Federation of Industries, North Eastern Region and Another vs State of Assam and Another

D.N. Chowdhury, J.—The constitutional validity of Section 46(4)(5)(6) and (7) of the Assam General Tax Act, 1993 is assailed in this proceeding. The principal ground on which the validity of the statutory provision of the aforesaid Act is challenged is that it is violative of Article 14, 19(1)(g), 301 and 304(b) of the Constitution of India.

Dr. A.K. Saraf, the learned Counsel appearing on behalf of the Petitioners referred to Section 46 of the Act and submitted that the said provision put restrictions on the movement of goods. According to Dr. Saraf, the Officer-In-Charge of the Cheek Post or barrier or the Officer empowered to act as such, is invested with the power of the assessing Officer to levy and collect the Taxes. The duties and function of the assessment and re-assessment is conferred upon the assessing officer by the statute and said power under no circumstances can be conferred upon the Officer-In-Charge of the Check Post. The learned Counsel further submitted that the provision empowered upon the check post officer to ascertain as to whether any sale or purchase of goods has taken place and whether tax on the same has been paid or not and in the event no such tax are paid the power authorising such officer to take necessary action including the demand of security and demand if tax on inter-state selling is violative of Article 286 of the Constitution read with Section 3 and 4 of the Central Sales Tax Act, 1956. Conferment of power on the check post officer to demand security on the goods coming from outside to the State of Assam is contrary to the Scheme of the Article 286 of the Constitution of India. The learned Counsel for the Petitioner further submitted that the provision of the Act is violative of Article 301 of the Constitution of India and the same imposed unreasonable restrictions on the free flow of trade and commerce in course of inter State trade and commerce. Dr. Saraf also submitted that the proviso creating restriction on free flow of trade and commerce in course of inter state trade and commerce was without the previous assent of the President of India is also violative of Article 304(b) of the Constitution of India. The learned Counsel for the Petitioners has brought my attention to the provisions containing in Rule 43 of the Rules. Sub-section (5) of Section 46 of the Assam General Sales Tax Act, 1993 provides that the check post officer is empowered to ascertain whether or not sale/purchase is properly accounted for in the documents and declaration forms referred to in Sub-section (7) of Section 46 of the Act. Sub-section (7) of Section 46 of the Act provides/describes the documents to be the bill of sale or delivery notes or such other documents as may be prescribed. Rule 43(7)(i) prescribed the documents to be billed or sale, delivery note, consignment notes and invoices, tax clearance certificate, transit pass any other document as may be notified by the Commissioner and declaration to be submitted by the carrier or bailee on inspection by the Officer. According to the learned Counsel: that necessary documents are clearly delineated in the Act and the Rule but there are instances in which the check post officer insisted for one or other documents despite furnishing of relevant documents as required under the law. Demand of tax clearance certificate is also violative of Article 19(1)(g) and 301 of the Constitution of India.

Mr. H.N. Sarma, learned Addl. Senior Govt. Advocate, appearing on behalf of the Respondents, on the other hand submitted that Section 46 is meant to cheak and prevent the evasion of Sale Tax and therefore no Dealer can make any legitimate grievance against such a move. The provision is within the legislative competence of the State legislature and the same was introduced as a measure to check evasion and prevent the evasion of taxes and there is no unconstitutionality in the move.

The Assam General Sales Tax Act, 1993 was enacted to amalgamate, consolidate and amend the law relating to the levy of tax on the sales or purchase of goods in the State of Assam. Chapter IX of the Act contains the provisions for accounts, inspection, search and seizure, restrictions on movement of goods and power to call for information. Section 46 of the Act is quoted below:

(1) No person shall transport or authorise the transport of from any railway station, steamer station, airport, post office or any other place, whether of a similar nature or otherwise notified in this behalf by the State Government, any consignment of such goods as may be specified by the State from time to time by notification in the Official Gazelle exceeding such quantities and except in accordance with such conditions as may be specified in such notification, with a view to ensure that there is no evasion of any tax payable under this Act.

