Assistant Commissioner of Commercial Taxes vs Highway Cargo Carriers

Paritosh K. Mukherjee, J.—This appeal arises out of a judgment and order passed by a learned Single Judge of this Court dated January 27, 1989, disposing of the writ petition whereby the Respondents were directed to release the seized goods forthwith, but the Respondents were not debarred from proceeding with the penalty proceeding pursuant to the show-cause notice dated January 10, 1989, and such penalty proceeding was directed to be disposed of within one month from the said date and all points raised in the writ petition were kept open.

By our earlier order dated August 29, 1991, we had fixed hearing of the appeal itself by dispensing with formal filing of the paper book and the Respondent/writ Petitioner was directed to prepare a list of papers containing the writ petition and the judgment of the Single Judge dated January 27, 1989, and also to include the order of the Assistant Commissioner of Commercial Taxes dated March 8, 1989, and we also gave liberty to the writ Petitioner to file supplementary affidavit incorporating the appellate order dated March 8, 1989, passed by the Assistant Commissioner, Commercial Taxes, Central Section, and pursuant to the said direction, the appeal was taken up for hearing.

Being aggrieved by the order passed by the learned Single Judge, the present appeal was preferred by the Assistant Commissioner of Commercial Taxes,-Central Section, and others, under Clause 15 of the Letters Patent and the Division Bench consisting of Mr. P.D. Desai, learned Chief Justice and Ajit K. Sengupta J. gave liberty to the writ Petitioner to prefer an appeal before the Appellate Authority against the order of penalty passed on January 30, 1991, by the Commercial Tax Officer, Central Section, and the Appellate Authority was directed to decide the appeal by passing a reasoned order on March 8, 1989, and to serve a copy of the same on the writ Petitioner on or before March, 13, 1989.

It was, further directed by the Court of Appeal that if in the meantime the writ Petitioner deposited a sum of Rs. 1,50,000 with the Commissioner to Commercial Taxes, the truck, as well as the seized goods, would be released forthwith in favour of the person from whom it had been seized or in favour of the Petitioner upon his producing an authority of receive the truck as well as the seized goods on behalf of the said, person.

During the pendency of the appeal, the appellate Authority had disposed of the appeal by judgment and order dated March 8, 1989, as directed, and the order of the appellate Authority has also been impugned by way of filing supplementary affidavit on behalf of the Respondent/writ Petitioner.

The facts of the appeal arising out of the writ petition is as follows:

M/s. Highway Cargo Carriers, the Respondent/writ Petitioner No. 1 herein (hereinafter referred to as writ Petitioner) carries on business of transport contractors, haying Trade Licence No. 60807. According to the writ Petitioner, M/s Shree Radha Trading Company, 8599, Paharganj, New Delhi 55, purchased 85 bags of betel nuts ; 34, bags of black pepper and 36 bags of small cardamoms from two dealers of West Bengal at Calcutta sometime in the last week of December 1988, namely, M/s. Kanhyalal Daga, 42 Sri Hari Ram Goenka Street, Calcutta-7 and M/s. Shankarlal Gupta, 10 Digambar Jain Temple Road, Calcutta 7, amounting to Rs. 4,27,752 including 4 % of Central Sales Tax, on proper receipt. After the said purchase, the said M/s. Shree Radha Trading Company, Paharganj, New Delhi, engaged the Respondent/writ Petitioner for transporting the same from Calcutta to Delhi. The writ Petitioner hired a truck, being No. WMK-8770, from M/s. Transport Corporation of Bengal of 134/ 4 Mahatma Gandhi Road, 51h floor, Calcutta-7, and despatched the goods for delivery to the said company at Delhi on December, 29, 19S9, with valid bills, challans and other relevant papers.

On December 29, 1989, the Commercial Tax Officer, Central Section, had detained the truck at Delhi Road approach and demanded permit from the driver of the said truck. The Respondent/writ Petitioner apprised the said Authority of the fact that the said goods were purchased in Calcutta and were being transported to Delhi and also produced necessary challans and bills of such purchase before the Authority concerned, but the Commercial Tax Officer refused to accept the submissions made by the driver of the truck and seized the goods and vehicle on December 29, 1989, for alleged contravention of Section 7(2) of the West Bengal Sales Tax Act, 1954, without serving any seizure list on the same date.

