Appeal No 126 of 1966
Appeal from the judgment and order dated November 29 and December 2 1963 of the Gujarat High Court in Special Civil Application No 641 of 1962
736 K R Chaudhuri for the appellant
R M Hazarnavis K L Hathi and section P Nayar for the respondents
section T Desai and I N Shroff for the intervener
The Judgment of the Court was delivered by Hegde J
The main controversy in this appeal by certificate is as to the constitutional validity of section 12A4 of the Bombay Sales Tax 1946 to be hereinafter referred to as the Act
As in our judgment that provision is void the same being violative of article 191f of the Constitution we have not thought it necessary to examine the other contentions raised  in the appeal
The facts material for the purpose of deciding the question formulated above are these The appellants are dealers registered tinder the Act carrying on business in art silk cotton and hand loom cloth
During the period January 26 1950 to March 31 1950 the appellants effected various sales outside the State of Bombay
As those sales were protected by article 2861a of the Constitution they were outside the reach of the Act
But yet the sales tax officer assessed the turnover relating to those sales
The tax levied in respect of that turnover was Rs 449439
In appeal the order of the sales tax officer was affirmed by the Assistant Collector of salestax
But the Additional Collector of sales tax in revision revised the levy to some extent and ordered a refund of Rs 223806
That amount was paid to the assessees
Not being satisfied with the order of the Additional Collector of sales tax the appellants took up the matter in revision to the Sales Tax Appellate Tribunal
But even before they moved the Tribunal in revision the Additional Collector of sales tax by his letter dated May 17 1958 informed the appellants that unless they furnished to the sales tax officer proof of their having refunded the amount paid to them in pursuance of his order to the purchasers within a period of three months from the date of that notice the same would be liable to be forfeited under section 12A4 The Tribunal by its order dated November 26 1958 allowed the claim of the appellants in full and directed  the refund of an addi tional sum of Rs 225626
During the period April 1 1950 to March 31 1951 the appel lants effected various sales outside the State of Bombay
The turn over relating to those sales was also brought to tax by the sales tax officer and in that connection a tax of Rs 2380636 was levied on the appellants
In appeal the Assistant Collector of sale tax allowed the appellants  claim in part and ordered a refund or
Rs 1215415 but at the same time he informed them that that amount would be forfeited to the State Government if not refunded to the purchasers from whom the same had been collected
No being satisfied with the relief obtained the appellants went up in revision to the Additional Collector of sales tax
That officer by 737 his order dated November 1 1958 granted further relief by ordering refund of an additional sum of Rs 358819
But the sales tax officer did not give effect to that order
As the Additional Collector did not accept the appellants  claim in full they went up in revision to the Tribunal
The Tribunal allowed their claim in full
The Revenue took up the matter in reference to the High Court but that reference was rejected
From the foregoing it is seen that in respect of the period April 1 1950 to March 31 1951 the appellants are entitled to get a refund of Rs 2380636
Despite the aforementioned orders the sales tax officer did not pay the amounts ordered to be refunded
On the other hand he threatened to take steps to forfeit the same by having recourse to section 12A4
On June 27 1962 the sales tax officer called upon the assessees to remain present in their office on July 2 1962 with particulars of the amount collected by them by way of sales tax from the purchasers in other States during the period January 26 1950 to March 31 1951
At that stage the appellants approached the High Court of Gujarat by special civil application No 641 of 1962 under article 226 of the Constitution
In that application they prayed for several reliefs the most important of which was to direct the respondents to comply with the orders of refund and to refrain from taking any action against them under section 12A4
The High Court dismissed that application
Hence
this appeal
The Act provides for the levy of tax on the sale of goods in the then State of Bombay
It came into force on March 8 1946
Any person who carries on business of selling or supplying goods in the State of Bombay whether for commission remuneration or otherwise is defined as a dealer in section 2c
Section 8 and section 8a of the Act provide for the registration of dealers
As mentioned earlier the appellants are registered  dealers
Under section 2k of the Act the assessment year is the financial year
Section 5 prescribes the incidence of taxation
Section 10 prescribes the returns to be made by the dealers
The assessment is made under section 11
Section 11 a provides for taxing the turnover escaping assessment
Section 12 provides for the payment and recovery of tax
Section 12A is the one with which we are concerned in this appeal
It reads 1 No person shall collect any amount by way of tax under this Act in respect of sales or supplies of any goods which are declared from time to time under section 7 as sales or supplies on which the tax is not payable