(2) Where goods are delivered to a carrier or a bailee for transmission, the movement of goods shall be deemed to commence at the time of such delivery and terminate at the lime when delivery is taken from such carrier or bailee. Where before delivery is, taken from him, a carrier or bailee to whom goods are delivered for transmission, keeps the said goods in any office, shop, godown, vessel, receptacle vehicle or any other place of business or any building or place the Commissioner or any Officer appointed to assist him under Sub-section (1) of Section 3 shall have power to enter into and search such office, shop, godown, vessel, receptacle, vehicle or other place of business or building or place and to examine the goods and inspect all records relating to such goods. The carrier or bailee or the person in charge of the goods and records shall give all facilities for such examination or inspection and shall, if so required, produce the bills of sale or delivery note or such other doer merit as may be prescribed and give a declaration containing such particulars as may be prescribed regarding the goods and give the name and address of the carrier or the bailee and the consignee.

(3) The State Government, if it considers that with a view to preventing or checking evasion of tax under this Act in any place or places in the Slate it is necessary so to do, may, by notification, direct the setting up of a check-post, or the erection of a barrier, or both, at such place of places as may by notification.

(4) At every Check-post or barrier mentioned in Sub-section (3) or at any other place when so required by any officer empowered in this behalf the driver or any other person in charge of any goods, vehicle or boat shall stop the goods vehicle or boat, as the case may be, and keep stationery as long as may reasonably be necessary, and allow the officer in charge of the check-post or barrier or the officer empowered as aforesaid to examine the contents in the goods vehicle or boat and inspect all documents relating to the goods carried which are in the possession of such driver or other person in charge for the purpose of ascertaining whether there has been any sale or purchase of the goods carried and in case there was sale or purchase of the goods carried whether such sale or purchase is liable to tax under this Act and if so liable-

(a) Whether such tax has been paid; or

(b) Whether the sale or purchase of the goods carried has, for the purpose of the payment of tax under this Act, been properly accounted for in the documents referred to in Sub-section (7).

(5) If, on such examination and inspection, it appears

(a)(i) that the tax, if any payable under this Act, in respect of the sale or purchase of the goods carried has been paid; or

(ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax under this Act, been properly accounted for in Sub-section (7) and the declaration given was correct and complete to the satisfaction of the check-post officer,

The said officer shall release the goods vehicle or boat with the goods carried; or

(b)(i) that the tax, if any payable under this Act, in respect of the or purchase of the goods carried has been paid or

(ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax under this Act, has not been properly accounted for in the documents referred to in Sub-section (7) or no correct and complete declaration is given in respect of goods carried and if the said officer is satisfied after making such enquiry as he deems fit that with a view to prevent the evasion of tax payable in respect of the sale or the goods carried, it is necessary to detain the goods, he shall detain the goods vehicle or boat or the consignment of the consignee to pay such tax, or to furnish adequate security in such form and in such manner and to such authority as may be prescribed, on behalf of the person liable to pay such tax.

(6) If the tax is paid or the security is furnished, then the goods detained shall be released forthwith.

(7) The documents referred to in Sub-section (4) and (5) are bills of sale, or delivery notes, or such other documents as may be prescribed.

(8) The driver or any other person in charge of the goods vehicle or boat shall, if so required, give the name and address of the owner of the goods vehicle or boat as well as those of the consignor and the consignee of the goods.

(9) The driver of the goods vehicle or boat shall, on demand by the said officer, produce for inspection his driving licence.

10(a) If the tax directed to be paid or the security directed to be furnished under Sub-section (5) is not paid or furnished; or

(b) if it appears to the said officer that the driver or the person in charge of the goods vehicle or boat is not giving the correct name and address of the owner of the goods vehicle or of the boat or of the consignor or the consignee of the goods, and if the said officer is satisfied, after making such enquiry as he deems fit, that with a view to prevent the evasion of tax payable in respect of the sale or purchase of the goods carried, it is necessary to detain the goods, he shall detain the goods either in the check-post or elsewhere as long as may reasonably be necessary and shall ascertain the correct name and address of the owner of the goods vehicle or the boat of the consignor or of the consignee of the goods.

