TaxTMI 
TaxTMI 
1999 (2) TMI 636
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....vasion of tax under section 46(1)(a) of the Act. (c) Whether compounding fee could be levied under section 46(1)(a) or 46(1)(b) of Act for the failure to obtain transit pass at the entry check-post? 2.. Mr. N. Sri Prakash, learned counsel for the petitioners in O.P. Nos. 2085 of 1998, 109 of 1999 and 1835 to 1842 of 1997 contended as follows: A State legislative under article 246 of the Constitution of India read with entry 54, List II, of the Seventh Schedule can tax a sale contemplated by the Sale of Goods Act, 1930. After the Forty-sixth Amendment to the Constitution of India a deemed sale as contemplated by article 366(29-A) can also be taxed. A transaction which does not result in transfer of property in goods from a seller to a buyer pursuant to an agreement for consideration will not be a sale so as to attract levy of sales tax. In Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash [1954] 5 STC 193 (SC); AIR 1954 SC 459 imposition of sales tax on forward contracts was held invalid. In this connection the apex Court held as follows: "The power conferred under entry 48 to impose a tax on the sale of goods can therefore be exercised only when there is a sale under....
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....ticle 366(29-A) of the Constitution of India are brought to tax under section 44-A which creates a "deeming" sale in the nature of a binding principle or a fiction. In the case of Consolidated Coffee Ltd. v. Coffee Board, Bangalore [1980] 46 STC 164 (SC); AIR 1980 SC 1468 the apex Court (page 174 of STC; page 1479 of AIR, in para 11) has observed as follows in regard to the true meaning of the word "deemed": "11. It is not possible to accept the aforesaid contention for the reasons we shall presently indicate. It is true that the word 'deemed' has been used in section 5(3) but the same word has been used not merely in section 5(1) but also in the other two sections 3 and 4 of Chapter II of the Central Sales Tax Act which has the heading 'Formulations of principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export'; the heading of Chapter II on the face of it suggests that what is done under sections 3, 4 and 5 including sub-section (3) is formulation of principles. Secondly, the word 'deemed' is used a great deal in modern legislation in different senses and it is no....
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....Phrases, Permanent Edition, Vol. 33A, at page 327, it is explained that 'principle means a general law or rule adopted or professed as a guide to action'. In other words, as opposed to any specific direction governing any particular or specific instance, transaction or situation a principle would be a guiding rule applicable generally to cases or class of cases. Looked at from this angle it will be clear that sub-section (3) of section 5 formulates a principle inasmuch as it lays down a general guiding rule applicable to all penultimate sales that satisfy the two conditions specified therein and not any specific direction governing any particular or specific transaction of a penultimate sale. In other words the content of the provision shows that it lays down a principle." 4.. The meaning of "deemed" expressed above is reiterated in Government of A.P. v. H.E.H. The Nizam [1996] 3 SCC 282 in a land acquisition case. Further, as held in Chandarana & Co. v. State of Mysore [1972] 29 STC 302 (SC); [1972] 1 SCC 17 at page 23 (page 308 of STC) a State Legislature cannot by creating a fiction of "deemed" sale transcend its own powers. Even if the "deeming" found in section 44-A(1)(c) a....
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.... presumption only. Similarly in AIR 1994 SC 733 in the case of Central Board of Secondary Education v. Ms. Vineeta Mahajan, the apex Court considered the deeming provision, "the use of unfair means at the examination" in rule 36 which reads as follows: "36.1 (iv)(a) If during the course of examination, any candidate is found indulging in any of the following, he shall be deemed to have used unfair means at the examinations: (a) having in possession papers, books, notes or any other material or information relevant to the examination in the paper concerned." The High Court allowed the writ petition on the following reasoning: "The question which arises for our consideration is, if the positive finding of the result committee is that the petitioner had not copied then can the provisions of rule 36.1(iv) be so invoked so as to come to the conclusion that the petitioner had been guilty of using unfair means. It is no doubt true that the said provisions raise presumption that the candidate is guilty of using unfair means if, inter alia, written material is found on the person in the examination. But this is a rebuttable presumption and it can be seen whether in fact the m....
