State of West Bengal and Anr. Vs. Road Transport Association, Siliguri and Anr.
Email(From the Judgment and Order dated 7.4.95 of the West Bengal Taxation Tribunal at Kolkata in R.N.No. 148 of 1993)
(From the Judgment and Order dated 7.4.95 of the West Bengal Taxation Tribunal at Kolkata in R.N.No. 148 of 1993)
Mr. Yashank Adhyaru, Senior Advocate, Mr. Satyajit Saha and Mrs. V.D. Khanna, Advocates with him for the Respondents.
Bengal Finance (Sales Tax) Act, 1941
Explanation to section 2(1a-1) and sections 4-C(6) and (7) West Bengal Sales Tax Rules, 1941, Rule 48L – Purchase tax – Liability to pay tax by a casual trader – Anti evasion measures introduced by the 1993 Amendment Act – Constitutional validity – Casual trader – Meaning – Seizure of goods from casual trader where such casual trader fails to pay the amount of purchase tax – Amendment of the law in 1993 under which the transporter carrying goods in his goods vehicle and failing to disclose the name and address of the consignee or consignor or failing to furnish copy of invoice, challan etc. is deemed to be causal trader – Amend-ment also providing for seizure of the goods from the transporter where such goods are not claimed by the bona fide owners and the transporter as deemed casual trader does not pay the purchase tax in respect of such goods and authorizing the sale of such seized goods by the Commissioner of Sales Tax – Whether these provisions deeming the transporter as causal trader with a liability to pay purchase tax and authorizing seizure of the goods for non pay-ment of the purchase tax constitutionally valid. Allowing the appeal of the State held that such course of action incorporated in the Act is meant to prevent evasion of tax . In the absence of any taxable event the goods will not be liable to tax and conse-quently no transporter can be made liable to pay the tax at the entry point for his failure to disclose the information required under explanation to sections 2(1a-1). Amended provisions there-fore cannot be said to be illegal much less unconstitutional and therefore the order of the tribunal holding the provisions to be unconstitutional not being sustainable, set aside.
A plain reading of subsection (6) shows that it is attracted where no one claims to be the owner of the goods in the custody of a transporter or owner or lessee of the godown of the ware-house and such a person denies his liability to pay tax under section 4C; with a view to checking evasion of tax payable there-under, it empowers the commissioner or any person appointed under subsection (1) of section 3 to assist him, to seize such goods from the custody of such transporter or from the owner or lessee of the godown or warehouse, if necessary, by breaking open the door of such godown or warehouse. A duty is cast upon the commissioner or the person authorized by him to prepare an inventory of the goods, before making seizure, in the presence of the transporter or the owner or lessee of the godown or warehouse, as the case may be, which should be countersigned by the concerned officer as well as by the witnesses. (Para 11)
It is evident from subsection (7) that it authorises the commissioner/the authorised person to sell in an open auction the goods which have been seized under subsection (6) and not claimed by the bonafide owner thereof, within fifteen days from the date of seizure, and adjust the amount of tax on purchases of goods that may be determined under subsection (4) with the sale proceeds of such goods. The balance amount, if any, is required to be deposited with a government treasury for refund to the bonafide owner of goods upon claim preferred in the prescribed manner within one year. (Para 12)
Sub-rule (4) of Rule 48L of the Rules, quoted above, says that if a casual trader fails to pay the amount of tax as determined under sub-rule (1) and demanded under sub-rule (3), the goods liable to purchase tax shall be seized for recov-ery of tax in the manner referred in subsections (6) and (7) of section 4C. It is thus abundantly clear that under sub-rule (4), for the purpose of recovery of tax due, the power of seizure and sale of the goods contained in sub-sections (6) and (7) of the Act is made available to the concerned authority. (Para 13)
The course of action incorporated in these provisions is meant to prevent evasion of tax due under the Act. We are, therefore, unable to accept that such a course of action could be taken by the author-ities even without any purchases of goods by a casual trader. The sine qua non for levy of tax under the Act is the purchase of the goods within the State of West Bengal. In the absence of an taxable event, the goods will not be liable to tax and, conse-quently, no transporter can be made liable to pay tax at the entry point for his failure to disclose the information which is required under explanation-1 of sections 2(1a-1) of the Act. We find no valid reason to hold that the said provisions are illegal much less unconstitutional, therefore, we are unable to sustain either the reasoning or the conclusion of the tribunal that sub-sections (6) and (7) of section 4-C of the Act and sub-rule (4) of Rule 48-L of the Rules are unconstitutional. In the result, we set aside the order of the tribunal under challenge. (Para 14)
1. This appeal, by the State of West Bengal and its commissioner of commercial taxes, arises from the judgment of the West Bengal Taxation Tribunal in R.N.No. 148/1993, dated April 7, 1995.