Provided that no such goods shall be detained by the said officer for more than forty-eight hours except with the permission of the next higher authority.

(11) The said officer may, in his discretion, permit the driver or other person incharge of the goods vehicle or boat to take the goods detained under Sub-section (1) subject to an undertaking given by the owner of the goods or his representative duly authorsed on his behalf-

(i) That the goods shall be kept in the office godown or other place within the State, belonging to the owner of the goods vehicle or the boat and in the custody of such owner, and

(ii) That the goods shall not be delivered to the consignee or any other person without the order of the said officer and for this purpose the driver or any other person incharge of the goods vehicle or (sic) shall furnish an authorisation from the owner of the goods vehicle or boat authorising him to give such undertaking on his behalf.

(12) In case the goods are subject to speedy and natural decay, and in the case of other goods where no claim is made within the prescribed period the said Officer shall, subject to such condition as may be prescribed, sell such goods in open auction and remit the sale proceeds thereof in a Government Treasury:

Provided that before effecting the sale the paid officer shall obtain the permission in writing of the next higher authority.

(13) Any person entitled to such sale proceeds shall, on application to the prescribed authority and upon sufficient proof, be paid the sale proceeds mentioned in Sub-section (12) after deducting the expenses of the sale and other incidental charges and amount of sales tax due under this Act in respect of die sale or purchase of the goods in question.

Explanation I for the purpose of this Section, "goods Vehicle" includes a motor vehicle, vessel, animal and any other form of conveyance.

(14) The owner or other person incharge of a boat or goods vehicle shall carry with him-

(i) bill of sale or delivery note or such other documents as may be prescribed, and

(ii) log-book or, as the case may be, good vehicle record or trip sheet, relating to the goods under transport and containing such particulars as may be prescribed and shall submit to such officer as may be prescribed the documents aforesaid or copies thereof within such time as may be prescribed.

(15) When a goods vehicle or boat coming from any place outside the State of Assam and bound for any other place outside the State and carrying the goods passes throught the State, the driver or other person in charge of such vehicle or boat shall apply to and obtain a transit pass in such form and in such manner as may be prescribed from the officer incharge of the entry check-post or barrier after his entry into the State of Assam and deliver it to the Officer incharge of the exit Check-post or barrier before his exit from the State or any other officer as may be directed, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or the person incharge of the goods vehicle or conveyance, the onus of proving that goods have actually moved out of the State shall be on the owner or person in charge of the goods vehicle or boat and all the provision of this Act shall so far as may be applicable as if such transporter or carrier or the driver or other person incharge of the vehicle were a dealer within the meaning of Clause (10) of Section 2.

Explanation - In a case where a vehicle owned by a person is hired for transportation of goods by some other person, the hirer of the Vehicle shall, for the purposes of this section, be deemed to be the owner of the vehicle...

In exercise of power conferred by Section 72 of the Act, the Governor of Assam made a set of Rules known as Assam General Sales Tax Act, 1993. Section 43 of the said Rules relates to said post which reads follows:

(1) Notwithstanding anything to the contrary contained in any law for the time being in force, every owner of warehouse, godown or any other such place, who stores goods for hire or reward shall maintain or cause to be maintained a correct and complete account indicating the full particulars of the person whose goods are stored and the quantity, value, date of receipt and date of delivery of such goods.

(2) Such accounts shall, on demand, be produced before the prescribed authority who may take or cause to be taken such extracts therefrom as he may consider necessary.

(3) If any owner of a warehouse or godown or any other such person who stores goods for hire or reward, contravenes any of the provisions of Sub-section (1) or (2) in a manner likely lead to evasion of any tax payable under this Act, in the prescribed authority may, without prejudice to any action which may be taken for abetment of an offence u/s 62 direct, after giving an opportunity of being heard in the manner prescribed, that such an owner or person shall pay by way of penalty a sum not exceeding five hundred rupees.