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....71, in para 5, as follows: "(5) Clause (1) provides that the President may with respect to any State, after consultation with the Governor thereof, by public notification, specify the castes, races or tribes or parts of or groups within castes, races or tribes which shall for the purposes of the Constitution be deemed to be scheduled castes in relation to that State. The object of this provision obviously is to avoid all disputes as to whether a particular caste is a scheduled caste or not and only those castes can be scheduled castes which are notified in the order made by the President under article 341 after consultation with the Governor where it relates to such castes in a State." Therefore, imposing a tax on a non-sale on the basis of a principle or a fiction or by providing a conclusive presumption is unconstitutional and ultra vires entry 54 of List II of the Seventh Schedule to the Constitution of India. 7.. The proviso to section 44(1)(c) permits proof that the goods have actually moved out of the State although the transit pass was not surrendered at the last check-post before its exit. However, the proviso itself operated only in a limited situation. Even such ....
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....e from the State without delivering the transit pass at the last check-post is the basis for the operation of section 44-A(1)(c) or 44-A(2)(c). Consequently if a goods vehicle is stopped prior to its exit from the State of Tamil Nadu then section 44-A(1)(c) or 44-A(2)(c) will not be attracted. (c) Before the persons contemplated by section 44-A(1)(c) or 44-A(2)(c) are held to be liable, they must be given an adequate opportunity to rebut the presumption of a sale having taken place within the State of Tamil Nadu. If the presumption is rebutted then liability will not attach. The persons concerned must be permitted to let any evidence to demonstrate that in fact the goods vehicle had crossed the State of Tamil Nadu without the goods contained in it having been sold within the State of Tamil Nadu. In the case falling under section 44-A(1)(c) the consignor of the goods must also be heard. As such a consignor will be a necessary party. In any view a proper party. (d) For a violation of section 44-A(1)(b) or section 44-A(2)(b) a detention of the goods vehicle concerned is not possible. Such a detention will be without jurisdiction. A detention of the goods vehicle may be possible ....
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....person concerned has the opportunity to displace the presumption by leading evidence. 17.. We are of the view that the words contained in section 28-B of the Act only require the authorities concerned to raise a rebuttable presumption, that the goods must have been sold in the State if the transit pass is not handed over to the officer at the check-post or the barrier near the place of exit from the State. The transporter concerned is not shut out from showing by producing reliable evidence that the goods have not been actually sold inside the State. It is still open to him to establish that the goods had been disposed of in a different way. He may establish that the goods have been delivered to some other person under a transaction which is not a sale, they have been consumed inside the State or have been re-despatched outside the State without effecting a sale within the State, etc. It is only where the presumption is not successfully rebutted the authorities concerned are required to rely upon the rule of presumption in section 28-B of the Act. It is, therefore, not correct to say that a transaction which is proved to be not a sale is being subjected to sales tax." ....
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....vocate (Taxes) contended as follows: Section 42(1) of the Act contemplates establishment of check-post with a view to prevent or check evasion of tax under this Act. Transit pass in section 44-A of the Act has been prescribed only with the same intention. The "deemed sale" refers to a rebuttable presumption only and the meaning explained in [1980] 46 STC 164 (SC) at page 174 (Consolidated Coffee Ltd. v. Coffee Board, Bangalore) is relevant. For assessing the liability to tax under section 44-A officers appointed as contemplated in section 2(c), 2(cc) and section 28 of the Act are empowered. Charging section 3 is attracted to levy tax with reference to liability created under section 44-A of the Act read with rule 35-B of the Tamil Nadu General Sales Tax Rules, 1959. The contention in the affidavit that section 44-A is ultra vires articles 245, 246 read with entry 54, List II of the Seventh Schedule to the Constitution is not correct. It is an enabling provision to prevent evasion of tax in the garb of consignment transfer. Where tax is imposed, there is invariably also an attempt to evade the tax and the Legislature has therefore prescribed the above ways and means by way of sec....