According to the writ Petitioner No. 2, although he met the Commercial Tax Authorities and requested them to hand over the seizure list so that steps might be taken against the said seizure, the said authorities till January 4, 1989, detained the truck and goods without serving any seizure list and at last on January 10, 1989, the impugned notice of seizure, alleged to have been made on January 5, 1989, was served upon the owner of the said truck, M/s. Transport Corporation of Bengal, who was asked to appear on January 30, 1989, at 11.30 a.m. and show cause why penalty proceeding should not be drawn up against the said transport owner for contravention of Section 7(2) of the Act of 1954, was issued.

The said seizure, according to the writ Petitioner, was a composite seizure, in respect of the three items, namely, 84 bags of bitternuts, 34. bags of black paper and 36 bags of small cardamoms, which are coming under the provisions of Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the ''1941 Act'') and West Bengal Sales Tax Act, 1954 (hereinafter referred to as the ''1954 Act'').

In the aforesaid premises the writ petition was moved on behalf of the Highway Cargo Carries (India) and others challenging, inter alia, the search and seizure made on January 27, 19S9, as stated aforesaid and the same disposed of, out of which the present appeal has been preferred by the Respondent the Commercial Tax Authorities.

Mr. S.N. Bose, learned Advocate for the Appellants, submitted in the first place that the writ petition having been disposed of by the learned Single Judge, and the writ Petitioner having preferred a statutory appeal u/s 12 of the 1954 Act, writ Petitioner was not entitled to enlarge the scope of the appeal, by challenging the validity or otherwise of the appellate order, passed by the Assistant Commissioner of Commercial Taxes, Central Section.

In the second place, he submitted, although cardamom is coming under the provisions of 1941 Act, but in any event betelnut and black pepper since coming within the purview of Act 1954, the act of seizure cannot be called in question.

In this context, Mr. Bose referred to the provisions of Rule 15AA of the 1954 Rules framed under 1954 Act, which runs as follows:

15AA. No person shall transport any consignment of a notified commodity from any place other than those referred to in Sub-section (1) of Section 6, by any road vehicle except on the following conditions, namely:

(1) Where such consignment is despatched from any place outside West Bengal and the quantity whereof exceeds the limit specified in Sub-rule (i) of Rule 14

(a) every such consignment shall be transported by or on behalf of a registered dealer ;

(b) the registered dealer who transports or on whose behalf such consignment is feeing transported, shall make an application in From IV in duplicate to the appropriate Commercial Tax Officer or Inspector for a permit giving the particulars detailed in Clauses (a) to (d) of Sub-rule (ii) of Rule 14. The appropriate Commercial Tax Officer or Inspector, if he is satisfied with regard to the bona fide of the application, shall issue a permit in From IVA in duplicate, one copy of which shall be made over to the applicant, the other copy being retained as an office copy ;

(c) any person transporting any such consignment of a notified commodity shall, on demand by the officer referred to in the proviso to Rule 17, produce the copy of the permit referred to in Clause (b), and the said officer shall, after checking, if necessary, allow the movement of such quantities of the notified commodity as are found permissible under the provisions of these rules;

(2) Where such consignment is despatched from any place within West Bengal and the value whereof exceeds rupees twenty five thousand

(a) any person transporting such consignment shall carry with him a consignment note or delivery note, sale bill or cash memo or similar document and a written declaration in duplicate duly signed by the consignor or his authorised agent in the form mentioned in the Schedule appended to this sub-rule, in respect of such consignment, and shall, on demand by the the officer referred to in the proviso to Rule 17, produce the said document and declaration, and the said officer, on being satisfied about the correctness of the documents and the declaration, shall only allow the movement of such quantity of notified commodity mentioned in that declaration and conforming the description given therein and to other documents produced. He shall retain one copy of the declaration and return the second copy on which he shall endorse the date on which the consignment is transported and shall sign seal and date such endorsement;

Mr. Bose, appearing for the Appellants, submitted that the purchases referred to by the writ Petitioner were not genuine.

Lastly, Mr. Bose submitted that from the order'' dated March 8,19S9. passed by the appellate Authority, which has been included as a part of the appeal proceeding by filing supplementary affidavit on behalf of the writ Petitioner, if appears that the appellate Authority noted the following submissions at the hearing of the appeal made on behalf of the writ Petitioner, which is set out below:

(a) The learned Commercial Tax Officer acted illegally and with material irregularity by initiating penalty proceedings against the Petitioner and passing the penalty order for violation of the provisions of Section 6of WBST Act, 1354, particularly in respect of commodities ''small cardamom'' which were seized by them, since the cardamom is a notified commodity u/s 4A of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called BFST Act). Imposition of penalty on the consignment of small cardamom without serving notice under BFST Act was illegal, arbitrary and without any authority of law.

