-in-charge of the check-post or barrier may, during inspection and verification of goods under transport including the documents and records relating thereto, direct the carrier not to part with the goods including re-transporting or re-booking until verification of goods, records and documents is done or enquiry, if any, is completed. Explanation.-In this section (a)'goods vehicle record' means the documents required to be carried by the driver of a transport vehicle under the Motor Vehicles Act, 1939 (4 of 1939) or the rules made thereunder; (b)'log book' means a register statement or other record containing particulars of the goods under transport; (c)'trip sheet' means a sheet or other documents containing particulars relating to the tripwise use of a transport vehicle, required to be carried by the driver under the Act referred to in clause (a); (d)'goods under transport' means goods which have been handed over to a carrier and complete delivery thereof has not been taken from such carrier; (e) 'carrier' means any person or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 59-A: (1)....................... (2)(a) Notwithstanding anything contained in sub-rule (1) if any person other than a registered dealer within the State (hereinafter referred to in this rule as the 'importer') intends either by way of purchase or otherwise, to bring, import or receive any specified goods from a place outside the State of Gujarat, of the value of rupees five thousand or more for use, consumption or disposal within the State, he shall make and furnish or cause to be furnished a declaration in form 45-B, Explanation.-For the purpose of this rule, specified goods means cement. (b) Form 45B shall be obtained by making a simple application to the Sales Tax Officer concerned of the area where the importer ordinarily resides. Such application shall bear a court fee stamp of rupees two for each form. The counterfoil of the declaration shall be retained by the importer and portions thereof marked original and duplicate shall be produced before the officer-in-charge of the check-post, who shall retain such original portion and return such duplicate portion duly sealed and signed in token of having verified it to the importer producing it. Provided that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of goods including cement within the State of Gujarat or any commodity including cement going out of Gujarat. While a declaration under form 45-B is to be furnished by an importer of cement who is other than a registered dealer form 45-C is to be furnished by an importer who is a registered dealer. It is further to be noticed that if it is form 45-B, it is to be obtained from the Sales Tax Officer concerned of the area where the importer, in case of not being registered dealer, ordinarily, resides; in case of registered dealer the form 45-C is to be obtained from the registering authority. The issuance of form 45-C has further been subjected to fulfilment of requirement of provisions of sub-rules (3) to (12) of rule 24-A and clauses (e) and (f) of rule 24-B of the Gujarat Sales Tax Rules. While sub-rules (3) to (12) of rule 24-A deal with the situation arising from loss, destruction or theft of the specified forms issued under the rules or the blank forms left with the dealer on his registration certificate being cancelled which are not very relevant for the present purpose. Rule 24-B, clauses (e) and (f) prescribe conditions for issuing the form itself and have a bearing on....
X X X X Extracts X X X X
X X X X Extracts X X X X
........................................................ permitted to import into the State of Gujarat a consignment as detailed below: Description of goods: Quantity: Purchase/to be purchased from: Signature and designation of issuing authority. Declared and certified that the details of the goods covered by the above permission are as under: Name and complete address of the: (1) (a) Out-State consignor: (b) A certificate of registration No. of the consignor. (i) under the.........(mention the name of the State) Sales Tax Act (Certificate No.)........... (ii) under the Central Sales Tax Act, 1956.......... (2) Name and complete address of the importer (consignee) (3) (a) Name and complete address of the agent, person, broker through whom the order is booked. (b) A certificate of registration No. of such agent, person, etc. (i) under the.........(mention the name of the State) Sales Tax Act, (ii) under the Central Sales Tax Act, 1956..................... (4) Copy of the order so placed is attached. (5) Complete address including the name of: (i) District (ii) State, from which the goods are despatched. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion including the name of (i) Taluka (ii) District of the State to which the goods are despatched. (8) Description of goods. (9) Quantity and the weight of goods. (10) Value of goods. (11) Consignor's invoice No.......... and date..... (copy of the purchase bill/cash memo No.......date........to be presented along with this declaration for inspection). (12) Details of the transport such as: (i) Truck No...... (ii) L.R. No. & date....... (iii) Name of the transporting company. (13) Signature and designation of the signatory. According to the averments made in the petition prior to November, 1993, on the representation of cement manufacturers in the State of Gujarat, the then Chief Minister of the Gujarat State made a public statement that the directions were given to the State Government to take certain measures for protecting the interest of cement manufacturers in Gujarat. It was in consequence of that the impugned notification was issued. In reply thereto, the following averments were made by the respondents on affidavit narrating the circumstances which led to insertion of the impugned sub-rules in rule 62-A in the Gujarat Sales Tax Rules, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....restriction for registered dealer who intends to bring in goods from Rajasthan to Gujarat either for use or for sale in the State of Gujarat but he will be required to furnish required information in the prescribed form. (ii) In respect of persons other than registered dealer intending to purchase or bring cement from any place outside the State of Gujarat, they will be required to give a declaration. (iii) With a view to implement the aforesaid decision, the Gujarat Sales Tax Rules, 1970, were amended by re-numbering rule 62-A thereof as 62-A(1) and inserting sub-rules (2) to (6) therein and appending forms 45-B and 45-C thereto. 