TaxTMI 
TaxTMI 
2006 (11) TMI 582
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....gnment agent of Electro-steel Castings Limited, Kolkata (West Bengal) for cast iron items. 4. On February 24, 2005, the petitioner sent one consignment of goods to a Pathankot dealer through Shiv Shakti Transport Company from its place of business, i.e., Mohali, to the place of the consignee at Pathankot. 5. At the check-post, set up under the provisions of the Act, the driver of the vehicle duly reported the transaction, but the concerned officer detained the goods on the ground that the goods were liable to be taxed at the first stage, while as per the bill accompanying the goods, tax had not been charged. After preliminary inquiry, notice was issued to the petitioner and the designated officer heard petitioner. The goods and the vehicle were released against bank guarantee on March 1, 2005, pending consideration of the matter. 6. According to the petitioner, the goods were general goods, liable to tax at last stage and though Schedule "D" read with section 5(3) of the Act, dealing with the declared goods mentioned one of the items as pipes, the goods in question being pipes manufactured from cast-iron, were not declared goods, as per judgment of the honourable Supreme C....
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....stified. Further stand is that the goods were released after passing of the order on February 28, 2005 and the order passed on February 28, 2005 was only a zimni order and subsequently, a detailed order was passed, wherein the date of March 1, 2005 was also incorporated. It is stated that the order was passed after March 1, 2005 but bears the date of February 28, 2005, by which, no prejudice was caused. 10. From the pleadings of the parties, following questions arise for consideration: (i) Whether the writ petition is liable to be dismissed on account of alternative remedy available to the petitioner? (ii) Whether the impugned order dated February 28, 2005, annexure P 6 is ultra vires the provisions of section 14B of the Act? (iii) Whether the impugned order dated February 28, 2005, annexure P 6, is ante-dated inasmuch as it refers to release of goods on March 1, 2005 and its effect? Re: Question No. (i) 11. Learned counsel for the State, while substantiating his plea of alternative remedy being available to the petitioner, relied upon judgments in Transport Corporation of India Ltd. v. State of Andhra Pradesh [1985] 60 STC 14 (AP), State ....
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....rit petition when an alternative remedy is available, but such a rule is not an absolute bar and in an appropriate case, inspite of availability of alternative remedy, this court is not debarred from entertaining writ petition where on undisputed facts, an authority is shown to have assumed jurisdiction which it does not possess. Article 226 of the Constitution of India, as such, does not debar entertainment of writ petitions but it is a self-imposed limitation put by the courts. 16. Reference may be made to the judgment of the honourable Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai AIR 1999 SC 22, where a writ petition was filed against cancellation of trade mark registration, which was dismissed. On appeal, the honourable Supreme Court observed: "15. Under article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consis....
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....pect of which sales tax was attracted at the first stage. Judgment of the honourable Supreme Court in Vasantham Foundry [1995] 99 STC 87, was cited, holding that cast iron was different from iron. Respondent No. 2 held that casting to produce things like pipes, etc., could not be treated as cast iron. On these facts, it was held that "cast iron pipes" were "iron" liable to tax at the first stage and tax having not been charged at the first stage, there was attempt to evade tax calling for penalty equal to 30 per cent of the value of the goods. 19. On March 22, 2005, this court passed the following order: "Let notice of motion be issued to the respondents. Mr. MS Joshi, Assistant Advocate-General, Punjab, accepts notice. Let a complete set of the paper book be supplied to him within 2 days. Written statement on behalf of the respondents shall be filed within 4 weeks. Replication, if necessary, be filed within 2 weeks thereafter. In the meanwhile, the bank guarantee in the sums of Rs. 26,750 and Rs. 80,250 stated to have been furnished by the petitioner on March 1, 2005 shall not be encashed. List for hearing on May 17, 2005." 20. On August 3....
