AI Drafter 
TaxTMI 
TaxTMI 
2008 (3) TMI 640
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.... petitioner to verify the connected records and to cross-examine the witnesses. In W.P. (C) No. 13124 of 2004, the petitioner's grievance is that the revisional authority vide his order dated August 17, 2004 under annexure 1 has illegally upheld the order of the STO dated November 12, 2002 (annexure 2) who without allowing opportunity of being heard to the petitioner and in violation of the principle of natural justice rejected the petitioner's prayer for verification of the relevant record maintained in respect of detention of the vehicle bearing registration No. AP-16-X-7549. Since the issues involved in both the writ petitions are interconnected, they are disposed of by this common judgment. The facts which give rise to these two writ petitions are as follows: The petitioner is a limited company having its inter-corporate office at 147, Transport Centre, Rohatak Road, New Delhi 110 035, and branch office at Haripur Road, Cuttack in the State of Orissa. Its registered office is at 3/2/3, Kabiraj Road, Calcutta. The vehicle bearing registration No. AP16-X-7549 belonging to the petitioner-company was intercepted by the officers of the Sales Tax Department at Gan....
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....2, 2002 why the petitioner shall not be asked to deposit tax, penalty equivalent to twenty percentum of the value of the goods in terms of second proviso to sub-section (5) of section 16D of the OST Act and entry tax totalling to Rs. 90,152 and in the event of its failure, action as deemed proper would be taken against the petitioner. After receipt of the show-cause notice, the petitioner filed applications for issuance of copy of the statement recorded from the driver of the vehicle, K. Rabi, statement of Gopal Sharma, Manager of the Transport Company and certified copy of the entire order sheet and to allow the petitioner to verify the connected record maintained in the office of the STO in respect of the detention of vehicle. The STO issued certified copy of the statement as recorded from K. Rabi, the driver of the vehicle, and copy of the statement of one Paramananda Naik. In response to the show-cause notice, the petitioner also filed preliminary objection before the STO on November 14, 2002. The petitioner filed revision petition before the Commissioner of Sales Tax, Orissa, Cuttack, against the order dated November 12, 2002 for not allowing the petitioner to inspect the r....
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....r 16, 2002 under annexures 1 and 8, respectively, as the same are violative of principles of natural justice as well as violative of proviso to sub-section (5) of section 16D of the Orissa Sales Tax Act. The learned counsel for the petitioner submits that the order passed by the Sales Tax Officer under annexure 8 is not in consonance with the provisions as laid down in the aforesaid proviso as there was no assessment order passed in the prescribed manner and that the order was passed by the Sales Tax Officer demanding tax and penalty in terms of the proviso to sub-section (5) of section 16D without giving the petitioner adequate opportunity of hearing and without giving copies of some documents and orders. Learned Senior Standing Counsel, Sales Tax Department, submits that the orders of the Sales Tax Officer under annexure 8 are in accordance with section 16D(5) of the Act and the revisional order in annexure 1 also does not suffer from any legal lacuna. Having heard the learned counsel for the parties, we do not find any illegality or irregularity in the impugned order dated August 17, 2004 under annexure 1 passed by the revisional authority warranting interference of....
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....ny rule the second proviso to sub-section (5) of section 16D of the Act is not workable. Emphasis has been laid on the term "prescribed" in sub-section (5) of section 16D of the OST Act. According to the learned counsel, the term "prescribed" has been defined under section 2(e) of the OST Act to mean prescribed by the Rules made under the Act. Relying on the judgment of this court in W.P. (C) No. 2774 of 2007 [Larsen Toubro Limited v. State of Orissa [2008] 12 VST 31 (Orissa)] disposed of on October 11, 2007, learned counsel submitted that taxation by way of administrative instruction which is not backed by any authority of law is illegal and contrary to article 265 of the Constitution of India. He further relied on the decision of the honourable Supreme Court in Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1, in support of his contention, that in absence of any definite provision prescribed in the rules as provided in the second proviso to sub-section (5) of section 16D of the OST Act, the assessment made on the petitioner-transporter is not sustainable in the eye of law. Further referring to paragraph 32.2 of the revisional order, learned counsel submitted ....