6.. That in the matter of taxation, the Legislature enjoys wide latitude and has powers to provide for all matters ancillary or incidental to the legislation. Further, that there is no precise or set formula or doctrine tests of precise of the felt needs of the times and exigencies of situation. That in the situation narrated hereinabove, the State Government had to consider two options as follows: (1) to reduce the rate of tax on sale of cement under the local Act, or (2) to create a regulatory machinery which would while not restri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n on the movement of goods within the meaning of article 304(b). For the same reasons, requirement of furnishing such information under form 45-C has been challenged. This is on the ground that these information are not in the personal knowledge of the consumer or the importer registered dealer but is in the personal knowledge of the consignor or the carrier who is otherwise supposed to divulge the same information under the parent provision. The requirement from the consumer importer or the registered dealer within the State of Gujarat to furnish this declaration to the carrier to be carried along with goods directly results in making the goods stationary until the information is received by the importer from the consignor and/or transporter after the goods have been subjected to invoice, delivery to the transporter, and the vehicle or the other carriage is identified in which the goods are to be carried and, thereafter, the declaration is filled in by the importer under his signature and delivered to the carrier. Therefore, until the declaration duly filled and signed by the importer is delivered after the goods have been ready for delivery, the goods have to be kept stationary a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tate sales resulting in locally manufactured cement costlier than the cement imported from neighbouring State for the buyer within the State, makes it abundantly clear that the delegated authority has not exercised powers under section 59-A(3)(a) of prescribing documents for the purpose envisaged but for other purpose shielding the local manufacturers of cement from the competitive market. Therefore, the exercise of powers in framing rules is not only ultra vires the parent Act and provisions of the Constitution but is colourable exercise of the powers by delegate. In this connection, it was also argued that if the purpose for which the rule 62-A(2) and (3) has been framed and subjected to condition prescribed in rule 24-B(e) and (f) is prevention of tax evasion then there is no discernible reason why such provisions have been made applicable only to the commodity known as cement and that too only to the transaction of import. It cannot be said that there is any specific problem of evasion of tax related to import of cement requiring a special treatment for that purpose for which, according to the petitioners, there is no clue in the return furnished by the respondents. If that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions in the context in which they have been imposed have no rational nexus to the purpose for which the power under section 59-A could be exercised. Learned counsel for the petitioner placed reliance on [1971] 27 STC 4 (SC); (1971) 1 SCC 59 (Hansraj Bagrecha v. State of Bihar) and in the case of Alka Agarwal v. State of Rajasthan [1987] 66 STC 204, a decision of the Rajasthan High Court. It was strongly contended by the learned counsel for the Revenue that section 59-A is a provision enacted for preventing evasion of tax. It authorises the State Government, the rule-making authority, to prescribe any document containing requisite information to be carried along with goods by the transporter. In exercise of that power, it has been prescribed that impugned declarations be furnished by the importer of the goods to be carried by the transporter. The information required from the importer is all relevant information which has nexus to the question of preventing avoidance and evasion of tax in respect of the goods which on being imported become mass of the property within the State and is liable to be dealt with the registered dealer or the consumer within the territory of State whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dismissal of the writ petition. Before we proceed further, two common premises on which there is no dispute between the parties, may be stated. First that section 59-A has been legislated in exercise of powers conferred under entry 54 of State List of the Seventh Schedule as ancillary provisions of imposition of tax on sale or purchase of goods for making levy of tax workable with the purpose of achieving object of preventing evasion of tax in any place or places in the State. The goods during the transport can be subject to inspection at check-post created for that purpose within State and the carriage can be kept stationary as long as required for that purpose. As such provision could affect unfettered free-flow of trade, the provision was inserted vide President's assent in terms of article 304(b). The purpose of the parent provision is disclosed in wordings of section 59-A(1) itself. Secondly, the information required through declaration in forms 45-B and 45-C is relevant and not de hors the purpose. The contention is in respect of person from whom such information is required and the condition which has been imposed on such person for obtaining the requisite forms for impo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at it is necessary by reason of the continued existence of emergency to the effect the vesting