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....ect from April 1, 1973 for the purpose of providing that the burden of proving that any movement of goods from one State to another was occasioned otherwise than as a result of sale shall be on the dealer making such claim. The deeming provision in section 44-A is not therefore ultra vires to section 6-A of the Central Sales Tax Act, 1956, which is independent of that section. The averment that section 44-A(1)(c) and 44-A(2)(c) have the effect of treating inter-State sales as sales within the State and hence ultra vires entry 92-A of List I of Seventh Schedule is also not correct. They are only aids and supplements to prevent evasion of tax, and hence not violative of entry 92-A of List I of the Seventh Schedule since section 44-A(1)(a) and 44-A(2)(c) are restrictions placed in that behalf and is an overriding power of the State for the protection of the total security and is a regulatory measure. The provisions cannot, therefore, be challenged as illegal or arbitrary. Section 28-B of the U.P. Sales Tax Act, 1948 is similar to section 44-A of the Tamil Nadu General Sales Tax Act, 1959. The question of validity of the provisions under the U.P. Sales Tax Act, 1948 came before t....
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.... view of the abovesaid decisions of the honourable Supreme Court upholding the validity of similar provision as contained in section 44-A of the Tamil Nadu General Sales Tax Act, 1959, the vires of section 44-A(1)(c) and 44-A(2)(c) cannot be challenged as unconstitutional and the original petitions deserve to be dismissed as not maintainable. 14.. In regard to prevention of evasion of tax, legislative powers to prescribe registration by transporters and owner's liability to carry documents for transport of goods, Mr. R. Mahadevan also referred to the decisions in Calcutta Iron Merchants' Association v. Commissioner of Commercial Taxes [1996] 101 STC 422 (SC), Tripura Goods Transport Association v. Commissioner of Taxes [1996] 102 STC 577 (Gauhati) and Paras Light House v. State of Karnataka [1998] 108 STC 85 (Kar.). Referring to facts of the case in O.P. Nos. 1835 to 1842 of 1997, it was stated that for non-surrender of transit passes at the exit check-post after giving a reasonable opportunity only the assessing authority has made the provisional assessments. Thus, the provisional assessments are quite in order. Section 42(5) of the Act refers to bill of sale or delivery notes ....
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....s vehicle owned by a person is hired for transportation of goods by some other person, the hirer of the vehicle shall, for the purposes of this sub-section, be deemed to be the owner of the goods vehicle. (2)(a) When any goods specified in the Seventh Schedule are consigned or transferred by any goods vehicle to another State from any place within the State, the consignor or transferor of the goods shall obtain a transit pass in the prescribed form and in the prescribed manner, from the assessing authority, having jurisdiction over the place from where the goods are consigned or transferred to other State. (b) The consignor or transferor of the goods shall deliver or cause to be delivered, within the prescribed period, the transit pass to the officer-in-charge of the last check-post or barrier, before the exit of the goods vehicle from the State. (c) If the consignor or transferor of the goods fails to comply with clause (b), it shall be deemed that the goods carried thereby have been sold within the State by the consignor or transferor and such consignor or transferor shall, notwithstanding anything contained in sub-section (1) of section 3, be liable to pay tax in accord....
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....ck-post; and seventy-two hours for a distance exceeding six hundred kilometres from first check-post to last checkpost. (4) The owner or other person in-charge of the goods vehicle or the consignor or transferor of goods, as the case may be, shall deliver or cause to be delivered the duplicate copy of the transit pass to the officer in-charge of the last check-post or barrier and allow him to inspect the documents and goods in order to ensure that the goods being taken out of the State are the same for which the transit pass has been obtained. The officer in-charge of the last check-post shall acknowledge the receipt of the transit pass on the triplicate copy of the transit pass available with the owner or the other person in-charge of the goods vehicle or the consignor or the transferor of the goods, as the case may be. (5) The officer in-charge of the last check-post or barrier shall have powers to unload and search the contents of the goods vehicle to ensure that the goods being moved out of the State are the same for which the transit pass is issued. (6) The officer-in-charge of the last check-post or barrier shall intimate the delivery of transit pass to the of....