2. The first respondent is an association of road transporters and the second respondent is its member and secretary. The respondents challenged before the West Bengal Taxation Tribunal (for short, ‘the tribunal’) constitutional validity of the following provisions of the Bengal Finance (Sales tax ) Act, 1941, as amended in 1993, (for short ‘the Act’) :
(i) explanation-I to sub -section (1a-1) of section 2;
(ii) subsection (6) and (7) of section 4-C of the Act and
(iii) the legality of sub-rule (4) of Rule 48-L of the West Bengal Sales Tax Rules, 1941 (for short, ‘the Rules’ ).
3. The tribunal took the view that explanation-1 to sections 2 (1a-1) of the Act is valid but vague and that there is no machinery provision specifying the manner of disclosure and, therefore, suspended the operation of the said explanation till a machinery for that purpose is provided; it was held that sub-sections (6) and (7) of section 4-C of the Act were invalid and unconstitutional and consequently , sub-rule (4) of Rule 48-L was also invalid. The application of the respondents was thus allowed by the tribunal by the order under challenge.
4. Mr. Dayan Krishnan, the learned counsel appearing for the appellants, contends that the approach of the tribunal in sus-pending operation of the explanation to section 2(1a-1) and declaring subsections (6) and (7) of section 4-C of the Act and sub-rule (4) of Rule 48L of the Rules as invalid and unconstitu-tional is erroneous and the decision untenable; the tribunal has erred in proceeding on the assumption that the power to seize and sell the goods is exercisable without purchase of goods by, and a proper assessment of purchase tax in respect of, a transporter of goods. Mr. Adhyaru, the learned counsel for the respondents has expressed the apprehension and real grievance of the respondents that due to fallacious interpretation of the said impugned provi-sions, trucks are being stopped at the entry points and in the event of failure of the transporters to furnish the details of the consignor or the consignee, they are required to pay tax even though the goods have not by then entered the limits of the State of West Bengal and no sale or purchase of goods by the transport-er takes place at that stage.
5. In our view, a true and proper interpretation of the impugned provisions will put the controversy at rest. To understand the import of the definition ‘casual trader’ and explanation-1 there-to, it is necessary to read them here:
“Sections 2 (1a-1)
“Casual trader ” means a person, other than a registered dealer, who whether as a principal or agent or in any other capacity, makes occasional purchases of goods in West Bengal for purposes other than his personal use or consumption of such goods in West Bengal or makes occasional sales of goods in West Bengal and who has no fixed place of business in West Bengal, and includes a consignor or a consignee of goods in West Bengal or a transporter as defined in clause (a) of the explanation to section 14C and an owner or lessee of a godown or warehouse let out to any person for storage of goods.
Explanation-1 – A transporter who, while carrying goods in his goods vehicle within the meaning of section 14C fails to disclose the name and address of the consignee or consignor in West Bengal or fails to furnish copy of invoice, challan, transporter receipt or consignment note or document of like nature in respect of any goods, shall be deemed to be a casual trader in respect of such goods carried in his goods vehicle.