The subject matter of the Act is relating to the area of levy of tax on sale or Purchase of goods in the State of Assam. Incidence and levy of tax is enjoined in Chapter-III of the Act. Every dealer is liable to pay tax under any of the laws repealed by the Act is liable to pay tax under the Act on all sales or purchase of goods other than goods specified in Schedule I with effect from the appointee date u/s 7(1), The Dealer to whom Sub-section (1) does not apply, shall be liable to pay tax under this Act on all sales or purchases of goods other than goods specified in Schedule-I with effect from the date immediately following the date on which his gross turnover calculated from the commencement of any year ending after the appointed day first exceeds the taxable quantum at any time within such year. Sub-section 4 of Section 7 protects the dealer from the tax of sales or purchase of goods where such sales or purchase takes place in (i) outside the State (ii) in the course of the import of the goods into or export of the goods out of the territory of India (ii) in the course of inter-state trade or commerce. The tax leviable u/s 7 for any year is charged on the taxable turnover during such year as contained in (a) to (f) of Section 8(1). Section 10(1) of the Act envisages that burden of proof in respect of any sale or purchase effected by a dealer, he is not liable to tax under this Act or is liable to tax at a lower rate of tax, or that he is entitled to a deduction in determining the taxable turnover, shall lie on the person concerned. Chapter IV, V, VII respectively deals with registration of dealers; return assessment and reassessment; and payment, collection recovery and refund of taxes and Ors. dues. Appeal Revision, Determination and Rectification are dealt by Chapter VIII. Maintenance and Preservation of accounts, inspection, search and seizure, restrictions on movement of goods and power to call for information is envisaged in Chapter-IX of the Act. Section 41(1) of the Act entrusted a dealer with the duty of keeping a complete account in respect of all goods produced, raised, manufactured, processed, bought, sold or delivered or transferred by him and if the Assessing Authority considers that such account is not sufficiently clearly and intelligible to enable him to make a proper check of the return of a proper determination of taxable turnover during any period the said authority may, without prejudice to his powers of assessment under this Act, direct the dealer or such person to produce and maintain account in such manner as may be required. All books of accounts and documents referred to in Sub-section (1) of Section 40 and all declarations and other documents laid down under Sub-section (2) of Section 10 shall be preserved by the dealer for a period of not less than eight years from the end of the year to which they relate: The persons specified in Section 42(1) is enjoined with the duty to furnish to the prescribed authority true and complete particulars and information and shall maintain true and complete accounts, registers and documents in respect thereof, and to produce such account of documents to the prescribed authority, who may take or caused to be taken such extracts as he may consider necessary. A person transporting goods shall carry a declaration in such form as may be prescribed by the Commissioner supported by either a cash memo, a bill or a challan, in case the movement is otherwise a result of sale, in respect of goods which being transported on a goods carrier, or a vessel and shall produce such challan, cash memo or bill alongwith the aforesaid declaration on demand before the prescribed authority under Sub-section 3 of Section 42. If any clearing, booking, or forwarding agent or dealer or person transporting goods contravenes the provision of Sub-section (1) or (3) in a manner which Section 43(1) imposed a duty on every owner of a Warehouse, godown or any other such place stores goods for hire or reward to maintain or cause to be maintained a correct and complete account indicating the full of the per on whose goods are stored and the quantity value date of receipt and date of delivery of such goods, on demand such account arc required to be purchased before the prescribed authority is likely to (held) to evasion of any tax payable under this Act, the prescribed authority may without prejudice to any action u/s 61 and 62 of this Act on the charge of abetment, after giving the person concerned an opportunity of being heard in the manner prescribed, direct him to pay by way of penalty, an amount which shall be equal to three times the amount of tax calculated on the value of goods in respect of which no particulars or information or correct particulars or information has been furnished under Sub-section (1) or no cash memo or bill or challan has been produced before the prescribed authority under Sub-section (3) or rupees one thousand whichever is greater.