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...........at .................check-post on or before................(date) by...........hours (time). Date: Signature Time: Status Place: Transit pass Goods vehicle registration number..........................carrying the consignments mentioned in the application is permitted to cross the Tamil Nadu border at.......................(name of the check-post) on or before.....................(date) by............... hours. Place: Signature of the officer Date: Assessment circle/check-post. Time: (Seal) Extension of time Time extended up to hours........................on or before.................................... (date)...................... Place: Signature of the officer extending the time Date: (full name, designation with seal) Acknowledgment Certified that I have received duplicate copy of this pass: Place: Signature of thee Officer, Check-post Date: (last check-post) Time: (Seal). 16.. Thus, section 44-A of the Act and rule 35-B are just machinery provisions. They do not levy any charge by themselves. They are enacted to ensure that there is no evasion of tax, especially in specified evasion prone commodities Section 4....
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....f the last check-post or barrier, before the exit of the goods vehicle from the State, then it shall be deemed that the goods carried into Tamil Nadu from outside the State have been sold within the State by the owner or person in-charge of the goods vehicle. In such circumstances, even if the owner or person in-charge of the goods vehicle is not a casual dealer or non-resident dealer and therefore is eligible for exemption up to a total turnover limit of rupees one lakh up to July 16, 1996 and rupees three lakhs from July 17, 1996 in a year under section 3(1) of the Act, he is liable to pay tax irrespective of the quantum of turnover. Further, the liability to tax is joint and several and he is also liable to pay the maximum penalty of one hundred and fifty per cent of such tax. 18.. According to proviso to section 44-A(1) when goods brought into Tamil Nadu in a vehicle from outside the State are re-transported in another vehicle to outside the State with the transit pass obtained in the entry check-post, the onus of proving that the same goods brought from outside the State alone have actually moved out of the State lies on the owner or person in-charge of the goods vehicle wh....
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....making assessment and recovery of tax as contemplated in the Act. Under section 28 of the Act officers for making assessment having territorial jurisdiction are appointed. Only officers appointed for making assessment having territorial jurisdiction are competent to assess with reference to section 44-A of the Act pertaining to "transit pass" either on the basis that they are registered dealers or that their place of business is within their jurisdiction. Casual dealers and non-resident dealers who will be covered by section 44-A of the Act will be assessed in non-resident circles created or already notified by the department. However, the check-post officers who are not assessing officers cannot assess any turnover with reference to non-surrender of transit pass or discrepancy as contemplated in rule 35-B(6). Even the assessing officer who issued the transit pass under section 44-A(2) from where the goods moved to other State may not be the competent assessing authority in all cases. Thus, the competent assessing authority has to issue a notice calling on the person concerned to show cause as to why the goods carried in the vehicle shall not be construed as deemed sale within t....
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....hich Indian courts have understood over a long period and not as laying down a rule of conclusive proof. In fact these presumptions are not peculiar to the Evidence Act. They are generally used wherever facts are to be ascertained by a "judicial process". The Supreme Court in Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381 at page 390; AIR 1986 SC 1099 at pages 1105 to 1106 has further observed as follows: "A presumption is not in itself evidence but only makes a prima facie case for party in whose favour it exists. It is a rule concerning evidence. It indicates the person on whom the burden of proof lies. When presumption is conclusive, it obviates the production of any other evidence to dislodge the conclusion to be drawn on proof of certain facts. But when it is rebuttable it only points out the party on whom lies the duty of going forward with evidence on the fact presumed, and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed the purpose of presumption is over. Then the evidence will determine the true nature of the fact to be established. The rules of presumption are deduced from enlightened h....
