Goodhealth Agro Tech. Ltd. vs Commercial Tax Officer and Another

S. Parvatha Rao, J.—The petitioner seeks a writ of mandamus or any other appropriate writ, etc., declaring the action of the respondent (first respondent) in detaining the vehicle No. KA. 36-1880 transporting sunflower oil to the petitioner on November 7, 1995 and issuing notice dated November 8, 1995, for payment of "tax" on the said consignment as illegal and arbitrary and directing the first respondent to release the present consignment forthwith and also to direct the respondents not to detain the future consignments of the petitioner on the basis of notice dated November 8, 1995, etc.

The petitioner, a company "engaged in the business of vegetable oil refinery and sale of such oils", is a dealer under the Andhra Pradesh General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. For its business it purchases various oils including sunflower oil from other States and also within the State. In the affidavit in support of the present writ petition, its director, Mr. Khailashchand Agarwal, states that in the recent past the authorities in the first respondent''s office collected sales tax from the petitioner on incoming consignment of oils, though there were no irregularities in the transport documents, on the ground that there was shortfall of revenue in the Nalgonda Division and that these taxes were collected under threat of detention of vehicles by merely issuing cash receipts, even though no irregularities were there, and no proceedings were issued in support of the collection. It is further stated that to avoid undue expenditure on detention of vehicles, the petitioner had paid the tax to the first respondent on earlier occasions and it was being assured that this practice would end shortly. The immediate action for filing the present writ petition is that on November 8, 1995, the first respondent issued notice demanding "tax" of Rs. 6,150 on the consignment of sunflower oil being transported to the petitioner from Raichur in lorry No. KA. 36-1880. In the said notice it is mentioned that the first respondent was instructed to collect tax on oil and oil-seeds by the Deputy Commissioner (Commercial Taxes), Nalgonda Division, during her visit on October 26, 1995, as there was lot of evasion in oil trade. It is submitted on behalf of the petitioner that this notice is illegal since there are no specific allegations in respect of the said consignment. It is stated that the first respondent is neither an authority at the check-post nor assessing authority of the petitioner, and that he is only an officer having jurisdiction over the areas through which the vehicle passes, and that he detained the vehicle at observation point Bandamedipalli and indicated that he would no allow the vehicle to pass unless tax was paid. It is further stated that the notice was silent about the detention, but the vehicle was held up at the observation point for the purposes of collection of "tax" of Rs. 6,150. It is also asserted that the petitioner has not indulged in any evasion of tax.

This writ petition discloses an unfortunate tendency of the Sales Tax Department to extract monies somehow or the other in its misguided zeal "to safeguard the revenue due to the Government". This tendency has to be nipped in the bud. No person can be taxed under our Constitution except under the authority of law.

Notice before admission was ordered on November 10, 1995 and in view of the reference made to the instructions of the Deputy Commissioner (Commercial Taxes), Nalgonda, we directed that the said Commissioner shall be impleaded as second-respondent in the writ petition. The learned Government Pleader for Commercial Taxes took notice.

In the counter-affidavit filed by the Deputy Commissioner of Commercial Taxes, i.e., the second-respondent herein, the justification for the exaction is stated as follows :

"It is submitted that there is general evasion of sales tax in trade like groundnut, groundnut seed oil, sunflower seed oil, cotton-seed oil. To prevent loss of revenue in the trade of the above goods coming into the State of A.P., the tax is being collected to protect State revenue and to check evasion of tax. There is no mala fide intention in this practice or in the procedure. The intention is to safeguard the Revenue due to the Government."

She further states that the Inspecting Officer had requested the petitioner to pay "the tax only" and that such tax collected is being informed to the concerned assessing authority for the purpose of assessment. The learned Government Pleader is unable to explain what tax was due from the petitioner to be paid in respect of the consignment of sunflower oil in question at the inspection and detention point. No tax could be collected merely on the goods that were being transported under proper papers. In paragraph 3 of the counter-affidavit, filed by the first respondent, it is stated as follows :

"The Deputy Commissioner (C.T.), Nalgonda during her camp at Mahaboobnagar visited the observation point on October 26, 1995 and after perusal of the registers maintained at the observation point has asked to collect the sales tax on the edible oils coming into the State from other States to safeguard the revenue, which is being complied with."