(b) The Appellant had been transporting the consignment from Calcutta to Delhi and, therefore, the question of contravention of Section 7(2) of the WBST Act did not arise. Contravention of Section 7(2)of the WBST Act did arise only In case of importation of goods from outside the State of West Bengal to the State.

(c) The Petitioner had purchased those consignments from local market of West Bengal and never imported those items from outside the State without permit. So the question of evasion of tax also did not arise. In support of the contention xerox copies of some purchase vouchers covering the consignment seized were filed.

After hearing the aforesaid submission made on behalf of the writ Petitioner in support of quashing the penalty proceeding, the appellate Authority came to the following conclusions:

It is indeed a fact that learned Commercial Tax Officer, Central Section, had erred in the matters of procedure in imposition of penalty. He should not have clubbed together all the three items of betelnut, black pepper and cardamom seized from the, vehicle No. WMK 8770 and started the proceedings under WBST Act and Rules framed thereunder. As is well-known cardamom is notified u/s 4A of the BFST Act. For the purpose of imposition of penalty for the transportation in contravention of BFST Act separate proceedings under Bengal (Sales Tax) Rules, 1941, should have been initiated.

Mr. Bose, appearing for the Appellants, tried to justify the authority of the appellate decision on the ground that the said irregularity was not material irregularity, as these three items seized from the truck were notified items: betelnut and black pepper u/s 25 of the WBST Act, 1954 and cardamom u/s 4A of the BFST Act, 1941. According to Mr. Bose, to import any of these items from outside the State a permit is required to be obtained from the appropriate Officer/Inspector of the Directorate of Commercial Taxes. There exits similar restriction on the intra-State movements of these notified items, if the value exceeds Rs. 25,000. In support of this branch of submission he has placed reliance to a case of The Titagar Paper Mills Co. Ltd. v. State of Orissa and Ors. 47 S.T.C. 240, wherein it has been held that wrong mentioning of a section in the notice would not invalidate the order, if the concerned Authority otherwise had jurisdiction to pass order.

In order to support the infirmity of the notice, Mr. Bose also placed reliance on a decision of this High Court, in the case of Madanlal Mahawar and Others Vs. The Commercial Tax Officer, Central Section and Others, wherein it has been held as follows:

Where the action of the Assessee firm implied that they intended to be heard in support of their returns and were asking for an opportunity to make their submissions by production of documentary evidence in support of their returns: Held, that this conduct was sufficient to indicate that the assessed had substantially waived the irregularity in the notice with which, the proceedings had started.

On the other hand, Mr. Mihirial Bhatiacharjee, appearing for the Respondent/writ Petitioner, submitted that the seizure itself being bad, which has been challenged, as such consequential notice for imposition of penalty and imposition of penalty are liable to be set aside.

In this regard, he has relied on the order cum seizure receipt issued by the Commercial Tax Officer, Central Section, dated January 5, 1989, wherefrom it appears that there was no formation of the requisite opinion by the said Authority that Shri Birender Roy, the person in charge of the motor vehicle and the aforesaid notified goods/commodities, had violated the provisions of Section 89A/15AAof Bengal Finance (Sales Tax) /West Bengal Sales Tax Act, 1941/1954, in respect of the notified goods.

In the schedule of the said order-cum-seizure receipt it appears that the said Commercial Tax Officer has noted the particulars of the notified goods which is set out hcreinbelow:

(1) 84 bugs of betelnuts,

(2) 34 bags of black peppers,

(3) 36 bags of small cardamoms.

In the next, he submitted that if the notice to impose a penalty is a condition precedent and the irregularity in the notice would vitiate the entire proceeding, then the entire order passed imposing penalty to such invalid notice, is a nullity in the eye of law. In this connection, Mr. Bhattacharjee has placed reliance on a decision of the Supreme Court in the case of Y. Narayana Chetty and Another Vs. The Income Tax Officer, Nellore and Others, wherein the Supreme Court observed as follows:

The notice prescribed by Section 34 of the income tax Act for the purpose of initiating re-assessment proceeding is not a mere procedural requirement: the service of the prescribed notice on the Assessee is a condition precedent to the validity of any re-assessment made u/s 34. If no notice is issued or if the notice issued is shown to be invalid then the proceedings taken by the income tax Officer without a notice or in pursuance of an invalid notice would be illegal and void.

In the next, referring to Manamuh Bhutoria''s case, Mr. Bhattacharjee argued that the principle that irregularity in the notice does not and cannot vitiate the proceeding, is not applicable in the facts of the present case at all, as here admittedly the appellate Authority came to the conclusion that the Commercial Tax Officer had erred in the matter of procedure in imposition of penalty, as quoted above.

