IMPORTANT POINT
Provisions of Sections 57, 58 and 59 of the M.P. Commercial Tax Act held as intra vires Entry 54 of List II of Seventh Schedule to the Constitution of India.

JUDGMENT

Kapadia, J.-These two civil appeals raise an important question of constitutional significance centering around Entry 54 of List II of the Seventh Schedule to the Constitution of India as also the extent and purport of the ancillary power vested in the State Legislature which has enacted the Madhya Pradesh Commercial Tax Act, 1994 (hereinafter referred to as "the Act"). The said Act levies tax on sale and purchase of goods. Purportedly, under the ancillary powers/powers incidental to the levy of tax on sale and purchase of goods sections 57, 58 and 59 are enacted. Under section 57 the Commissioner is empowered to call for information from clearing and forwarding agents to give certain particulars in respect of transaction with any dealer. By the impugned judgement, the Madhya Pradesh High Court has struck down the provisions of sections 57, 58 and 59 of the said Act on the ground of lack of legislative competence, relying on, the following the judgment of this Court in the case of State of Haryana v. Sant Lal & Anr. reported in [(1993) 4 SCC 380].

2. The original petitioners Swastik Roadways were carrying on business of clearing and forwarding agents. They used to receive goods for being consigned to places outside the area of their operation. They also used to receive goods from place to place outside their principal place of business for delivery to consignees. In short, they were clearing and forwarding agents engaged in the business of transporting goods.

3. On 1st April, 1995, the Madhya Pradesh Commercial Tax Act, 1994 came into force. It received the assent of the President on 7th January, 1995. In the present case as stated above sections 57, 58 and 59 have been challenged. As per the said three sections the petitioners were required to furnish information including the statement of accounts to the Commissioner as he may require in respect of transactions of any dealer with them (clearing and forwarding agents) provided clearing and forwarding agents handled the documents of title to the goods or provided they transported the goods. By virtue of section 57(2), in case of failure to furnish information a penalty is provided of an amount equal to three times the amount of tax payable in respect of the goods involved in the transaction and which appear to have been evaded by the owner of the goods. Section 58 speaks of control on clearing and forwarding agents to prevent or check evasion of tax. Further the State Government is empowered to issue directions in that regard, in order to ensure that such persons maintain registers concerning their business and send intimation about such business in a proforma.

4. By the impugned judgment, the High Court took the view that by virtue of these provisions, the carriers and clearing and forwarding agents were sought to be treated as dealers though they have nothing to do with the sale or purchase of goods, and for evasion of tax by their principal, they were sought to be penalised to the extent of a sum equal to three times the amount of tax payable in respect of the goods involved in the transaction. Following the judgment of the Supreme Court in the case of Sant Lal (supra), the High Court struck down the above three provisions as unconstitutional and beyond the powers of the State Legislature under Entry 54 of List II of the Seventh Schedule to the Constitution of India. Being aggrieved, the Department has come by way of appeal to this Court.

5. Mr. P.C. Sen, learned counsel appearing on behalf of the appellants submitted that there is a very narrow controversy in this case. He submitted that both sides agreed that the impugned Act is enacted to levy tax on sale and purchase of goods. That both sides agreed that the incidence of tax is on the dealer. However, the dispute is whether clearing and forwarding agents have proximate connection with sale and purchase of goods or with evasion of tax by the dealers. Mr. Sen contended that in an appropriate case of tax evasion by the