2 No person selling or supplying any goods shall collect from the purchaser any amount by way of sales tax unless he is a registered dealer and is liable to pay tax under this Act in respect of such sale or supply Provided that this sub section shall not apply in cases where a person is required to collect such amount of tax separately in order to comply with the conditions 738 and restrictions imposed on him under the provisions of any law for the time being in force
3 Every registered dealer whose gross turnover exceeds Rs 60000 a year shall issue a bill or cash memorandum signed and dated by him or his servant manager or agent to the purchaser in respect of the goods sold or supplied by him showing the particulars of the goods and the price at which the goods are sold or supplied shall keep the counterfoil or duplicate of such bill or cash memorandum duly signed and dated and preserve it for a period of not less than two years from such date
4 If any person collects any amount by way of tax in contravention of the provisions of sub section 1 or 2 or if any registered dealer collects any amount by way of tax in excess of the amount payable by him under this Act the amounts so collected shall without prejudice to any prosecution that may be instituted against such person or dealer for an offence under this Act be forfeited to the State Government and such person or dealer as the case may be shall within the prescribed period pay such amount into a Government treasury and in default of such payment the amount shall be recovered as an arrear of land revenue
 In view of article 2861a of the Constitution as it stood at the relevant time the appellants  sales outside the State of Bombay were not exigible to tax
Therefore if the appellants had collected any amount from their purchasers in respect of those sales by way of tax they had undoubtedly contravened sub section 2 of section 12A
Sub section 4 of section 12A provides for the forfeiture to State government any amount collected by a dealer by way of tax in excess of the amount payable by him under the Act
For the purpose of deciding the point in issue it is not necessary to find out the scope of the expression collects any amount by way of tax in section 12A4
We shall assume without deciding the collection made by the appellants if any was by way of tax
It was not contended nor could it have been contended that the impugned provision is a taxation measure bringing to tax directly or indirectly the sales effected outside the State of Bombay
In Abdul Quadar and Co vs Sales Tax Officer Hyderabad1 interpreting section 112 of the Hyderabad General Sales Tax Act 1952 a provision somewhat similar to the impugned provision this Court observed that legislation under Entry 54 of List II of the Constitution similar to Entry 48 of List 11 of the Government of India Act 1935 the entry with which we are concerned in this case proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry but 1  739 even so lays down that though it is not exigible under the law it shall be paid over to the government merely because some dealers by mistake or otherwise have collected it as tax hence it is difficult to see how such a provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry
Therein it was held that it cannot be said that the State legislature was directly legislating for the imposition of sales or purchase tax under Entry 54 of List 11 when it made the provisions of section 11 2 for on the basis of the provision the amount that was collected by way of tax was not exigible as tax under the law
According to the Revenue section 12A4 is a penal provision and it provides for the imposition of penalty on those who contravene section 12A1 and 2
It was said on its behalf that power to enact such a provision is incidental to the power to tax sales
In support of that contention reliance was placed on the decision of the Gujarat High Court in Ram Gopal vs Sales Tax Officer Surat and Another1
That decision upheld the validity of section 12A4
If that decision lays down the law correctly then the appellants are out of court
But we think that the said decision cannot be sustained
We shall not go into the question whether from the language of the impugned provision it is possible to hold that it is a penal provision
For our present purpose we shall assume it to be so
We shall also assume that the legislature had legislative competence to enact that provision
But the question is whether it is violative of article 191f which guarantees the freedom to hold property
Prima facie the appellants are entitled to get the amount ordered to be refunded to them
It is for the respondents to establish that the same is liable to be forfeited
Even according to the respondents that amount can be forfeited only as a measure of penalty for the contravention of section 12A1 and 2
Under our jurisprudence no one can be penalised without a proper enquiry
Penalising a person without an enquiry is abhorrent to our sense of justice
It is a violation of the principles of natural justice which we value so much
The impugned provision which provides for the forfeiture of the amount in the hands of the dealers does not lay down any procedure for ascertaining whether in fact the dealer concerned bad collected any amount by way of tax from his purchasers outside the State and if so what that amount is
Neither section 12A4 nor any rule framed under the Act contemplates any enquiry much less a reasonable enquiry in which the person complained of can plead and prove his case or satisfy the authorities that their assumptions are either wholly or partly wrong
The Act is silent as to the machinery and procedure to be followed in determining the question as to whether there has been a contravention of sections 12A1 and 2 and if so to what extent
1 16 STC 1005