in the Wheat Board of such holdings,.........for the purpose of maintaining, controlling and regulating supplies and prices to ensure economic stability and orderly transition to conditions of peace. Finding that there was nothing contrary to hold against the declared purpose, Lord Redcliffe said: "How then, can a court of law decide that the vesting was for another and extraneous purposes or hold that what the Governor-in-Council has declared to be necessary is not in fact necessary for the purpose he has stated. There is no warrant at all for presenting this as a case in which powers entrusted for one purpose are deliberately used with design of achieving another itself unauthorised or actually forbidden. If bad faith of that kind can be established, a court of law may intervene." These principles were reiterated by Court of Appeal in Mc. Eldomney v. Forde [1969] 2 All ER 39, by Lord Mc. Dermolt, C.J. In Sant Saran Lal v. Parsuram Sahu AIR 1966 SC 1852, the Supreme Court had occasion to examine the scope and ambit of rule-making power conferred by section 27 of the Bihar Money ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exercise of its power? (3) whether it is not capable of being related to one of the prescribed purposes? (4) if the power has been exercised under a provision which conferred authority of a limited scope, whether the rule made can be justified within the ambit of those limits? (5) whether the rule made is to any extent inconsistent with the provisions of the enabling Act? and (6) whether the provision infringes any of the fundamental rights or other restrictions or limitations imposed by the Constitution? To see what is the authorisation, we shall first have to look at the enabling provisions. Section 59-A of the State Act has been enacted for the purpose of enabling the State Government to establish check-posts at any place or places within the State for the purpose of preventing evasion of tax in any place or places within the State. For achieving that purpose, further empowers the officer-incharge of the check-post or barrier to stop the vehicle, boat or animal carrying goods and to examine the contents in the vehicle, boat or on the animal, which are in the possession of the driver or other person-in-charge of the goods. The driver or other person-in-charge of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from outside or leave the State from within or the goods are transported within the State. While the intra-State transactions may directly result in attracting the provisions of the State Sales Tax Act and levy thereunder, goods leaving the State may attract the levy of the sales tax under the State Act or the Central Sales Tax Act to be administered by the State depending upon whether the movement of the goods has directly occasioned as a result of sale or not? In the case of goods coming from outside there is no such liability of the State tax on that transaction is attracted, yet the provisions can be reasonably related to preventing of apprehended evasion of tax which is likely to arise as a result of dealing with the goods after the same has become part of the mass of the property within the State and is dealt with within the State thereafter. The list of the documents to be carried along with the goods has been described in the provision itself. The limited authority for the purpose of this provision which has been conferred on the rule-making authority is to prescribe documents other than mentioned in the Act relating to goods and containing such particulars as may be prescr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hotographs, maps, etc. In the plural: deeds, agreements, title papers, letter receipts and other written instrument used to prove a fact. Oxford's English Dictionary defines the word "document" as "something written, inscribed which furnishes evidence of any subject, as a manuscript, titledeed, stone, picture, etc., the bill of lading and policy of insurance, handed over as collateral security to furnish with the papers or the documents for the manifestation of the ownership and cargo. The declaration in contract has been defined to mean "a simple affirmation allowed to be taken in certain cases instead of oath or solemn affirmation". Parent Act deals with tax on sale or purchase of goods. It is relating to such goods that documents are required to be carried along with the goods by the transporter. In this context, the "document" relating to goods containing prescribed particulars can only mean such documents as are used in the ordinary course of business as proof of the possession or control of goods and proof of dealing with the goods by the consignor and consignees, whether as owner, transferor, transporter or otherwise. A declaration of certain statement of facts or d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o follow with the seizure. If the "documents" in the context of the scheme would have included mere statements by the parties to transaction, the falsity of document would also have been made an event entailing similar consequences as falsity of a declaration under section 59-A(3)(c). Thus, in our opinion, under the scheme of the provisions of section 59-A which is a self-contained provision and confers a limited power on the rule-making authority for prescribing documents to be carried along with the goods, did not authorise the rule-making authority to obtain declaration of any person other than the driver or person in-charge of the vehicle, boat or animal carrying goods in exercise of the powers. In this connection, it is further to be noticed that by the impugned rules 62-A(5) and (6), the issuance of form 45-C has further been made subject to clauses (e) and (f) of rule 24-B, i.e., to say making of declaration itself by the importer has been made possible only in case he has satisfied the conditions of rule 24-B(e) and (f) noticed hereinabove. The power conferred under section 59-A(3) is limited to the extent of prescribing documents to be carried along with the goods by....