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....rther contended that the detention of the vehicle was justified and that in the circumstance of the case, the STO is justified to demand Rs. 90,152, which comprises of the amount of sales tax, surcharge leviable on the value of the goods carried in the vehicle and penalty equivalent to 20 per cent and entry tax at one per cent of the value of the goods. Learned counsel further vehemently argued that transporter having chosen to pay the said amount to avoid seizure of the goods and to secure release of the vehicle, thereafter the transporter's challenge to such levy was illegal. He further submitted that the constitutional validity of the second proviso to section 16D(5) had not been called in question by the petitioner. In the absence of any challenge to such provision, action taken in terms of the said provision cannot be assailed, more so, after acting in terms of the said provisions. To the challenge of violation of the principles of natural justice, learned counsel contended that the STO issued a notice on November 6, 2002 to the petitioner, through the driver of the vehicle, indicating the facts of the case and asked it to show cause by November 12, 2002 why it should n....
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....sessed to tax as a dealer under the sales tax laws. The constitutional provisions are amply clear on this point. Entry 54 of List II of the Seventh Schedule and entry 92A of List I of the Seventh Schedule to the Constitution of India authorise levy of tax only on sale and purchase of goods other than newspaper. For ready reference, the said entries are quoted below: "Entry 54 Schedule VII (II):-Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. . . . Entry 92A of Schedule VII (I):- Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce." However, if a transporter besides its transport business has indulged in purchasing and selling and supplying and distributing "goods" as defined under section 2(c) of the OST Act he is assessable to tax in respect of its trading business. The honourable Supreme Court of India in the case of State of Orissa v. Orissa Road Transport Co. Ltd. [1997] 107 STC 204, while considering the business activity of the Corporation, observed that besides running the business of providing transport ....
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.....-For the purposes of this section,- (i) 'transporter' means the owner or any person having possession or control of a goods vehicle, who transports on account of any other person for hire or on his own account, any goods from one place to another, and includes any person whose name is entered in the permit issued under the Motor Vehicles Act, 1988 as the holder thereof, the driver or any other person in-charge of such vehicle; (ii) 'bailee' means the person to whom goods are delivered; (iii) 'lessee' means the person to whom the lease of goods is granted by the lessor; and (iv) 'goods vehicle' means a goods carriage as defined in the Motor Vehicles Act, 1988. Explanation II.-For the purpose of this section, where goods are delivered to a transporter, bailee or the owner or lessee of a warehouse for transmission, the movement of the goods shall be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from the transporter, bailee or the owner or lessee of the warehouse, as the case may be. If the Commissioner has reason to suspect that any transporter, bailee or the owner or lessee of a ware....
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....ction and shall produce the bills or such other documents as may be required relating to the goods and give its name and address. Under sub-section (2) of the said section, if the Commissioner has reason to suspect that the transporter is attempting to contravene the provisions contained in sub-section (1) or evade payment of tax, he shall, for reasons to be recorded, have the power to seize such accounts, registers or the documents of the transporter. Under sub-section (3) the power conferred under sub-section (2) also includes power to break open any box, almirah or other receptacle in which any account, register, or other documents of the transporter may be kept. Under sub-section (4) the powers exercisable under sub-section (3) shall not be delegated to any officer below the rank of a sales tax officer appointed under this Act or the Rules made thereunder. Sub-section (5) empowers the Commissioner to seize any goods, vehicle or seize and confiscate any goods of any transporter which are found in any vehicle or vessel or any other place while on transit, but not accounted for by the transporter in their accounts, registers and other documents maintained in respect of the good....
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.... India. The entries in the legislative List have a very wide meaning and scope and should have a broad interpretation so as to make provisions in the Act workable and in the interest of the Revenue. The obligation imposed upon the transporters under sections 42 and 44 of the Act is also a part of such preventive measures against any evasion of taxes and the same should not be read in a narrow sense. . . . (1)In our opinion, there cannot be any irregularity to call for books of account, documents, evidence, etc., as the same is necessary for the tax authorities to make proper verification and scrutiny of the genuineness of the transactions. Issuance of notice for verification of a transaction is a formal step and the same is required for proper (1)See at page 101 of [2005] 142 STC. verification and scrutiny of the genuineness of the transaction to safeguard the interest of the State revenue. . . . We have perused section 46A which, in our view, has been inserted only for achieving the objective of sealing loopholes of avoidance and evasion of sales tax by the fictitious dealers with the help of transport companies. Normally the transporters are not liable to pay tax but ....
