Orissa High Court
Mohammed Habib Ummer Sahigir And Ors. vs Commissioner Of Sales Tax And Ors. on 3 August, 1994
Equivalent citations: 1994(II)OLR410
Author: G.T. Nanavati
Bench: G.T. Nanavati, D.P. Mohapatra
JUDGMENT G.T. Nanavati, C.J.
1. All these petitioners involve a common question of law and, therefore, they are disposed of together by this common judgment.
2. The petitioners are dealers in betel-nuts and other goods They are so registered under the Orissa Sales Tax Act and the Central' Sales Tax Act. They (except the patitioner in OJC No. 6525/9J) purchase betel-nuts from registered dealers of other States either by placing purchase orders directly from Cuttack or through their branches or against in those States. The goods thus purchased are despatched from those States by trucks or other transport vehicles. They carry with them invoices, way-bills and other documents. The way-Dills specify names of the consignors, names of the consignees and description of the goods including quantity or weight and value of the goods. It is the petitioners' case that even whom the goods are thus accompanied by proper documents, the officer-in-charge of the check- posts or barriers misusing their power Under Section 16-A of the Orissa Sales Tax Act, 1947 (hereinafter referred to as "the Act") read with Rule 94 of the Orissa Sales Tax Rules, 1947 (hereinafter called "the Rules") unreasonably detain the goods and on the plea that value of the goods is not correctly mentioned in the way-bills and the goods may not be accounted for in future because of such under-valuation, while selling them within the State, demand and under pressure recover sales tax in an arbitrary and illegal manner. It is also their grievance that before collecting sales tax they are not given notice as required by Rule 94, nor reasons are recorded for the apprehension that there is likelihood of evasion of tax in respect of those goods. They, therefore, want this Court to issue a writ of mandamus or any other appropriate order directing the authorities to refund the sales tax so collected in respect of the consignments which are the subject-matter of these petitions. The petitioners have also challenged the validity of Sub secs. (9) and (10) of Section 12 of the Act. But at the time of hearing of the petitions, learned advocates appearing for the petitioners stated that they are not pressing the same and the petitioners will challenge the same as and when that becomes necessary. The prayer clause does not contain a prayer for declaring the said provisions as illegal or ultra vires,
3. The opposite parties in their counter affidavits have tried to justify their actions by asserting that the same are in accordance with Rule 94 of the Rules. They have denied that the officers-in charge of the check posts or barriers do not record reasons in writing or give notice in the prescribed form before taking further action. They have also denied that the persons in charge of the vehicles are pressurised to pay sales tax. The Additional Commercial Tax Officer, Intelligence, Cuttack Intelligence Range, in his reply affidavit filed in OJC No. 1643 of 1993 has stated as under ;
"7. That on verification of the way-bill it was found that the purchase price of the betel-nuts has been grossly under- valued. As such there was an apprehension in the mind of the Department that the dealer bringing such goods, even though will sell the same at market prica, will show in his accounts and documents as if the goods has been sold slightly at higher price than the purchase price, in which case the revanue will lose tax worth of lakhs and crores of rupees.
8. That therefore the Officer-in-charge of the check-gate naturally issued a notice in form 68 after receipt of which the dealer/petitioner opted to pay tax assessed by the check-gate Officer."
He has further stated that:
"the goods once reach its destination Io9es its identity and the dealer can always claim in such an eventuality that the goods were purchased and sold at a lower price due to their inferior quality and in such an eventuality in case of regular assessment, the department will be left at large to prove its case of undervalue in absence of the goods in question at the relevant point of time."
4. The question that arises for consideration is as to whether Section 16-A and Rule 94 justify such an action on the part of the officers in-charge of check-posts or barriers. For ready reference, the relevant part of Section 16-A is quoted below :
"16-A. Establishment of check-post or barrier and inspection of goods while in transit-
(1) If the State Government consider it necessary that with a view to prevent evasion of tax under this Act, in any place or places in the State, it is necessary so to do, they, may by notification direct the setting up of a check-post or the creation of a barrier or both ; at such place or places as may be notified.
(2) At every check-post or barrier mentioned in Sub-section (1), or at any other place when so required by any officer empowered by the Commissioner in this behalf the driver or any other person in charge of a goods vehicle or boat shall stop vehicle or boat, as the case may be, and keep it stationary 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 vehicle or boat and inspect all records relating to the goods carried, which are in the possession of such driver or other person in charge who shall, if so required, give his name and address and the name and address of the vehicle or boat.