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... notice that in pursuance of section 31(2a) of the Bihar Act the Transport Commissioner had issued notification and prescribed that a person transporting goods shall carry form XXVIII-A and XXVIII-B duly filled in in respect of the goods brought into the State or sent outside the State. Form XXVIII-A merely related to issue of permit by the officer concerned. Form XXVIII-B was a form of permit which was to be filled by the permit holder before the Transport Officer. From the aforesaid provisions, it is apparent that the Bihar Act has specifically empowered carrying on a declaration distinct from "documents", in such form as has been prescribed by the Commissioner. The declaration was not statutorily required to be furnished by the driver only as is the case under the provisions of the Gujarat Sales Tax Act with which we are concerned. Section 35 of the Bihar Finance Act, specially provided for authorising restriction on movement or exit of goods by subjecting the same to "permit" rule which provision was not challenged. There is no such provision like section 35 of the Bihar Act under the State Law authorising rule-making authority to subject the import of any commodity to the i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onomic growth free from geographical barriers. Article 301 provides that trade, commerce and intercourse throughout the territory of India shall be free. This freedom is made subject to other provisions of Part XIII of the Constitution. Article 302 empowers the Parliament to legislate such restrictions on the said freedom as may be required in the public interest. Article 303 prohibits the Parliament as well as the State Legislature from making any law making or authorising preference to one State over another or making or authorising of making discrimination between one State and another by virtue of any entry relating to legislative powers of the Parliament or State Legislature as per the Lists enumerated in the Seventh Schedule. At the same time, it makes room for making laws by the Parliament alone for giving preference or making discrimination only in the case of a situation arising from scarcity of goods in any part of the territory of India if a declaration to that respect is specifically made by any such law. That is to say permissible criterion for preferential or discriminatory treatment in this regard is fixed by the Constitution itself leaving out the scope of bringi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e application of the provisions of Part XIII. Article 301 read in its proper context and subject to the limitations prescribed by the other relevant articles in Part XIII must be regarded as imposing a constitutional limitation on the legislative power of the Parliament and the Legislature of the States. Wherever it is held that article 301 applies the legislative competence of the Legislature in question will have to be judged in the light of the relevant articles of Part XIII. Article 301 applies not only to inter-State trade, commerce and intercourse, the freedom of trade guaranteed by article 301 is freedom from all restrictions except those which are provided by the other articles in Part XIII. The court was dealing with a tax imposed by the Assam Taxation (on Goods carried by Roads or inland Waterways) Act, 1954. The Act was passed by Assam Legislature in order to provide for tax on certain goods transported by road or inland waterways in the State of Assam. The court held that: "..........restrictions, freedom from which is guaranteed by article 301, would be such restrictions as directly and immediately restrict or impede the free-flow or movement of trade. Taxes may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r or making discrimination between one State and another merely because by varying rates prevalent in different States but emphasised that "article 301 is in terms of widest amplitude of trade, commerce and intercourse, are thereby declared free and unhampered throughout the territory of India. The freedom of trade is against imposing barriers or obstructions within the State as well as inter-State, all restrictions which directly and immediately affect the movement of trade are declared by article 301 to be ineffective. It must be taken as settled law that the restrictions or impediments which directly and immediately impede or hamper the free trade, commerce or intercourse fall within the prohibition imposed by article 301 and subject to other provisions of the Constitution, they may be regarded as void." In Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4 (SC); (1971) 1 SCC 59 the court was concerned with validity of levy of purchase tax on jute under section 3-A of the Bihar Finance Act and rule 31-B prohibiting the transporting of goods outside the State except on obtaining a despatch permit in the prescribed form. Justice Shah, speaking for the court after considering th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such goods exceeding the quantity specified with a view to ensuring that there is no evasion of tax payable under the Act. But the power under section 42 can only be exercised in respect of levy, collection and recovery of intra-State sales or purchase tax. It cannot be utilised for the purpose of ensuring the effective levy of interState sales or purchase tax............When rule 31-B seeks to prohibit transport of goods to any place outside the State of Bihar unless a certificate is obtained from the appropriate authority, it seeks to prohibit transport of goods pursuant to transactions which may not even be of the nature of sale or purchase transactions: in any case, it restricts transport pursuant to transactions in the course of interState trade and commerce. The operation of the rule is not restricted only to transactions in the course of intra-State trade and commerce. The rule authorises restrictions on inter-State transactions and is on that account unauthorised." In Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1119 the court held: "Whether there is a violation of the freedom guaranteed by article 301, one has to