LPN7SCI 8 740 Hence it would be open to the department to evolve all the requisite machinery and procedure which means that the whole thing from the beginning to end is treated as of a purely administrative character completely ignoring the legal position
The imposition of a penalty on a person is at least of a quasi judicial character
The impugned provision does not concern itself only with the amount admittedly collected by a person in contravention of sub sections 1 and 2 of section 12A Even if there is any dispute either as to the facturn of collection or as to the amount collected such a case also comes within the scope of section 12A4
Yet that section does not provide for any enquiry on disputed questions of facts or law
The forfeiture provided for in section 12A4 prima facie infringes article 191f
Therefore it is for the respondents to satisfy the Court that the impugned provision is a reasonable restriction imposed in the interest of the general public
Section 12A4 does not contemplate the making of any order
As mentioned earlier that section prescribes that if any registered dealer collects any amount by way of tax in excess of the amount payable by him under the Act the amount so collected shall without prejudice to any prosecution that may be instituted against him for an offence under the Act be forfeited to the State government and he shall within the prescribed period pay such amount into a government treasury and in default of such payment the amount shall be recovered as arrears of land revenue
This section does not contemplate adjudication
Nor does it provide for making any order
Hence it is doubtful whether any appeal can be filed against a demand made under that section under section 21
The question whether appellants in the instant case had been afforded a reasonable opportunity to establish their case or riot is besides the point
The constitutional validity of a provision has to be determined on construing it reasonably
If it passes the test of reasonableness the possibility of powers conferred being improperly used is no ground for pronouncing it as invalid and conversely if the same properly interpreted and tested in the light of the requirements set out in Part III of the Constitution does not pass the test it cannot be pronounced valid merely because it is being administered in the manner which might not conflict with the constitutional requirements
On a reasonable interpretation of the impugned provision we have no doubt that the power conferred under section 12A4 is unguided uncanalised and uncontrolled
It is an arbitrary power
As held by this Court in Dr NB Khare vs State of Delhi1 whether the restrictions imposed by a legislative enactment upon a fundamental right guaranteed by article 191 are reasonable within the meaning of article 195 would depend as much on the procedural portion of the law as the substantive part of it
1  741 Rao1 wherein it was observed that in considering the reasonable That view was reiterated by this Court in State of Madras vs V G ness of laws imposing restrictions on fundamental rights both the substantive and procedural aspects of the impugned law should be examined from the point of view of reasonableness
This Court has taken that view consistently
A provision like the one with which we are concerned in this case can hardly be considered reasonable
For the reasons mentioned above this appeal is allowed
The order of the High Court is set aside and a writ of mandamus will be issued to the respondents to comply with the refund order set out in the petition filed before the High Court and to refrain from proceeding against the appellants under section 12A4
The appellants are entitled to their costs both in this Court and in the High Court
YP Appeal allowed


Summary:
In view of article 286 1 a of the Constitution as it stood at the relevant time the sales by the appellants registered dealers outside the State of Bombay were not exigible to tax
The appellantswere directed to refund amounts collected by them from their purchasers in respect of these sales by way of tax failing which the amounts would be forfeited under section 12A4 of the Bombay Sales Tax Act
The appellants filed a writ petition in the High Court to restrain the respondents from taking action against them under section 12A4 The High Court dismissed the petition
In appeal this Court Held section 12A4 of the Bombay Sales Tax Act was void being violative of article 191f of the Constitution
Prima facie the appellants were entitled to get the amount ordered
to be refunded to them
It was for the respondents to establish that the same was liable to be forfeited
Even according to the respondents that amount could be forfeited only as a measure of penalty
Under our jurisprudence no one can be penalised without a proper enquiry
740 E F
The impugned provision which provided forfeiture of the amount in the hands of the dealers did not lay down any procedure for ascertaining whether in fact the dealer concerned hid collected any amount by way of tax from his purchasers outside the State and if so what that amount was
Neither section 12A4 nor any rule framed under the Act contemplated any enquiry much less a reasonable enquiry in which the person complained of could plead and prove his case or satisfy authorities that their assumptions were either wholly or wholly wrong
This section did not contemplate adjudication nor provide for making any order
Hence it was doubtful whether any appeal could be filed against a demand made under that section under section 21 740 G H 741 E
Abdul Quadar and Co vs Sales Tax Officer Hyderabad  Dr N B Khare vs State of Delhi  State of Madras vs V G Rao 19521 SCR 597 followed
Ram Gopal vs Sales Tax Officer Surat and another 16 STC 1005 disapproved