Explanation-2 – An owner or lessee of a godown or warehouse, who fails to disclose the name and address of the owner of any goods stored in such godown or warehouse, shall be deemed to be a causal trader in respect of such goods.”
6. It is seen that subsection (1a-1) of section 2 of the Act defines the expression “casual trader” to mean: (i) a person, other than a registered dealer, who whether as a principal or agent or in any other capacity, (a) makes occasional purchases of goods in West Bengal for purposes of his personal use or consump-tion in West Bengal; or (b) makes occasional sales of goods in West Bengal, and has no fixed place of business in West Bengal and (ii) includes (a) a consignor or a consignee of goods in West Bengal; or (b) a transporter as defined in clause (a) of the explanation to section 14C and (c) an owner or lessee of a godown or warehouse let out to any person for storage of goods.
7. Explanation-1, referred to above, ropes in a transporter within the meaning of the expression ‘casual trader’, who fails to fulfil the obligation to disclose the name and address of the consignee or consignor in West Bengal or to furnish copy of invoice, challan, transporter receipt or consignment note or document of like nature in respect of any goods carried in his goods vehicle. Explanation-2 includes an owner or lessee of a godown or warehouse also within the meaning of a ‘casual trader’ in case of failure to furnish particulars mentioned therein but this explanation is not the subject-matter of the present discus-sion.
8. A perusal of the definition clause and explanation-1 shows that there is no ambiguity in them. The requirements of the expla-nation are clear enough. Not providing any proforma for declaring particulars under the explanation would neither make it vague nor unworkable for want of any machinery provision. It cannot be dis-puted that a prescribed proforma would have been appropriate but absence of a proforma for making the required declaration would not warrant suspension of the said explanation. We find no sub-stance in the reasoning of the tribunal and, therefore, set aside the finding of the tribunal in regard to explanation-1.
9. Section 4-C of the Act is a charging section in respect of a causal trader. Subsection (1) thereof opens with a non-ob-stante clause and mandates that subject to the provisions of subsection (3), a causal trader shall pay tax on his every purchase of goods in West Bengal. Certain purchases are exempted thereun-der but we are not concerned with them here. Subsection (2) prescribes rates mentioned in various clauses of subsection (1) of section 5 at which the tax is payable by a causal trader on purchase of any goods. Subsection (3) speaks of refund of the tax paid by a casual trader when he makes regular sales and gets himself registered in the circumstances specified therein. Subsection (4) is a machinery provision. It says that notwithstand-ing anything contained in subsection (2) of section 11, the tax payable under the main section shall be determined and collected in such manner and by such authority as may be prescribed and imposes an obligation on a causal trader to pay the same at such time and at such interval as may be prescribed. Subsection (5) thereof deals with the procedure for production, inspection and seizure of account and document.
10. Subsection (6) and (7) of the Act and Rule 48L (4) of the Rules, quoted hereunder, are at the centre of the controversy. They have to be read as part of the scheme of taxation of a ‘c-asual trader’ under section 4-C of the Act read with Rule 48L of the Rules and not in isolation.
4C. Liability to pay purchase tax by a casual trader……
(1) to (5) …. …..
(6) Where there is no claimant of the ownership of any goods, whether in the custody of transporter, or such owner or lessee of the godown or the warehouse denies his liability to pay tax under this section, the commissioner or any person appointed under subsection (1) of section 3 to assist him may, with a view to check-ing evasion of tax payable under this section, seize such goods from the custody of the transporter or from the godown, or ware-house of the owner or lessee of goods, if necessary, by breaking open the door of such godown or warehouse, and shall, before making seizure, prepare an inventory of such goods in the pres-ence of the transporter or the owner or the lessee of the godown or warehouse, as the case may be, and get such inventory counter-signed by him or any other witness.