scrutinise whether the impugned legislative ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heet. The declaration required to be made under the main provision is by the driver or any other person-in-charge of the vehicle carrying the goods particulars to be contained in declaration have been prescribed in form 45-A under rule 62-A(1). Making of declaration under subsection (3)(c) or carrying of any document under sub-section (3)(a) has not been made subject to any condition by parent provision nor has it authorised laying down any condition for carrying of document along with the goods or for furnishing the declaration. So far as rule 62-A(2) and (3) prescribes the forms 45-B and 45-C for declaration by importers, assuming for the present purposes that a declaration of this sort could be prescribed as documents to be carried within the meaning of section 59-A(3)(a), the act of prescribing declaration by itself prima facie does not result in restriction on movement of trade. We notice from forms 45-B and 45-C that the provision is not merely for making a declaration but a declaration which can be made only on fulfilment of certain conditions. While the form 45-B envisages a permission by the prescribed authority to import the specified goods in the State of Gujarat and is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be carried along with goods which are to move from another State to within the State of Gujarat as a result of sale transaction or otherwise and it is that movement which is incidental to and a consequence of such transaction of import which is directly intended to be restricted unless tax dues or returns in respect of the transaction other than one in question has been made in time before the requisite authority. That is to say, irrespective of the fact whether the returns have been made but if the same have been late, irrespective of the fact whether the levy of tax has been challenged and recovery are pending; or that the tax, penalty or interest has been the subject-matter of any dispute and any interim orders of the court or other appropriate authority, the registering authority is empowered to withhold the issuance of the form of declaration, which is only to serve as a purpose for collecting information in respect of the goods under movement, to keep track on future transaction that might take place within the State and the condition is imposed directly with reference to the purchase transaction made with an outside seller in present. In our opinion, such requirement un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons. This is wholly beyond the object and purpose of the main provision of section 59-A. Such provision is directly a restriction on the import of goods by a registered dealer from another State. The condition in order to be reasonable must have a rational nexus sought to be achieved. It is not that a dealer is precluded from carrying on trading activity merely because the returns have been filed late or payment of tax has been delayed or tax has not been paid on account of pendency of disputes relating to levy does or for the like reason nor is the case of the State that the dealer is not entitled to trade at all in the eventuality of conditions of sub-rule (3) being not satisfied. That is to say a registered dealer is not precluded from intra-State or inter-State trade or any trading activity resulting in export when the transactions really may attract the levy and imposition of tax, etc., but the restriction has been imposed on the import of cement, a transaction on which the State tax is attracted, i.e., to say question of evasion and avoidance of State tax is not involved in the case of import and it is only that activity has been subjected to the impugned provisions. It is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in-charge of the check-post or barrier after entering into the State and deliver it to the officer-in-charge of the check-post or barrier before it makes exit from the State failing which it shall be presumed that the goods has been sold by the owner or person-in-charge of the vehicle in the State. The challenge to provision was that it results in levy of tax on the basis of presumption only. The court repelled the objection on the ground that the presumption was a rebuttable one which is clearly a rule of evidence, has the effect of shifting the burden of proof and the provision was enacted to prevent the evasion of tax. So far as legislative competence to impose tax on the presumption was concerned, it was held to be intra vires by holding that it was a machinery provision for levying of tax which prevents evasion of tax otherwise liable to pay by holding it to be a rebuttable presumption. The court held that they (section 28 of the Act and rule 87 of the Rules) are introduced as stated earlier to check evasion and to provide a machinery for levying tax from person who dispose of goods inside the State and avoid tax which they are otherwise liable to pay. The law provides enou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g permit by a person not registered dealer or subject to fulfilling all obligations under the State Sales Tax Act or the Central Sales Tax Act de hors the transaction in question before he can even be permitted to obtain the form for making a requisite declaration in order to enter into a sale transaction with other person situated in other State. Strong reliance is placed on Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1119. It would be appropriate, while considering this case, to notice the relevant provisions of the Bihar Act under which the matter had arisen. Under the scheme of the Bihar Act, section 34 provided setting up of check-posts or barriers with a view to preventing evasion of tax payable under that part of the Act. Sub-section (2) of section 34 authorises the State Government to prescribe by a notification to file a correct and complete declaration in such form and the manner prescribed. Section 35 authorises certain restrictions on movement of the goods by laying down that no person shall transport from any railway