As regards the "tax" that is sought to be collected, it is further explained as follows :

"In this case, there is no detention of the vehicles carrying the goods, and the sales tax collected on such consignment is nothing but an advance collection and cash receipt issued contains all the details about the consignment. The intention of such collection of tax is that the consignment is sure to be accounted for by the dealer. Further, if the consignment is not supported by proper documents, there is separate provision for action u/s 29(6A) of the Andhra Pradesh General Sales Tax Act."

But, it is not the case of the respondents herein that the consignment in question has not been supported by proper documents. In fact, it is stated in the counter-affidavit of the first respondent that on November 10, 1995, the driver (of the vehicle) approached him and reported that he was not having sufficient amount to pay the sales tax and requested him to allow the vehicle to go and that accordingly the vehicle was allowed to leave the observation point, which is incredible. The first respondent state : "Accordingly, the vehicle was allowed to leave the observation point" (para 5 at page 5 of the counter-affidavit of the first respondent). And that was on November 10, 1995. Thus, it is not in dispute that from November 7, 1995 to November 10, 1995, the vehicle was not allowed to leave the observation point. It is to be noticed that in fact the present writ petition was presented November 9, 1995 and, as already stated above, notice before admission was ordered on November 10, 1995 and the learned Government Pleader for Commercial Taxes took notice on behalf of the respondents on that date and requested time till November 13, 1995, for obtaining instructions. The first respondent was asked to establish on what authority he had issued the impugned notice dated November 8, 1995 and its legality; and the learned Government Pleader was directed to communicate the same to the respondents. The learned counsel for the petitioner states that as per his instructions the vehicle was released only on November 11, 1995 after the first respondent came to know about the directions of November 10, 1995 of this Court in the present writ petition and that it is hard to believe that the first respondent released the vehicle on the driver reporting that he did not have sufficient amount to pay the sum demanded by the first respondent. We leave it at that.

What is important is the manner in which the respondents seek to defend the admitted demands being made by them. The first respondent states this in his counter-affidavit :

"......... it is submitted that the instructions of the Deputy Commissioner (C.T.), Nalgonda, for collecting of sales tax is not restricted to a particular dealer and no allegation of evasion by a particular dealer. Instructions are to collect sales tax on all such consignments.

In this particular case the driver of lorry No. KA. 36/1880 has been asked to pay sales tax on the sunflower oil being consigned from Raichur to Hyderabad." (Emphasis [Here italicised.] supplied).

He has not stated how sales tax is leviable on such consignments. He however describes the impugned notice as "nothing but an appeal asking to pay tax of Rs. 6,150". The impugned notice itself reads as follows :

"Please take notice that during the course of check of the vehicular traffic at observation point Bandameedipally, Mahbubnagar on November 7, 1995, at 11.50 P.M. a vehicle bearing No. KA. 36/1880 is found carrying sunflower oil from Raichur to Hyderabad. The consignee of the oil is M/s. Goodhealth Agro Tech. Ltd., Hyderabad and consignor M/s. Jagadish Industries, Raichur. There was lot of evasion in oil trade. The Deputy Commissioner (C.T.), Nalgonda Division, Nalgonda, during the visit at Mahbubnagar on October 26, 1995, has instructed to collect sales tax on oils and oil-seeds to safeguard the revenue legitimately due to the Government. Hence you are requested to pay tax of Rs. 6,150 at 2 per cent on the value of goods of Rs. 3,07,520."

The second respondent in her counter-affidavit justifies her instructions as follows :

"Only to safeguard the revenue due to the Government, instructions are issued in this regard on consignments of goods coming from Karnataka State for payments of taxes at the check-posts and observation points.

In the particular instance, the Inspecting Officer has requested the petitioner to pay the tax only."

It is not stated how any tax became leviable on the consignment in question. No provision of any statute or rule is relied upon in support of the demands for the payment of the alleged "tax".