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....her the basic metal remains the same after the treatment or whether commercially known different goods emerge. It cannot be said that cast iron after it is machined and finished and sold as different goods, e.g., bends, pipes, man-hole covers, motor parts, etc., will still be treated as cast iron. The test is whether the goods are being dealt with as cast iron or as different goods made out of cast iron in the market place. . . . Therefore, in our view, 'cast iron casting' in its basic or rough form must be held to be 'cast iron'. But, if thereafter any machining or polishing or any other process is done to the rough cast iron casting to produce things like pipes, man-hole covers or bends, these cannot be regarded as 'cast iron casting' in its primary or rough form, but products made out of cast iron castings. Such products cannot be regarded as 'cast iron' and cannot be treated as 'declared goods' under section 14(iv) of the Central Sales Tax Act. This view is not in conflict with the view taken in the case of Bengal Iron Corporation v. Commercial Tax Officer [1993] 90 STC 47 (SC); [1994] Suppl 1 SCC 310, but it is in conso....
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....n sub-section (2), the driver or any other person-in-charge of the goods vehicle shall stop the vehicle and keep it stationary, as long as may reasonably be necessary, and allow the Officer-in-charge of the check-post or the information collection centre or the aforesaid Officer to check the contents in the vehicle by breaking open the packages, if necessary, and inspect all records relating to the goods carried which are in the possession of the driver or any other person as may be required by the aforesaid officer, and if considered necessary, such officer may also search the goods vehicle and the driver or other person-incharge of the vehicle or of the goods. (4) The owner or person-in-charge of a goods vehicle entering the limits or leaving the limits of the State of Punjab, shall stop at the nearest check-post or information collection centre, as the case may be, and shall furnish in triplicate a declaration mentioned in sub-section (2) along with the documents in respect of the goods carried in such vehicle before the officer-in-charge of the check post or information collection centre. The officer-in-charge shall return a copy of the declaration duly verified by him....
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....not stopped the vehicle as required under sub-section (3) 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 person concerned, order the detention of the goods along with the vehicle for such period, as may reasonably be necessary. Such goods shall be released on furnishing a security or executing a bond with sureties in the prescribed form and manner by the consignor or consignee, if registered under the Act, to the satisfaction of the officer detaining the goods and in case the consignor or the consignee is not registered under the Act, then on furnishing a security in the form of cash or bank guarantee or crossed bank draft, which shall be thirty per cent of the value of the goods, rounded up to the nearest hundred. (ii) If the owner or the person-in-charge of the goods has not submitted the documents as mentioned in sub-section (2) and sub-section (4) at the nearest check-post or information collection centre, in the State of Punjab, as the case may be, on his entry into or exit from the State, such goods shall be detained and shall be released only after the matter....
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....e of the goods and the vehicle on furnishing a security by the consignor or the consignee in the form of cash or bank guarantee or crossed bank draft for an amount equal to the amount of penalty imposable and shall decide the matter finally within a period of fourteen days from the commencement of the enquiry proceedings; and (iv) The officer-in-charge of a check-post or information collection centre or any other officer referred to in sub-section (2), may receive the amount of cash security as referred to in clause (i) of sub-section (6) and the amount of penalty imposed under sub-section (4) and clauses (ii) and (iii) of sub-section (7) against a proper receipt in the prescribed manner. (8) In the event of the consignor or consignee of the goods not paying the penalty imposed under sub-section (7) within twenty days from the date of the order imposing the penalty, the goods detained shall be made liable to be sold by the officer, who imposed the penalty, for the realisation of the penalty by public auction in the manner prescribed. If the goods detained are of a perishable nature or subject to speedy or natural decay or when the expenses of keeping them i....
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....ttle highly debatable issues as attempt at evasion could not be alleged merely on the ground that the assessee was raising a bona fide legal dispute, which required adjudiction. Attempt at evasion, which was the essence of the jurisdiction conferred on the Check-post Officer could not be inferred when adjudication of legal dispute was involved. Raising of a bona fide legal argument could not be equate to the mens rea for evasion of tax. 28. On the other hand, learned counsel for the State submitted that power conferred on Check-post Officer could be exercised if the said officer was of the opinion that the assessee had given a declaration without any basis and such declaration had possibility of tax evasion. 29. In this connection, reference may be made to observations of the honourable Supreme Court in Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore [1980] 45 STC 197; AIR 1980 SC 346, (AIR para 5) (STC page 200), in the context of imposition of penalty when there was a bona fide legal dispute about exigibility of tax: "5. . . But where the assessee does not include a particular item in the taxable turnover under a bona fide b....