(3) The Officer-In charge of the check-post or barrier, or the officer empowered as aforesaid shall have power to seize and confiscate any goods which are under transport by a goods vehicle or a boat and are not covered by way-bill issued by the person who consigns the goods, in such form and containing such particulars as may be prescribed" :
Rule 94 provides for setting up of a check post or erection of barrier and the extent of powers which an officer in charge of such a chock post or barrier can exercise. Sub-rule (1) of that rule provides for setting up of a check post or erection of a barrier to enable traffic being inter- cepted, detained and searched. Sub-rule (2) provides that any officer not below the rank of an Assistant Sales Tax Officer can be put in charge of a check-post or a barrier. Sub-rules (3) and (4), which are relevant for our purpose, are quoted below ;
"(3) The driver or any other person in charge of a goods vehicle or boat shall stop the vehicle or boat, as the case may be, at a check-post or barrier and keep it stationary as long as it is reasonably required by the officer-in-charge of the check- post or barrier and allow examination of the goods in the vehicle or the boat and inspection of all the records connected with the goods in the vehicle or boat including way-bill in form XXXII.
(4) (a) If on such examination and inspection as referred to in Sub-rule (3), the Officer-in-charge of the check-post or barrier finds that the goods are not fully covered by a way bill in FORM XXXII or that the way bill is defective or incomplete or that there is evasion of tax, or apprehends, for reasons to be recorded in writing, that there is likelihood of evasion of tax is respect of the goods carried in any vehicle or boat, he shall, in order to prevent or check evasion of tax, serve on the owner of goods or any person on his behalf a notice in FORM VI-B giving him an opportunity to rectify the defect or omission, if any, or an option to pay such amount as may be indicated by the officer-in-charge of the check-post or barrier.
(b) If the owner of the goods or any person on behalf of such owner fails to pay the tax as required in Sub-rule (a) above, the Officer-in charge of a check-post or barrier shall order the unloading of the goods and seize and confiscate them after following the procedure in Sub-rule (6).
(c) Where the Officer-in-chargs of this check-post or barrier seizes the goods, he shall issue a receipt giving the description, quantity and approximate valuation of the goods unloaded and seized to the driver or other person in charge of the vehicle or boat and obtain his acknowledgement."
5. Sub-rule (3), before its amendment in 1991, did not contain the words "or apprehends, for reasons to be recorded in writing, that there is likelihood of evasion of tax". It appears that the said Sub-rule was amended in 1991 as a result of the decision of this Court in the case of M/s. Orient Paper and Industries Ltd. v. State of Orissa, 1991 (I) OLR 91. As regards the extent of power of an officer-in-charge of a check-post, this Court in that case has observed as under;
"......Once there is no defect in the way-bill or the same is not incomplete, their jurisdiction to detain the goods would arise only if there be evasion of tax. ....Once the way-bill is found free from defect and is complete, the question of detention goods can arise only if there be evasion of tax. As to this, it may be observed that question of evasion arises once the transaction has become taxable which would be when there has been either a sale or a purchase. As to the goods which are brought from outside the State, it is apparent that the same being in course of inter-State trade or commerce, the liability to tax depends upon the situs of the sale. As in most of these cases the movement of the goods would be pursuant contract of sale or purchase, the situs would be outside the State because of which the goods would suffer Central sales tax or the State sales tax in the exporting State. So far as this State is concerned, the question of payment of sales tax would arise if after the goods have been brought into the territory, there is a further sale. The occasion for the same would be after the goods have entered territory and not at the point of entry. So there would be hardly any occasion to detain such goods at the check-post. This apart when in the way-bill the registration number of the buyer of the goods is reflected there would be no justification for the check-post officers to entertain a belief that the payment of tax would get evaded by such person on his selling the goods subsequently. So, goods of such a person are not to be ordered for unloading except where the goods be such which are not fully covered by the way-bill or the way-bill be defective or incomplete. He would reiterate that on there two conditions being absent, the in-coming goods, specially those being brought by registered dealers, would not be detained at the check posts. Any effort of the officer of the check-post to do the contrary shall be deemed to be an unauthorised act which, it is the duty of the department to see, is not indulged by the concerned officers............"