Thus, according to Mr. Bhattcharjee, this is not at all a procedural error but a substantive mis-quotation and misuse of the power without application of mind, as would be evident from the order-cum-seizure receipt. Mr. Bhattacharjee further argued that referring to the notice dated January 10, 1989, issued by the Commercial Tax Officer, Central Section, it appears that penalty was sought to be imposed u/s 7(2) of the West Bengal Sales Tax Act, 1954, although, under the law the said authority is not entitled to impose penalty in respect of cardamom, which comes within the purview of the 1941 Act for which no show-cause notice has at all been issued under the relevant statute upon Transport Corporation of Bengal.

In this context, Mr. Bhattacharjee has also referred to a Single Bench decision of this Court in the case of Bhagwan Devi Saraogi and Ors. v. income tax Officer, Ward, District 1(2), Calcutta, and Ors. 1181.T.R. 906 wherein a learned Single Judge of this Court held, if no valid notice of reassessment has been issued or if the notice issued is illegal or invalid, the entire reassessment proceeding would be without jurisdiction and would be void and illegal.

Mr. Bhattacharjee has also referred to the case of Rama Devi Agarwalla and Others Vs. Commissioner of Income Tax, wherein Division Bench consisting of S.C. Deb and Dipak Kumar Sen JJ. observed, as follows:

Held that the notice prescribed u/s 34 of the Indian I.T. Act, 1922, or Section 148 of the I.T. Act, 1961, cannot be regarded as a mere procedural requirement and if the notice issued by the I.T.O. u/s 34 is invalid for any reason, the entire proceeding taken by the I.T.O. would become void for want of jurisdiction.

Therefore, it has become necessary for this Court to adjudicate upon whether there is infirmity in initiation of the penalty proceedings and order imposing penalty dated January 30, 1989, passed by the Commercial Tax Officer, Central Section, as well as the appellate order dated March 8, 1989, confirming the said order.

At the very outset, in our view, the objection raised by Mr. Bose, appearing on behalf of the Appellants to the effect that this Court should not interfere with the appellate order as at the behest of the Respondent/writ Petitioner, that writ petition itself was disposed of, has no substance, as with the level of the Appeal Court, the appellate Authority had been directed to dispose of the appeal, within a particular period of time and by passing ''a reasoned order'', so that it may be available to the Court of Appeal at the final hearing to adjudicate upon the same.

This Court is of the view that by non-scoring of the particular provisions of Rule 89A/15AA of the Bengal Finance (Sales Tax)/West Bengal Sales Tax Act, 1941/1954, in the Order-cum-Seizure receipt dated January 5, 19S9, issued by the Commercial Tax Officer, Central Section, there was no proper application of mind by the said Commercial Tax Authorities before search and seizure as to whether the writ Petitioner had actually contravened the relevant provisions of/the respective Acts and Rules.

Further, the observations of the appellate Authority in the order dated March 8, 1989, cannot be sustained in law that there was a procedural departure, in the matter of imposition of penalty, no penalty could be imposed by the Commercial Tax Authorities, on the basis of material irregularity in the matter of exercising jurisdiction, which cannot be called a procedural one, since the source of derivation of authority are the two different Acts and the authorities could not have assumed jurisdiction only under one of the enactments in respect of all the items of which one item was not covered by such enactment. The said omission goes to the very root of the matter relating to assumption of jurisdiction and cannot be lightly brushed aside. In that view of the matter, the other submissions of Mr. Bose are of no help to the Appellants.

In our view, in the light of the principles laid down in the catena of cases of Bhagwan Devi Saraogi and Ors. v. income tax Officer, Nellore, and Ors. (Supra) and Rama Devi Agarwalla and Ors. v. Commissioner of income tax, West Bengal - III (Supra) the entire proceedings for imposing penalty dated January 30, 1989, and the appellate order confirming the imposition of penalty, dated March 8, 19S9, which has been made part of the appeal proceeding, are liable to be set aside.

As the Respondent/writ Petitioner by challan dated March 6, 1989 has deposited a sum of Rs. 1,50,000, in terms of the order of the Appeal Court dated March 3, 1989, referred to hereinabove we direct the appellants to make refund of the said amount within a period of one month from the date of communication of this judgment.

Let a signed copy of the operative part of this judgment and the order be given to the learned Advocates for the parties, on their usual undertaking to observe all necessary formalities.

Altamas Kabir, J.

I agree.