station, steamer station, airport, post office or any other place any consignment of such goods exceeding such quantities as may be speci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted as per the form. The High Court took the view that as the importer has to send a form in advance to the consignor that it can be filled up to accompany the goods it blockades the transportation in inter-State trade or commerce. On this premise, the High Court held that as these provisions directly apply to inter-State trade or commerce, it was of the opinion that the primal requirement is that it must be filled in by the permit holder before the transport of goods. The names and addresses of the dealer and the consignor as well as the consignee must be filled in and equally the number of vehicle where the same is used. The requirement that such form should be filled in before the transport, ordinarily requires that same must be first sent to consignor in advance including the number of goods carrier which may not be issued in the State of origin of declaration. Goods may have to be transported from one vehicle to another and it is difficult if not impossible to postulate all the details required by the various columns of the prescribed form which may some times be difficult if not impossible of performance. Enumerating such other difficulties, the court held that the impugned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appropriate form would, in our opinion, not amount to interruption but only a stoppage." Apparently, the ratio of Harihar Prasad Debuka's case [1989] 73 STC 353 (SC); AIR 1989 SC 1119 is founded on the aforesaid three premises, namely, the provision applied uniformly to all goods; the purpose for which the provision has been made is disclosed in the notification itself and there was no material to hold an inquiry into the correctness of such declaration, and that the required particulars are to be furnished by carrier at the time of entry in the State when requisite information is with him and, therefore, the provisions which have been made is ancillary to the levy of tax for preventing evasion. The stoppage of goods for checking for obtaining and filling up the forms does not result in direct and immediate restriction in inter-State trade or commerce. It is to be noted that as per the rule and the Act under consideration by their Lordships, the declaration was to be furnished by any person transporting the goods. The rule did not require the declaration to be furnished by importer. However, the same cannot be said in the present case. The fact that carrier is not a person who ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvoice or challan, the name and address of the transporter and the vehicle number in which the goods are being carried, which come into existence only after leaving the stage of segregating the goods for despatch and delivery to the transporter are conveyed to the importer, thereafter only, the importer can fill in the form under his signature giving out to carrier. That is to say, after the goods have been ready for despatch, goods must remain stationary until such declaration form under the signature of the declaratory reaches the transporter or in the alternative, the goods after their being entering the State of Gujarat are made stationary until further information about its entry and place is furnished to the importer and he manages to transmit his declaration to the transporter for being delivered to the officer-in-charge of the check-post or barrier before the carrier reaches such check-post or barrier. If the goods reaches the check-post or barrier and at the time of checking is not accompanied by such a declaration, the subsequent furnishing of declaration fulfilling the requirement is not envisaged by the impugned rules. That apart, purpose of seeking declaration is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to keep the vehicle stationary for that reason alone in our opinion, is de hors the purpose for which the stoppage can reasonably be made. This brings us to the other part of the argument that the framing of rules 62-A(2) and (3) to (6) along with prescribing forms prescribing the conditions aforesaid is clearly violative of articles 303, 304(a) and article 14 being directly resulting in discriminating between the goods manufactured within the State of Gujarat and the similar goods manufactured outside the State when imported from other States and whether the impugned rules having been made in colourable exercise of rule-making powers to make law for preventing evasion of tax. As we have noticed earlier, articles 303 and 304(a) limits the legislative powers of the Parliament as well as the State Legislature to make law including law imposing tax which discriminates between the goods imported from other States or giving preferential treatment to the goods manufactured within one State over the goods manufactured in another State. In State of Rajasthan v. Ghasiram Mangilal (1969) 2 SCC 710, State of Rajasthan had exempted sale of bardana from tax at the hand of first importer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the rate of sales tax is beneficial to the State revenue. The other justification is what provisions of Part XIII of the Constitution do not permit. The reasonable restrictions contemplated in Part XIII have to be backed by law and not by executive action provided the same are within the limitations prescribed under the scheme of Part XIII." The facts of the present case are very much nearer. Here also, it is a case of making rule 62-A(2) to (6) applicable only in the case of importer of cement and no other commodity. The importer of cement has been subjected to two conditions which a purchaser of cement within the State or exporter of cement outside the State has not been subjected to. In State of Tamil Nadu v. Sanjeetha Trading Co. AIR 1993 SC 237, the court while sustaining the prohibition imposed on movement of timber outside the State while upholding the prohibition on the ground of it being a declaration an essential duty under the Tamil