Case: M/S. A.B.C. (India) Ltd Vs. State Of Assam

1. This is an appeal filed against the judgment and order dated 4.1.2000 passed by the Gauhati High Court in Writ Appeal No. 197 of 1996. The Division Bench while allowing the appeal filed by the State of Assam held that the controversy raised in the matter was covered by the decision of this Court in the case of Tripura Goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. , (1999) 2 SCC 253  and not in the case of State of Haryana & Ors. vs. Sant Lal & Anr. (1993) 4 SCC 380.  The respondents filed a writ petition in the High Court challenging the seizure of books of accounts and documents made by the authorities at the offices and godowns of the respondents under the provisions of the Assam General Sales Tax Act, 1993 (hereinafter referred to as "the Act"). The respondents have also prayed for a declaration that Sections 42 and 44 of the Act, as ultra vires. The short facts for the purpose of disposal of this civil appeal are as follows: The respondent is a company registered under the Companies Act engaged in the business of transportation of goods on behalf of the customers throughout the country. A Bill, namely, Assam General Sales Tax Bill, 1993 was passed in the Assam Legislative Assembly and the Bill received the assent of the Governor on 14.5.1993 and became an Act (Assam Act No. XII of 1993), for short "the Act,1993". This Act has repealed all the earlier four Sales Tax Acts. Sections 42 and 44 of the Assam General Sales Tax Act, 1993 read as under: "Section 42 : Furnishing of information by clearing and forwarding agent etcIn the instant case, the officers of the Sales Tax Department made a surprise visit to the premises and godowns of the respondent-Company and searched the premises and godowns. On September 2, 1993, notices were issued to the appellant- Company to produce the documents to satisfy the authority about the proper accounting of the goods seized. The appellant challenged the legality of one of such notices before the learned single Judge of the High Court by way of filing a Writ Application (Civil Rule No. 2486 of 1983). The writ application was opposed by the State of Assam. The learned single Judge allowed the writ application following the decision of this Court in State of Haryana vs. Sant Lal (supra). The learned single Judge was of the opinion that the provisions contained in Sections 42 and 44 of the Act are prospective in nature and, therefore, on the basis thereof the authority appointed under the Act had no jurisdiction to demand books of accounts prior to July 1,1993. Aggrieved by the said order, the State of Assam preferred Writ Appeal No. 197 of 1996 before the Gauhati High Court and submitted that since the tax is levied under the aforesaid Act and whatever is ancillary or subsidiary provision necessary for achieving the object of such legislation would be covered by Entry 54 of List II of the Seventh Schedule to the Constitution of India. It was further submitted that the entries in the Legislative List should not be read in a narrow or pedantic sense, but must be given their fullest meaning and widest amplitude and be held to be extending to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. The judgment in the case of Tripura Goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. (supra) was also cited before the learned Judges of the Division Bench. According to the learned counsel appearing for the State of Assam, the said judgment squarely covers the controversy raised in the present case. The learned Judges of the Division Bench, after perusing the relevant provisions of the Act and two judgments namely, Tripura Goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. (supra) and State of Haryana & Ors. vs. Sant Lal & Anr. (supra), was of the opinion that the case on hand would be covered by the decision of this Court in the case of Tripura Goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. (supra) in which case the earlier decision of this Court rendered in the case of State of Haryana & Ors. vs. Sant Lal & Anr. (supra) was duly considered. In the result, the appeal filed by the State of Assam was allowed and the order passed by the learned single Judge declaring Sections 42 and 44 of the Act as ultra vires was set aside and the said provisions were held to be intra vires of the Constitution of India. The respondents, being aggrieved, preferred this appeal by way of special leave petition.