(7) If the goods seized under subsection (6) are not claimed by the bonafide owner of such goods within fifteen days from the date of seizure the commissioner may sell such goods in open auction and adjust the amount of tax on purchases of goods that may be determined under subsection (4) with the sale proceeds of the goods and deposit the balance if any, with a government treasury for refund to the bonafide owner of goods upon claim preferred in the prescribed manner within one year.
xxx xxx xxx
Rule 48L (4) :
If a casual trader fails to pay the amount of tax as determined under sub-rule(1) and directed to be paid under sub-rule (3), the goods liable to the purchase tax shall be seized for recovery of tax in the manner referred to in sub-sections (6) and (7) of section 4C.”
11. A plain reading of subsection (6) shows that it is attracted where no one claims to be the owner of the goods in the custody of a transporter or owner or lessee of the godown of the ware-house and such a person denies his liability to pay tax under section 4C; with a view to checking evasion of tax payable there-under, it empowers the commissioner or any person appointed under subsection (1) of section 3 to assist him, to seize such goods from the custody of such transporter or from the owner or lessee of the godown or warehouse, if necessary, by breaking open the door of such godown or warehouse. A duty is cast upon the commissioner or the person authorized by him to prepare an inventory of the goods, before making seizure, in the presence of the transporter or the owner or lessee of the godown or warehouse, as the case may be, which should be countersigned by the concerned officer as well as by the witnesses.
12. It is evident from subsection (7) that it authorises the commissioner/the authorised person to sell in an open auction the goods which have been seized under subsection (6) and not claimed by the bonafide owner thereof, within fifteen days from the date of seizure, and adjust the amount of tax on purchases of goods that may be determined under subsection (4) with the sale proceeds of such goods. The balance amount, if any, is required to be deposited with a government treasury for refund to the bonafide owner of goods upon claim preferred in the prescribed manner within one year.
13. The procedure to levy the impost under section 4-C of the Act is mentioned in sub-rule (1) of Rule 48L of the Rules. It provides that if upon information or otherwise the commercial tax officer or inspector, authorised by the commissioner in that behalf, is satisfied that a causal trader is liable to pay tax under subsection (1) of section 4C of the Act on his purchases made in West Bengal of goods, he is required to determine by a precise order in writing in form VIB the amount of tax payable by such trader after taking into consideration the purchase bill memo, challan, or consignment note which may be available relat-ing to such goods. Sub-rule (4) of Rule 48L of the Rules, quoted above, says that if a casual trader fails to pay the amount of tax as determined under sub-rule (1) and demanded under sub-rule (3), the goods liable to purchase tax shall be seized for recov-ery of tax in the manner referred in subsections (6) and (7) of section 4C. It is thus abundantly clear that under sub-rule (4), for the purpose of recovery of tax due, the power of seizure and sale of the goods contained in sub-sections (6) and (7) of the Act is made available to the concerned authority.
14. From the above discussion, it is clear that the course of action incorporated in these provisions is meant to prevent evasion of tax due under the Act. We are, therefore, unable to accept that such a course of action could be taken by the author-ities even without any purchases of goods by a casual trader. The sine qua non for levy of tax under the Act is the purchase of the goods within the State of West Bengal. In the absence of an taxable event, the goods will not be liable to tax and, conse-quently, no transporter can be made liable to pay tax at the entry point for his failure to disclose the information which is required under explanation-1 of sections 2(1a-1) of the Act. We find no valid reason to hold that the said provisions are illegal much less unconstitutional, therefore, we are unable to sustain either the reasoning or the conclusion of the tribunal that sub-sections (6) and (7) of section 4-C of the Act and sub-rule (4) of Rule 48-L of the Rules are unconstitutional. In the result, we set aside the order of the tribunal under challenge. However, we make it clear that the impugned judgment insofar as it holds Rule 48M of the Rules as unconstitutional is not challenged before us.
15. The appeal is, accordingly, allowed.
16. There shall be no order as to costs.
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