Section 44 enables the authority appointed under Sub-section 1 of Section 3, either before or after assessment to call upon any dealer to produce before it or him any accounts, registers or documents or to furnish any information relating to the financial transaction of the dealer, the profit derived from such transaction and the stock of goods produced, raised processed, manufactured, bought, sold or delivered by such dealer and the dealer shall comply with such requirement as laid down in Section 44(1), All accounts registers and documents relating to the financial transactions of a dealer, the profit, derived from such transactions and all goods kept in any place of business of any dealer shall at all reasonable times, be open for inspection by any authority appointed under Sub-section (1) of Section 3 and the dealer shall render all possible assistance to such authority in carrying out the inspection. For the purpose of collection of intelligence inquiry and investigation in connection with the evasion of taxes and other violation of provisions of the Act the State Govt. is empowered by notification to constitute under such term and condition as may be prescribed a bureau of investigation or vigilence or enforcement by whatever name called appointed Sub-section 1 of Section 3.

u/s 46(1) no person is transport or authorise the transport of from any railway station, steamer station, airport, post office or any other place. Whether of similar nature or otherwise notified in this behalf by State Government, any consignment of such goods as may be specified by the State Government, from time to time by notification exceeding such quantities and except in accordance with such condition as may be specified with a view to ensure that there is no evasion of tax as under the Act. Sub-section 2 of Section 46 enjoins upon the Commissioner or any officer appointed empowers the officers or officer, to assist him under Sub-section (1) of Section 3, the power to enter into and search such office, shop, godown, vessel, receptacle, vehicle or other place of business and to examine the goods and inspect all records relating to such goods delivered to carrier or bailee or the person in charge of the goods for such transaction. Sub-section 3 of Section 46 clothed the State Govt. all the power to set up a check post, or the erection of a barrier, or both, at such place or places as may be notified with a view to prevent or check evasion of tax under the Act. Sub-section 4 of Section 46 authorises the officer-in-charge of the check post or barrier to examine the contents in the goods vehicles or boat and inspect all documents relating to the goods carried which are a the possession of such driver or other person in charge for the purpose of ascertaining whether there has been any sale or purchases of the goods carried and incase there was sale or purchase of the goods carried, whether such sale or purchase is liable to tax under this Act and if so liable whether such lax has been paid; or whether the sale or purchase of the goods carried has, for the purpose of the payment of fax under this Act, been properly accounted for in the documents referred to in Sub-section (7), The necessary power is given to the officer of the check post to examine, inspect and satisfy to ensure that there is no evasion over the tax payable under the Act. Sub-Section 7 specified that the document referred to in Sub-section (4) and (5) are bills of sale, or delivery notes, or such other documents as may be prescribed by Rules. The authorised officer is empowered to detain a vehicle or goods as long as may reasonably be necessary for purpose of the inspection and complete the processe as laid down in Section 46. Section 47 of the Act empowered the Commissioner subject to restriction and conditions as may be prescribed and subject to the provisions of any other law for the time being in force, requiring any person including a Banking Company or post office or railway or any transporter or carrier or clearing, forwarding or transporting agent to furnish such information or statement as may be useful for a relevant to any investigation or enquiry into any alleged or suspected evasion of any tax payable under this Act by any Dealer or person under the Act or to examine any accounts, registers, documents or other refolds in the possession of such person.

Section 48 conveyed certain powers of the Civil court upon the authorities specified in Chapter-II of the Act like, discovery and inspection; enforcing the attendence of any person including any officer of a banking company and examining him on oath or affirmation, compelling the production of books of account or other documents; and issuing commission. Sub-section 2 of the aforesaid provision conferred on the authority referred to in Sub-section (1) the power to impound or retain in his custody for such period as he may think fit any books of account or other documents produced before him in a proceeding under this Act.