Reasoning: We entirely agree with the judgment of the learned Judges of the Division Bench of the Assam High Court for the conclusion arrived at by them and reasons recorded in the judgment. In the present case, the appellant has challenged the validity of Sections 42 and 44 of the Assam General Sales Tax Act, 1993 along with the impugned assessment contending that the transporters are not "dealers" within the meaning of the Assam General Sales Tax Act, 1993 and hence any obligation to maintain the documents such as registers, cash memos, challans etc. as required under Section 44 of the Act could not be imposed upon them nor any provision imposing penalty and punishment for non-compliance of the same could be made and the same is beyond legislative competence. In our view, under Section 42 of the Act, it is an obligation on every clearing, booking or forwarding agent or any other person transporting goods who during the course of its business handles documents of titles to the goods for or on behalf of any dealer or person holding certificates under Section 14 of the said Act to furnish to the prescribed authority true and complete accounts, register, documents etc. The said Section also provides for levy of penalty at the rate of three times of tax calculated on the value of the goods in respect of which no particulars or information have been furnished under Section 42(1) of the Act or no cash memo or challan has been produced before the competent authority under Section 42(3) or Rs.1000/- whichever is greater. The said Section empowers the appointed authority to enter and search any place of business of any dealer if he has reason to believe that any dealer is attempting to evade tax for that any person transporting goods for any other person who has kept in accounts in such a manner as is likely to cause evasion of tax. As per the accepted norms of taxation the jurisdiction whatever is ancillary or subsidiary provision necessary for achieving the object of a tax statute is covered by Entry 54 of List II of the Seventh Schedule to the Constitution of 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. In our view, the transporters are not strangers to the sale or purchase of goods, to the contrary are parts and parcels and are directly involved in storing the goods purchased or sold by, and in many cases such, transactions are fictitiously carried on in false name and address besides false classifications vis-a-vis transportation of such goods in and outside of the State making themselves party to the episode of such fictitious transactions for the sole purpose of evasion of tax by the dealers purchasing and selling such goods. The judgment of this Court in Tripura Goods Transport Association & anr. Vs. Commissioner of Taxes & Ors. (supra) was cited before us. In that judgment, this court has specifically held such agents transporting goods to be reasonably and proximately connected to the sale transaction and hence occasionally liable under the Sales Tax Laws. It is pertinent to mention that this Court while considering the Tripuras case had taken into consideration the judgment by this Court in the case of State of Haryana & Ors. vs. Sant Lal & Anr. (supra). The present case, in our view, is fully covered by the judgment rendered by this Court in Tripuras case. In our opinion, there cannot be any irregularity to call for books of accounts, 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 verification and scrutiny of the genuineness of the transaction to safeguard the interest of the State revenue. We have carefully perused both the judgments. Both the judgment uphold the legality of the charging and penal provisions in issue. But this Court struck down the relevant provisions of the Haryana General Sales Tax Act, 1973 because of apparent ambiguity inherent therein. However, in course of considering the analogous provision viz Section 36 A and Section 38 B of the Tripura Sales Tax Act, 1976, this Court in the case of Tripura goods Association & anr. Vs. Commissioner of Taxes & Ors .(supra) held that maintenance of accounts by the transporters is only to help the taxing authority to trace the dealer, fix the goods transported co-relating with the dealers transporting such goods for fixing tax liability in this regard. This Court further held as follows: "If a clearing or forwarding agent or "dalal" or person transporting goods is indeed reasonably and proximately connected with the sale occasioning the liability to the sales tax, it is legitimate to license himself under the Act and maintain and furnish such information and particulars to the assessing authority thereunder as he would in the course of his business come to possess, it is legitimate then to make him liable for such escapement of tax as has resulted from the breach by him of such obligation and to a reasonable penalty."In our view, the Assam Act is completely distinguishable from the Haryana Act. There is a marked difference between the provisions of Haryana and Tripura Laws inasmuch as Section 38 of the Haryana General Sales Tax Act, 1973 do not clearly define the person dealing with "documents of title of goods". Further, this Court declared the provisions of Section 38 of the Haryana General Sales Act to be ultra vires primarily on the ground that the transporters/carriers were specifically excluded from the definition of "person transporting goods" in the explanation appended to Section 38 of the Act. For this ambiguity alone, this Court has struck down Section 38 of the Haryana General Sales Tax Act. In the case of Tripura goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. (supra), this Court upheld the analogous provisions contained under Section 36A and 38B of the Tripura Sales Tax Act as the said provisions clearly defined the expression "dealer" and "documents of title to goods" have been clearly defined and in that view, this Court upheld the legality of Section 36A and Section 38B of the Tripura Sales Tax Act. It is further seen that Explanation II to Section 42 of the Act excludes only person in-charge of a rail head or a post office from the definition of "person