We are satisfied that the coercive demands being made in the name of "tax" detaining the vehicles en route even though covered by necessary papers, are arbitrary exactions without any authority of law and are in violation of article 265 of the Constitution which mandates that "no tax shall be levied or collected except by authority of law". The State''s power to tax is derived from the Constitution and the proper authority to determine what should and what should not constitute a public burden is the Legislature of the Yadlapati Venkateswarlu Vs. The State of Andhra Pradesh and another, . In Harivansh Lal Mehra Vs. State of Maharashtra, , the Supreme Court held that no customs duty could be levied on the basis of administrative instructions and observed :

"........... Every levy of customs duty or any other tax must be sanctioned by law."

This was reiterated by the Supreme Court in Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu [1993] 90 STC 1; Cooperative Sugars (Chittur) Ltd. Vs. State of Tamil Nadu, , wherein it was held that a stipulation in a G.O. could not be relied upon for sustaining the levy of State''s sales tax and that "a t ax can be levied only by a statutory provision". In Commissioner of Sales Tax, U.P. Vs. Auriaya Chamber of Commerce, Allahabad, , the Supreme Court held that tax collected and levied without the authority of law was refundable to the assessee. In HMM Ltd. and another Vs. The Administrator, Bangalore City Corporation, Bangalore and another, , the Supreme Court was dealing with a case of levy of octroi duty by notification u/s 98(2) of the City of Bangalore Municipal Corporation Act, 1949. The Supreme Court held that under the said notification mere physical entry into the city limits would not attract the levy of octroi unless goods were brought in for use or consumption or sale, and that on the facts of that case octroi was wrongly collected. The Supreme Court further held as follows in the context :

"........... Realisation of tax or money without the authority of law is bad under article 265 of the Constitution. Octroi cannot be levied or collected in respect of goods which are not used or consumed or sold within the municipal limits. So these amounts become collection without the authority of law. The respondent is a statutory authority in the present case. It has no right to retain the amount....."

The law as to when and how sales tax could be collected is clearly stated by the Supreme Court in Khazan Chand and Others Vs. State of Jammu and Kashmir and Others, as follows, dealing with the provisions in the Jammu and Kashmir General Sales Tax Act, 1962 :

"......... Collection of tax by the State may be either after the liability is quantified by assessment or may be prior to actual assessment by requiring the assessee to pay before any assessment is made the amount of tax admitted to be due and payable by him. This is done by making provisions such as those for advance payment of tax and for self-assessment contained in the Income Tax Act, 1961. This is also what sub-section (3) of section 8 of the Act does by requiring that the quarterly tax payable on the basis of a quarterly return required to be furnished by sub-section (2) of section 7 shall be paid before furnishing such return. This is a mode of collection of revenue in advance before quantification of the actual tax liability and the Legislature would be well within its right and would be competent to provide for recovery of such amount if it is not paid by the prescribed time."

In the present case neither the Andhra Pradesh General Sales Tax Act, 1957 nor the Central Sales Tax Act, 1956 nor the Rules made thereunder provide for collection of sales tax in the manner sought by the respondents. The demand on the basis of 2 per cent on the value of the goods under transport is not supported by any authority of law - not even by any Government Order or direction, whatever the legality of it. It is equally obvious that the detention of the vehicle from November 7, 1995 to November 10, 1995, i.e., as per the respondents, is grossly arbitrary and an abuse of power. In the event, the claims of good intentions and absence of mala fides are out of reckoning. This Court undoubtedly will uphold any action of the authorities under the sales tax laws that is within the ambit of law and in legitimate exercise of their powers in bringing to book dealers who fall foul with the law, but will not countenance any action contrary to law, which is not legitimate or which is arbitrary and hits an honest dealer below the belt. Targets for collection of tax have to be realistically fixed and have to be achieved in conformity with the law. Collection of tax in advance also has to be as provided by law.

In the circumstances, the writ petition is allowed with costs. As the consignment in question was already released, no direction in that regard is necessary. Advocate''s fee Rs. 350. In addition the respondents shall pay exemplary costs of Rs. 1,000 to the petitioner. A copy of this order shall be communicated to the Commissioner of Commercial Taxes, A.P.

Writ petition allowed.