Nadu Essential Articles Control and Requisitioning (Temporary Powers) Act (29 of 1949) observed that: "The matter may be different where total prohibition has been imposed on the movement of goods or articles from one State to anoth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sport Company's case [1986] 62 STC 381 (SC); AIR 1986 SC 1099: "......that these provisions are enacted to make the law workable and to prevent evasion. Such provisions fall within the ambit and scope of the power to levy the tax itself." Article 304(a) makes it clear that while State Legislatures are free to impose tax within its territory but prohibits to make any such law which is not equally applied to goods manufactured within the State and goods brought from outside. If a Legislature at any stage of imposition of tax gives preference and does not subject locally manufactured goods to the same rigours to which goods manufactured outside the State and brought into the State, are subjected, it would be clearly violative of article 304(a). Article 304(a) does not make any distinction between the law which falls in the category of restrictive or regulatory. The preference of local goods over the imported can be manifested at any stage of imposition and levy of tax by subjecting it to such conditions to which local goods are not subjected to. If the substance of taxing law is to give preferential treatment to local goods over the imported goods, it transgresses the limits ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w of trade through the entire territory of India, has made it clear that it cannot subject the goods manufactured outside the State to greater rigours than the similar goods which are manufactured within the State, are subjected to. There is yet another reason for us to conclude that the impugned rule 69-A(2) to (6) is contrary to constitutional provisions. Article 14 guarantees equality before law and protection against unreasonable and irrational discrimination at the hands of the State. Article 19(1)(g) guarantees freedom of trade, subject to reasonable restrictions. Part XIII makes trade, commerce and intercourse throughout the territory of India free, imposing limitation on the exercise of legislative power, whether by the State or the Union, except to the extent provided under articles 302 to 304. Articles 303 and 304(a) as noticed above, prohibit Union as well as the State within the sphere of their respective legislative power to make any law which discriminates between the goods manufactured in one State and the goods manufactured in another State. That is to say, it is a specie of provision against discrimination guaranteed in its magnificient amplitude under article 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thing was pointed out by the learned counsel for the Revenue, nor there is anything in the reply affidavit to throw any light in this regard. It begets further question. If the purpose for which the rule is enacted to be taken to be for preventing evasion of tax then what is the rational nexus for treating cement on different platitude than other commodities so far as the purpose of preventing evasion of tax is concerned. We see no reason, nor any has been furnished in the reply, which relates to this differential treatment given to cement for treating it differently from other commodities in the matter of subjecting to the rigours of impugned rules 62-A(2) to (6) and forms prescribed therein. It cannot be said nor any such case has been made out that cement or dealers in cement have any particular feature or special tendency in respect of evasion of tax for their being dealt with within the State after import than dealing with other commodities imported in the State of Gujarat from outside Gujarat. The law is well-settled that a classification in order to be reasonable must be shown to be founded on reasonable criteria having rational nexus to the purpose sought to be achiev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AIR 1958 SC 538 and the court further held that, "that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself.......... ..............that the Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest." The principles were restated in S.P. Mittal v. Union of India AIR 1983 SC 1. If we look for the reason with reference to object for which the rules are purported to have been made, no reasonable basis for the classification appears on the face of the rule nor is deducible from the surrounding circumstances or matter of common knowledge, how the cement as a commodity on being imported, a transaction which does not attract levy of any tax within the State of Gujarat stands differently from other commodities imported within the State of Gujarat for the purpose of preventing evasion of tax, occasion of which may arise on its subsequent dealing by the importer within the State of Gujarat after it has become part of the m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inter-State purchase resulting in import of cement. If the import of cement through inter-State trade is prevented, there cannot be any occasion of its being assimilated in the mass of property of the State to give rise to any tax liability in future and there will be no occasion for using the provision for preventing tax evasion on such future transactions. Moreover, cement as a class falls in a special category for the purpose of being differential treatment with respect to this object is not disclosed nor is discernible otherwise from surrounding circumstances. From the perusal of paras 4, 5 and 6, it is apparent that it was the situation arising from purchasers of cement having been attracted to making purchases from outside the State resulting in lesser taxable transactions in cement taking place within the State, prompted to create a device so that the local purchaser desist from purchasing cement from outside the State. To achieve that object, the impugned methodology has been adopted out of the various alternatives thought by the State. That object has nothing to do with the object of preventing evasion of tax for