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....ed the vehicle and the goods which in turn were liable to tax under the Act. Anything else he did would be without jurisdiction and we have no hesitation to state, that on account of his total misdirection, there was improper exercise of jurisdiction and the order of the Appellate Tribunal, the first appellate authority as well as Check-post Officer are, therefore, liable to be quashed and they are accordingly quashed." 31. In Orient Paper & Industries Ltd. v. State of Orissa [1995] 97 STC 490 (Orissa), it was observed: "10. Before parting, we propose to deal with the submission of Shri Mahanti that there is harassment of persons at the check-posts and we should intervene to see that honest tax-payers are spared the highhandedness of the persons manning the check-posts. Learned Standing Counsel, on the other hand, contends that evasion of tax being rampant and it being difficult to realise tax after the goods have slipped away, the State has to provide for check-posts to prevent or check evasion. It is urged by the learned counsel that where the officer-in-charge of a check-post has to deal with a large number of vehicles crossing the check-post, some amount of inconven....
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....ses the movement of the goods would be pursuant to the contract of sale or purchase, the situs would be outside the State because of which the goods would suffer Central sales tax or the State sales tax in the exporting State. So far as this State is concerned, the question of payment of sales tax would arise if after the goods have been brought into the territory, there is a further sale. The occasion for the same would be after the goods have entered the territory and not at the point of entry. So, there would be hardly any occasion to detain such goods at the check-posts. This apart, when in the way-bill the registration number of the buyer of the goods is reflected, there would be no justification for the check-post officers to entertain a belief that the payment of tax would get evaded by such a person on his selling the goods subsequently. So, goods of such a person are not to be ordered for unloading except where the goods be such which are not fully covered by the way-bill or the way-bill be defective or incomplete. We would reiterate that on these two conditions being absent, the incoming goods, specially those being brought by registered dealers, would not be detained at ....
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....rchased on the basis of analysis of scanty materials. While exercising powers under section 16-A read with rule 94 of the Rules, there is no scope for such analysis and where controversial issues are involved, it would not be appropriate for the check-post officer to delve into that aspect. Such controversies should be left to be determined and adjudicated by the Sales Tax Officer under whose jurisdiction the concerned purchaser is registered as a registered dealer. 7.. Judged in the aforesaid background, action of the check-post officer in directing payment of tax cannot be maintained, and is vacated. Petitioner shall file details of the purchase of excavator before the Sales Tax Officer, Cuttack-I, West Circle, who is its assessing officer, and shall file an undertaking to abide by the result of assessment so far as that article is concerned, as would be finally determined. The undertaking shall be filed within ten days from today. The check-post officer would do well to send all relevant materials to the assessing officer to facilitate a proper adjudication." 33. Learned counsel for the State relied upon judgment of the honourable Supreme Court in Shahnas Trading Co.....
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....n E.K. Hajee Mohammed Meera Sahib & Sons v. Sales Tax Officer, II Circle, Trivandrum [1992] 86 STC 99 (Ker). In E.K. Hajee Mohammed Meera Sahib [1992] 86 STC 99 (Ker), this court clearly held as under: 'If a particular movement of goods is inspected in transit and the officer feels genuinely that there is an attempt at evasion of tax, he can search, inspect, detain or seize the goods as per the statutory provisions, but it can be so done only on the basis of some material.' The court also held as under: 'Without anything more, if the delivery note contained only a specification of the value of the goods and the bill amount, it cannot be stated that the check-post authorities have no powers to search, inspect and detain the goods if they have material to suspect, that the goods under transport do not possess the required documents, or there is an attempt at evasion of tax.' So, the power to detain the goods in transit can be exercised by the check-post authority only when he has reason to believe that there was an attempt to evade the tax. If such inference can be drawn from under-valuation of the goods, then the power to detain the goods c....