From the survey of the Acts and Rules, it appears that the legislature with a view to check and prevent evasion of sales tax introduced Section 46 in the staute. The object of the legislation is to levy and collection of tax on sale and purchase of goods in the State of Assam. The legislature sanctioned an express grant of statutory power on the authority to realise tax. The express grant of statutory power carries with it by necessary implication of the authority to use all reasonable means to make such grant effective (Sutherland''s statutory construction). Section 46 is essentially a mechanism for making the legislative measure effective. Section 46 is an economic move to plug evasion of tax payable under the Act (sic) adjustment are inherently complex in nature therefore larger latitude are to be given to the legislature in the matter of formulating the economic measure. Justice Steward speaking on behalf of the majority in San Antonio Independent School District v. Rodriguez reported in 411 US 1 , 109. 36 L.ED Second (16.48,87) observed " No scheme of taxation, whether the tax is imposed on proper, income or purchases of goods and services, has yet been devised which is free from all discriminatory impact. In such complex arena in with (sic) perfect alternative exist, the Court does well not to impose too rigorous a standard of scrutiny creating lest all local fiscal scheme become subject of criticusm under Equal protection Clause" The burden proving discrimination or infringement of fundamental right is always heavy and more onerous still when a taxing state is under attack. The legislative power to (sic) is subject to the constructions and restrictions imposed by the Constitution. However the constitutional limitation on exercising of taxing power will not be inferred or implied but must be distinctly expressed. The presumption is always in favour of the constitutionality of an enactment since it must be assumed that the legislature knows well and rightly appreciates the needs and that the laws are directed to meet the problems manifest by experience "It is the duties of the judge to apply the laws not only to what appears to be regulated by experience of deposition, but to all the cases where a just application of them may be made, and which appears to be comprehended either within the con(sic) that may be gathered from it" Domat''s Civil Law Cushing''s Edition), Vol-a.p.88

The Provisions contained in Section 46 can not inferred as a measure for levy and collection of tax on sale or purchase of goods specified in Article 286 of the Constitution of India. A sale, lo be a sale in the course of inter state (sic) there must be transportation of goods from one State to Anr. under the contract of sale or purchase. As observed in Bengal Immunity Company v. Stale of Bihar reporter in (1955) 6 STC 446 " a sale could be said to be in course of inter state trade only however when two conditions concurred... (i) A sale of goods and (ii) a transport of goods from one State to Anr. under the contract of sale, unless both these conditions are satisfied there can be no sale in the course of inter-trade. Whether the transaction fulfills the conditions of inter State sale is a question of fact and which can be enquired into and ascertained at the check post by the concerned officer. The measure adopted u/s 46 of the Act is regulatory in character. The word regulation can not be considered in any rigid or inflexible formula, it is a word of great importance having wide scope and meaning. The restriction imposed in Section 46 is regulatory in nature and can not be termed as restriction so as to attract Article 301 or 304(b) or 19(1)(g) of the Constitution of India. The restriction cited at the bar is not the restriction which directly and immediately restrict the free flow or movement of trade. Reasonableness is to be tested in the content of the surrounding circumstances. The legislature in its wisdom armed the taxing authority with Section 46 to seal the evasion and make taxation system effective. The concept of economic barrier is to be looked at in proper perspective and adapted with the changed situation. What was considered as an economic barrier at one point of time has now ceased to be so.

The possibility of abuse, as highlighted by Dr. Saraf cannot be a ground for striking down a statutory provision as unreasonable. A mere likelihood of abuse of the power by the creature of the statute is not the test for determining the reasonableness of the limitations imposed by law. If however the statutory power or discretion is abused or misused the person aggrieved shall have his remedy against the illegal action but that would not be a ground for invalidating the statute itself.

The decisions cited by Dr. Saraf in XIV STC Trading Corporation of India Ltd. and Anr. v. State of Mysore (SC) Orient Paper Industries Ltd and Anr. reported in 97 STC 490 (Orissa High Court) and Utkal Galvanisers Limited v. Commissioner of Commercial Taxes, Orissa reported in 104 STC 222 are all decisions on facts and therefore are not applicable in the instant case.

The Writ Petition therefore fails and it is dismissed. But in the circumstances there will be no order as to costs.