transporting goods". This Explanation clearly states that person in charge of a goods carrier carrying such goods would be included in the definition of "person transporting goods". It is only due to the reason, this Court was inclined to declare Sections 36 A and 38B of the Haryana General Sales Tax Act as ultra vires and illegal. The Assam Act, in all its spirit and content is analogous to the Tripura Sales Tax Act and not similar to the Haryana General Sales Tax Act inasmuch as the Assam Act clearly defines the expressions "document of title to goods" and there is no disparity amongst such agents dealing with documents of title to goods. The argument of learned counsel appearing for the appellant that Explanation II to Section 42 of the Act was misinterpreted by the High Court holding the transporters to be dealers under the Assam Act has no merits. The contention of the appellants counsel is based on misconception that the expression "goods carrier" in the Assam Act is qualified by the expression "other than" which qualifies the expression "a rail head or a post office". The preposition of appearing before the expression "a goods carrier carrying such goods" clearly shows that this expression is directly related to the words "person in-charge" giving the meaning that person in-charge of a goods carrier carrying such goods is included in the definition of "person transporting goods". Section 38 of the Haryana General Sales Tax Act, 1973 required clearing or forwarding agent, Dalal or any other person transporting goods (manager, agent, driver or employee) within the State, who during the course of his business handles documents of title to goods for or on behalf of any dealer to furnish to the assessing authority the particulars and information in respect of the transactions of the goods and further required to obtain licence from the assessing authority in breach whereof heavy penalty was provided for, were held to be ultra vires and no proximate connection was found to be existing between the transaction of sale and the clearing or forwarding agent, dalal or other transporter. The penalty as provided was also held to be disproportionate to the quantum of escaped assessment. It was also observed in the case of State of Haryana & Ors. vs. Sant Lal & Anr. (Supra) that the legislative entries have to be read in a wider sense so as to include all subsidiary and ancillary matters. Provisions by which evasion of tax could be prevented and further providing machinery for the purpose would be within the ambit of the legislative entry. It was further observed that if a clearing or forwarding agent or dalal or a person transporting the goods is indeed reasonably and proximately connected with the sale occasioning the liability to the sales tax, it would be a legitimate requirement for such person to obtain licence and maintain and furnish such information and particulars to the assessing authority as in the course of his business he may come to possess. But while commenting on sub-section (1) of Section 38 of the Haryana General Sales Tax Act it was observed that it was not every clearing or forwarding agent or dalal or person transporting goods who comes into possession of the particulars and information required to be furnished. It was further observed that it is only such clearing or forwarding agents or other persons transporting the goods who can be required to obtain licence and would be liable to penalty for breach of such provisions. The meaning of the words "documents of title to goods" was also held to be not clearly defined. So it was found that provisions of the Act cannot have any application to those persons who do not handle documents of title. Thus provisions of the Act cannot have any application to all and the State Legislature will have no power to legislate in respect of such persons. The matters which are not ancillary or subsidiary to the legislative entry cannot be legislated upon under the entry. The Division Bench of the Gauhati High Court while considering the impugned judgment had taken into consideration both the judgments of this Court as cited above and held that Sections 29, 36A and 38B of the Tripura Sales Tax Act are in substance similar to Sections 42 and 44 of the Assam Sales Tax Act and uphold the provisions of the Assam Act in consonance to the judgment of this Court in the case of Tripura goods Transport Association & Anr. Vs. Commissioner of Taxes & Ors. (supra). In our opinion, there is no exclusion of any transporter/carrier from the definition of person dealing in "documents of title to goods"We have perused Section 46 A 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 liability of the transport arises only if the transporter or carrier does not disclose the particulars required under Section 46A of the said Act read with Rule 21A of the Rules thereunder. The newly inserted Section 46 A of the Act, in our view, is legally sound and analogous to Section 38 B of the Tripura Sales Tax Act, 1976. It is also pertinent to mention that Section 38 B of the Tripura Sales Tax Act, 1976 has been upheld by this Court in the case of Tripura Goods Transport Association & anr. Vs. Commissioner of Taxes & Ors. (supra). In our view, the obligation imposed upon the transporters under Sections 42 and 44 and 46A of the Assam 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. Section 46 A and Rule 21 A of the Assam Act and the Rules framed thereunder respectively are valid and piece of legislation for the purpose of checking evasion of taxes by making the transporters/carriers accountable for the part they play in the transaction of sale and purchase of goods13. Thus we hold that the insertion of Section 46A and Rule 21A have in no way infringed the fundamental rights of the petitioners as the inserted provisions are analogous to those of Section 38 B of the Tripura Sales Tax Act, 1976 which have since been upheld by this Court. The State Legislature has the jurisdiction and competence under Entry 53 of List II of the VII Schedule to the Constitution of India to legislate such provisions as contained in Section 46 A of the Act, 1993.