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.... goods becoming insolvent during movement of goods in transit. The above list of circumstances may expand, but such rebuttal should be shown as to how the goods imported inside the State have been disposed of. However, we would like to make it clear that without showing proof as to the manner in which the goods inside the State have been disposed of in several ways as discussed supra, merely by producing F form and pattials from the outside the State buyer that the goods in question have been sold, the movement of goods through the last check-post or barrier without delivering the transit pass and subjecting the goods to check by the check-post authority cannot be rebutted. The machinery provision of section 44-A of the Act and rule 35-B of the Rules have been introduced with effect from October 1, 1994, to check tax evasion and to provide a machinery for levying tax from persons who dispose of goods inside the State and avoid tax by showing the transaction as passing through the State from outside the State or moving from inside the State to another State. The provisions of law given enough protection to them and enable them to show that they are in fact not liable to pay tax. Onl....
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....section 44-A(1) of the Act, since at the time of the deemed or the presumed sale the owner or person in-charge of the goods vehicle was in custody of the goods and acted as agents for handling of goods or documents of title relating to goods. 26.. However, section 44-A comes into operation to fasten liability to tax and penalty only when the duplicate copy of the transit pass is not delivered at the last check-post or barrier within the prescribed period as contemplated in section 44-A(1)(b) or section 44-A(2)(b) of the Act. However, if no transit pass is obtained at the first check-post as contemplated in section 44-A it amounts to violation of the provision only, and on that basis no liability to tax is contemplated in section 44-A(1)(c) or 44-A(2)(c) of the Act. In such circumstances, section 42(2) of the Act would be attracted on the ground of not carrying the documents relating to the goods inasmuch as section 42(5) of Act says that the documents to accompany the consignment are bill of sale or delivery note or such other documents as may be prescribed. Transit pass is the document prescribed in respect of goods mentioned in the Seventh Schedule to be obtained in the first ....
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....t officer, then the wilful omission to obtain transit pass alone will not lead to the inference of evasion of tax recoverable under the Act when the omission is detected in other check-post or when checked on the way by any officer of the Commercial Taxes Department empowered to do so. On the other hand, when a goods vehicle has not stopped in the first check-post or has avoided the first check-post so as to subject the documents and goods vehicle for inspection by authorities established under section 42 of the Act, then the failure to obtain transit pass will strengthen the case of attempt to evade tax recoverable under this Act, thereby warranting detention of the vehicle and attracting section 46(1)(a) of the Act while offering the option for composition. 29.. Similarly, when the duplicate copy of transit pass is delivered at the last check-post or barrier belatedly without obtaining extension of time, then it may lead to an inference of rebuttable presumption of sale. However, the mere failure to obtain extension of time which resulted in belated submission alone will not convert the transaction into a deemed sale. There should be adequate material either detected at the ch....
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.... compounding fee of Rs. 1,000 for the offence under section 46(1)(b) of the Act by the first revisional authority in R.P. No. 85 of 1998 dated December 24, 1998 is quite in order and no interference is called for however, as the offence has been ordered to be compounded on obtaining the petitioners willingness to pay a sum of Rs. 1,000 under section 46(1)(b) of the Act, the further direction to comply with the provisions of section 44-A of the Act for movement of goods intended to Pondicherry, namely, the obtaining of transit pass is a physical impossibility and therefore such a direction is quashed. Further, in such circumstances, the check-post officer at the intermediary checkpost, where the offence of non-obtaining the transit pass at the first check-post is compounded, can issue a transit pass as if construing that check-post is the first check-post so as to ensure that the goods in question did move to other State by delivering the transit pass at the last check-post so as to ensure that there is no evasion of tax. However, if the non-obtaining of transit pass is found at the last check-post, after compounding the offence the genuineness of the transaction could be verified s....