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....er the transaction was the sale in transit by transfer of document and covered under section 6(2)(b) of the Central Sales Tax Act or not is the matter to be adjudicated in the assessment proceeding and not in the penalty proceeding. I am not expressing any view in respect of the nature of the transaction. On the facts and circumstances stated above, I am of the view, penalty under section 15A(1)(o) is not justified. The penalty is accordingly set aside." 36. In United Polymer Industries v. State of Punjab [2006] 146 STC 571, a division bench of this court observed as under: "Under the above provision, if there is any reasonable suspicion of evasion of tax, the detaining authority is justified in detaining the goods and holding an enquiry into the matter. Though, this power is necessary to safeguard the interest of Revenue and to check evasion of tax, this provision is not intended to confer any arbitrary power on the detaining officer to detain goods without any rhyme or reason under the colourable exercise of such power. Such abuse of power is required to be checked lest it should become a source of abuse of authority or violation of legitimate rights of citizens." ....
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....en 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 cannot be said to be ancillary or incidental to the power to legislate for levy of sales tax." 39. In Sodhi Transport Co. v. State of U.P. [1986] 62 STC 381 (SC); AIR 1986 SC 1099, question was considered with reference to section 28B of the U.P. Sales Tax Act, 1948. It was held that the provisions being machinery provisions enacted to ensure that there was no evasion of tax, were incidental to entry 54, List II of the Seventh Schedule to the Constitution and presumption contained in section 28B of the Act not being conclusive, merely laid down a rule of evidence, shifting burden of proof on the persons not carrying the documents to show that goods were not sold inside the State. In para 19 (STC page 392), it was observed as under: "19. The foregoing discussion disposes of the contentions regarding legislative competence or unreasonable character of the provisions contained in section 28-B of th....
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....e was not in a position to produce any of the three documents, i.e., challan, cash memo or bill as the said documents were in the alternative and any one of the said documents could be produced. 45. In State of Rajasthan v. D.P. Metals [2001] 124 STC 611 (SC); AIR 2001 SC 3076, following judgment in Sodhi Transport's case [1986] 62 STC 381 (SC); AIR 1986 SC 1099, provisions of section 78 of the Rajasthan Sales Tax Act, 1994 were upheld. 46. In Commercial Tax Officer v. Swastik Roadways [2004] 135 STC 1 (SC); [2004] 3 SCC 640, provisions of sections 57 and 58 of the Madhya Pradesh Commercial Tax Act, 1994 requiring furnishing of information by clearing and forwarding agents regarding details of consignors, consignees, quantity of goods carried and value thereof were upheld on the ground that the same were intended to prevent/check evasion. 47. In A.B.C. (India) Ltd. v. State of Assam [2005] 142 STC 88 (SC); [2005] 6 SCC 424, provisions of sections 42 and 44 of the Assam General Sales Tax Act, 1993 were upheld following judgment in Tripura Goods Transport Association's case [1999] 112 STC 609 (SC); AIR 1999 SC 719 and distinguishing judgment in Sant Lal's ....
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....isions for searches.' At page 302 of the said judgment, it was observed: 'A search and seizure is, therefore, only a temporary interference with the right to hold the premises searched and the articles seized. Statutory regulation in this behalf is a necessary and reasonable restriction and cannot per se be considered to be unconstitutional. The damage, if any, caused by such temporary interference if found to be in excess of legal authority is a matter for redress in other proceedings. We are unable to see how any question of violation of article 19(1)(f) is involved in this case in respect of the warrant in question which purport to be under the first alternative of section 96(1) of the Criminal Procedure Code.' The said view has been reiterated in several decisions of the honourable Supreme Court. At the same time, power of search and seizure affects not only right of possession and enjoyment of property but also privacy of a citizen. It also affects right of personal liberty under article 21 of the Constitution. Procedure for affecting such a right itself has to be fair and reasonable, as held by the honourable Supreme Court in Ma....
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....concerned, it has again to be reasonable having regard to the facts and circumstances of the case. (3) As to judicial warrants, the court must have sufficient reason to believe that the search or seizure is warranted and it must keep in mind the extent of search or seizure necessary for the protection of the particular State interest. In addition, as stated earlier, common law recognised rare exceptions such as where warrantless searches could be conducted but these must be in good faith, intended to preserve evidence or intended to prevent sudden danger to person or property." (underlining(1) supplied). Judicial review: 51. It is well-settled that wherever exercise of power by any public authority is arbitrary, the same will be open to judicial review and will be liable to be quashed. Reference may be made to judgment of the honourable Supreme (1)Here italicised. Court in Comptroller and Auditor General of India, Gian Prakash, New Delhi v. K.S. Jagannathan AIR 1987 SC 537, wherein it was observed: "20. There is thus no doubt that the High Courts in India exercising their jurisdiction under article 226 have the power to issue a writ of mandamus or a writ in the....