the purpose of which power of prescribing documents to be ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which the power has been conferred. If looked in the proper perspective, in the aforesaid circumstances, it is further clear that the rules have been framed in colourable exercise of powers under section 59-A(3)(a). In this connection, we may recall the observations of their Lordships in Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1199 wherein their Lordships while enunciating the scope and ambit of the constitutional validity of regulatory or compensatory measures vis-a-vis article 301 had expressed clearly: "Such measures cannot be challenged as interfering with the freedom guaranteed by article 301 unless they are shown to be colourable measures to restrict the free flow of trade, commerce and intercourse." In Harihar Prasad's case [1989] 73 STC 353 (SC); AIR 1989 SC 1199 the court found that the purpose was disclosed in the notification itself. Therefore, the court held that in view of the clear declaration in the notification itself, there was nothing to hold further enquiry about the colourable nature of the exercise of the powers and distinguished the decision in Bagrecha's case [1971] 27 STC 4 (SC); (1971) 1 SCC 59 wherein the purpose was not disclos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e any question of bona fides or mala fides on the part of the Legislature. The whole doctrine resolves itself into the question of competency of a particular Legislature to enact a particular law. If the Legislature is competent to pass a particular law, the motives which impelled it to act are really irrelevant. On the other hand, if the Legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power vide Cooley's Constitutional Limitations, Volume 1, page 379. A distinction, however, exists between a Legislature which is legally omnipotent like the British Parliament and the laws promulgated by it which could not be challenged on the ground of incompetency, and a Legislature which enjoys only a limited or a qualified jurisdiction." In enunciating the principle, the court approved what Duff, J., has said in Attorney-General for Ontario v. Reciprocal Insurers 1924 AC 328: "Where the law-making authority is of a limited or qualified character, it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what is that the Legislature....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was argued by the learned counsel for the petitioner that any provision which results in restriction of trade and can be saved on the anvil of article 304(b) can only be an Act of Legislature. Rules framed under the Act by the delegated authority not being a legislative act, cannot be saved with reference to that provision inasmuch as only Parliament under article 303 and the State Legislature with the previous sanction of the President under article 304(b) are empowered to impose such reasonable restrictions as are in the public interest and not any other authority. The learned counsel for the petitioner, for this purpose, relied on a decision of the apex Court in the case of State of Mysore v. H. Sanjeeviah AIR 1967 SC 1189. Having carefully scrutinised the contention, we are unable to accept this contention. Their Lordships in the case of State of Tamil Nadu v. Hind Stones AIR 1981 SC 711 considering the Sanjeeviah's case AIR 1967 SC 1189 held as under: "......A statutory rule, while ever subordinate to the parent statute, is otherwise, to be treated as part of the statute and as effective. 'Rules made under the statute must be treated for all purposes of construction or o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vi. ka. 18 men goshana karega aur prasthuth karega yaa karvayega". These were held to be ultra vires. That was a case in which the State of Rajasthan has required an importer of vehicle within the State of Rajasthan to furnish a declaration of the type and the same was not applicable to the goods carried in pursuance of the transactions made within the State or goods sold outside the State of Rajasthan. On consideration of those provisions, it was held that "the contract of sale clearly provided that the scooter could be moved from Kanpur in the State of Uttar Pradesh to Jaipur in the State of Rajasthan, it was, therefore, clear that the movement of goods in the instant case from one State to another was the result of covenant or an incident of contract of sale and the sale was an inter-State sale under section 3(a) of the Central Sales Tax Act, 1956, and a provision which was made by the Act or by the Rules which sought to prevent evasion of liability to pay intra-State sale or purchase tax would be within the competence of the Legislature or the authority competent to make the Rules but the State Legislature had no power to legislate for the levy of tax on the transaction whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the respondents tried to draw support from the report of the Tax Inquiry Commission, 1953-54 suggesting that where the transaction takes place between registered dealer at one State and unregistered dealer or consumer in another, low rate of levy prescribed in the Central Sales Tax Act will not be suitable and it also suggested that the transaction of this type should be taxable at the same rate which exporting State imposes on similar transactions within their own territories. We are not here concerned with the legality or legitimacy of the rate structure of taxation provided in other States under the existing law relating to the Central sales tax. Firstly, that is an action which is not under challenge before us. Secondly, the recommendation of the commission of 1953-54 is not of any relevance in so far as the question of rate structure that can prevail under the Central Sales Tax Act is concerned. That can be decided only with reference to the provisions of the Central Sales Tax Act. If the provisions of that Act authorise the State Government to act in any particular manner, the fact that such provision was not recommended by the Taxation Inquiry Commission cannot be of any hel....