6. We will, therefore, now consider whether as a result of Insertion of the words "or apprehends.........that there is likelihood of evasion of tax" the rule now enables an officer-in-charge of the check- post to collect sates tax on future sales at the check-post on the plea that there is likelihood of evasion of tax because while effecting sales subsequently within the State the dealer will take advantage of under-valua- ion of the goods in the way-bills and will not disclose the correct turnover of sales. Sec 16- A empowers the State Government to establish check- posts or barriers with a view to prevent evasion of tax, The officer-in- charge of a check-post or a barrier is tor that reason e powered to detain for a reasonable period the goods vehicle and to examine the contents and all the records relating to the goods carried. If the officer- in-charge ot the check-post or barrier finds the said goods are not covered by the way-bills in the prescribed form, then he is authorised to seize and confiscate the said goods. But he is put under an obligation to release those goods on payment of tax payable in respect of such goods. Section 16-A further specifically provides that no order of confiscation shall be made in respect of the goods which are not liable to payment of tax. In the light of this statutory provision, we shall have to consider what an officer-in-charge of a check-post can do acting under Rule 94 of the Rules. So far as detention of the vehicles for a reasonable period and examination of the goods and documents are concerned, the petitioners have no serious objection, What is objected is levy of sales tax on the goods so carried on the ground that in the way-bills correct valuation of the goods is not shown end, therefore, there is likelihood of evasion of tax in future in respect of those goods. The actions of the officers-in-charge of the check-posts are not sought to be justified in these cases on the ground that the way-bills were defective or incomplete as all the details which are required 10 be stated in the way-bills can be noticed in those way-bills. In OJC No. 1643 of 1993, the officer-in charge of the concerned check-post has filed a reply affadavit and made an attempt to show that the way-bills were detec- tive. Having seen those way-bills, we find that they were not defective and they did contain all the details and also the required certificate.
7. Relying upon the decisions in M/s. Sodhi Transport Co, v. State of U. P., AIR 1986 3C 1099, T.A.C.A. Association v. State of Kerala, 71 (1988) STC 332 (Ker); Sri Vinayak Store v. Sales Tax Officer, 85 (1992) STC 423 (Ori.); and Dunlop India Ltd. v. Officer-in-charge of Sales Tax Check Post, 87 (1992) STC 15 (Ker); it was contended by the learned counsel for the petitioners that the officsr-in-charge of the check post has no power to levy advance sales tax. It was further submitted that in all these cases no sales had taken place within the State and, therefore, no tax under the Act had become payable. Therefore the action of the officers-in-charge of the check-posts of collecting sales tax in advance, wrongly describing them as voluntary payments, should be regarded as unauthorised and illegal. We need not examine this larger question as we are of the opinion that what the otficers-in-charge of the check-posts have done in these cases is not at all justifiable. Establishment of check-posts and levy of tax may be permissible as ancillary or incidental to the levy and collection of tax under the Act, but it is difficult to appreciate how in case of a registered dealer who purchases from a registered dealer of another State and brings the goods from outside for sale within the State under proper way-bills and other documents, a reasonable apprehension can be entertained that the said goods are under-valued and the under- valuation will lead to evasion of tax in future. Assuming that Rule 94 does not go beyond Section 16-A and that it is permissible to take action as contended, the requirement of the rule is that there should be a reasonable apprehension. Any type of apprehension is not enough because the rule requires recording of reasons for the appehension. Therefore, unless the material or information in possession of the officer Justifies entertaining such apprehension, the action of the officer has to be regarded as unauthorised and illegal.
8. In all these cases the goods were regarded as under-valued on the basis of the local market price. There was no material before the officers-in-charge of the check posts to show that on any previous occasion any of these registered dealers had not correctly shown the turnover of their sales or the price at which they had sold such goods in the local market. Merely because th8 price at which the petitioners purchased their goods from outside the State was less, the check-post officers should not have jumped to the conclusion that the purchase price was deliberately shown less with a view to evade payment of proper sales tax in future. They appear to have acted on a mere suspicion that the registered dealars may not maintain proper accounts in respect of such goods and may show a lower sale price falsely representing that the goods were of poor quality. We emphasize that we are in these petitions concerned with registered dealers and it is not in dispute that they had purchased the goods from registered dealers of other States and that the goods brought within the State were for future sale. Moreover, in case of registered dealers it would not be difficult for the assessing authority to levy and collect the proper amount of tax at the time of regular assessment. If it is suspected by the check-post officer that a registered dealer may not later on show the correct turnover of goods or the tax payable by him, he can, after examining the rules and the accompanying documents, forward the information so gathered to the concerned assessing officer. On the basis of such date, the assessing officer would be in a position to assess and levy proper tax, as he has the power to examine the accounts of a registered dealer and to reject the same if they are found not to be correctly maintained.
9. On consideration of the materials placed before us, we are of the view that in these cases the power under Rule 94 of the Rules has been exercised by the concerned officers on suspicion and not because they reasonably apprehended that there was likelihood of evasion of tax. The action of the cheak-post officers in collecting take from the petitioners in respect of the transactions which are the subject- matter of these petitions must be recorded as unauthorised and illegal. We, therefore, allow all these petitions and declare the impugned action of the check-post officers as illegal. However, instead of ordering refund of the amounts which were thus unauthorisedly collected by the check-post officers, we direct that the Sales Tax Officers, while making regular assessment for the relevant assessment years, shall give credit of those amounts to the respective petitioners.
10. These petitions are allowed accordingly. There shall be no order as to cost.
D.P. Mohapatra, J.
I agree.