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....f section 16D envisages imposition of tax on transporters. Such a plea is misconceived. It does not envisage treating a transporter as a dealer and levy tax on the transporter by way of passing any assessment order. The second proviso to sub-section (5) of section 16D provides the basis of computation of the amount required to be paid by the affected person for avoiding seizure and confiscation of the goods and the release of vehicle and goods. No assessment of tax on a transporter has been prescribed in the second proviso to sub-section (5) of section 16D. Section 16D is meant to check tax evasion and it should not be read in a narrow sense. It is intended to take care of cases where there is a collusion between the transporter and consignee for evading payment of legitimate tax due. The language used in the second proviso to section 16D(5) to the extent "tax at the appropriate rate payable in respect of such goods to be assessed in prescribed manner" connotes that the amount required to be paid for release of the goods would be the amount of tax payable in respect of goods in question if it would have been assessed in the prescribed manner. This is provided to safeguard the inter....
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....ition of tax on any person. In Larsen & Toubro Ltd. [2008] 12 VST 31 (Orissa), the honourable Orissa High Court set aside a circular on the basis of which assessment orders were passed holding that assessee is liable to pay tax whereas in order to assess tax the State has to act in accordance with statutory prescription by framing rules in exercise of its rule-making power under section 29 of the OST Act. In Govind Saran's case [1985] 60 STC 1, the honourable Supreme Court held that the necessary components for imposing tax were not clearly and definitely ascertainable. In that case the honourable apex court further held that any uncertainty or vagueness in the legislative scheme defining necessary components of levying tax will be fatal to its validity. Since in sub-section (5) of section 16D no provision has been made to levy tax on the transporter as alleged by the petitioner, this case is of no help to the petitioner. The judgments of the honourable Supreme Court in A.B.C. (India) Ltd. [2005] 142 STC 88 and Tripura Goods Transport Association v. Commissioner of Taxes [1999] 112 STC 609 on the other hand support the case of the Revenue. The further case of the petitioner ....
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....posit Rs. 90,152 to avoid seizure of the goods, notice was issued to the petitioner to show cause by November 12, 2002 why it should not be asked to pay Rs. 90,152 in terms of the second proviso to section 16D. On November 12, 2002 no reply to show-cause was filed. On the request of the petitioner the date of show-cause was extended to November 15, 2002. On this date also, no show-cause was filed. Thereafter only on November 16, 2002 the STO on the basis of documentary evidence and result of examination and inspection conducted which clearly proved that goods were transported to Cuttack fraudulently by the petitioner to evade tax due to the State, passed the impugned order under annexure 8. In the present case, it is not disputed that the petitioner carried 279 bundles of medium printing paper weighing 16,286 kg. from M/s. Venkatechalpati Paper and Boards Pvt Ltd., Ponneri-Taluk in the district of Thiruvallur, Tamil Nadu to Cuttack. For the purpose of transportation of goods way-bill No. BB-0260393 of Ashirbad Prakashan Pvt. Ltd., Macheswar, Industrial Estate, Bhubaneswar was used. Sale invoice was also issued by the seller in the name of Ashirbad Prakashan Pvt. Ltd. Macheswar, ....
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.... the particulars of the consignor of the goods for transportation and of the consignee to whom the goods have to be delivered in West Bengal. Similarly, every reasonable transporter is expected to have a copy of the challan, transport receipt or consignment note or document of like nature in respect of goods which are being transported. The requirement to furnish these particulars cannot, therefore, be treated as requiring the transporter to furnish information which is beyond his capacity or control. So also a prudent and reasonable owner or lessee of the warehouse where such goods are stored is expected to know the name and address of the owner of such goods and requiring him to furnish those particulars cannot be said to be either oppressive, irrelevant or arbitrary . . . ." Here the transporter alone is showing interest for release of the goods vehicle as an affected person. It volunteered itself and paid the amount of Rs. 90,152 as demanded by the STO and got the vehicle released along with goods as the persons affected for such detention. This clearly shows that the petitioner-transporter is a party to the present fictitious transaction for the sole purpose of evasion o....