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....on, no doubt involves a vast amount of administrative discretion which shields the action of administrative authority. But where it is found that exercise of discretion was mala fide and the complainant is entitled to compensation for mental and physical harassment then the officer can no more claim to be under protective cover. When a citizen seeks to recover compensation from a public authority in respect of injuries suffered by him for capricious exercise of power and the National Commission finds it duly proved then it has a statutory obligation to award the same?. It was never more necessary than today when even social obligations are regulated by grant of statutory powers. The test of permissive form of grant are over. It is now imperative and implicit in the exercise of power that it should be for the sake of society. When the court directs payment of damages or compensation against the State the ultimate sufferer is the common man. It is the tax-payers, money which is paid for inaction of those who are entrusted under the Act to discharge their duties in accordance with law. It is therefore, necessary that the Commission when it is satisfied that a complainant is entitled t....
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....ctice 1993, volume 1, pages 849-850, may be quoted: '4. Wednesbury principle-A decision of a public authority will be liable to be quashed or otherwise dealt with by an appropriate order in judicial review proceedings where the court concludes that the decision is such that no authority properly directing itself on the relevant law and acting reasonably could have reached it.' (Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [1948] 1 KB 223; [1947] 2 ALL ER 680, per Lord Greene, M.R.) 99.. Two other facets of irrationality may be mentioned. (1) it is open to the court to review the decision-makers evaluation of the facts. The court will intervene where the facts taken as a whole could not logically warrant the conclusion of the decisionmaker. If the weight of facts pointing to one course of action is overwhelming, then a decision the other way, cannot be upheld. Thus, in Emma Hotels Ltd. v. Secretary of the State of Environment [1980] 41 P & CVR 255, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident bar in a hotel was operated in such a way that the bar was not an incident of ....
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.... account matters which it ought to take into account, the court will interfere. See, Padfield v. Minister of Agriculture, Fisheries and Food 1968 AC 997. If the decision-making body comes to its decision on no evidence or comes to an unreasonable finding - so unreasonable that a reasonable person would not have come to it - then again the courts will interfere. See Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn. [1948] 1 KB 223. If the decision-making body goes outside its powers or misconstrues the extent of its powers, then, too the courts can interfere. See Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147. And, of course, if the body acts in bad faith or for an ulterior object, which is not authorised by law, its decision will be set aside. See Sydney Municipal Council v. Campbell 1925 AC 338. In exercising these powers, the courts will take into account any reasons which the body may give for its decisions. If it gives no reasons - in a case when it may reasonably be expected to do so, the courts may infer that it has no good reason for reaching its conclusion, and act accordingly. See Padfield's (1968 AC 997, 1007 & 1061)'." 55. Refer....
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....n situation was called for or not, is a question which has to be decided from case to case and no principle of universal application could be laid down. If no inference of attempt at evasion can be drawn, exercise of power will not be called for. On the other hand, if attempt at evasion can be reasonably inferred from the given facts, exercise of such power may be justified. Normally, statutory remedies being available, writ court will not examine whether exercise of power at check-post was called for or not but in an appropriate case, writ court is not debarred from doing so to prevent injustice or uncalled for harassment, which may be patent and which may not require ascertainment of any disputed facts or if the exercise of power is mala fide. 58. As seen from the above case law, there are instances of interference by the writ court with the exercise of power where there was no nexus with the attempt at evasion, such as in Utkal Galvanisers Limited [1997] 104 STC 222 (Orissa), Automobile Products of India [1991] 81 STC 414 (Karn), Parry and Company Ltd. [2004] 138 STC 437 (All), Orient Paper & Industries Ltd. [1995] 97 STC 490 (Orissa) and United Polymer Industries [2006] 146 ....