1993 Supreme(SC) 770

SUPREME COURT OF INDIA
B.P. Jeevan Reddy and S.P. Bharucha, JJ.
Civil Appeal No. 1410 of 1993
Decided On: 09.09.1993
State of Haryana and Ors. Appellants
Vs.
Sant Lal and Anr. Respondent
Counsel for the Parties
For Appellant/Petitioner/Plaintiff: Abhishek Manu Singhvi, Senior Adv., Maninder Singh, Pushpinder Bansal and Indu Malhotra, Advs.
For Respondents/Defendant: B.S. Jain, H.D. Pathak and Vishnu Mathur, Advs.

Headnote:

Haryana General Sales Tax Act, 1973 - Sections 2(c), 37,38,38(1),38(2) - Haryana General sales Tax Rules, 1975 - Rule 53 - Consignments - Obtain a license - On instructions of their clients they arranged for booking of consignments to be transported by railway from aforesaid railway stations and obtained necessary documents in names of their clients similarly they took delivery of consignments on behalf of their clients at aforesaid railway stations and handed over same and documents relative thereto to their clients - For such services they were remunerated by their clients - By virtue of Sub-section (1) of said Section 38 of Haryana General Sales Tax Act they were obliged to furnish information in respect of such consignments to and by virtue of Sub-section (2) they were debarred from carrying on their business unless they obtained a licence for purpose assessing authority under said Act - Sub-section (3) made them liable to imposition of a penalty in an amount equivalent to per cent of value of goods in respect of which particulars and information had not been furnished - Rule 48 of Haryana General Sales Tax Rules was made with reference to said Section 38 - It was contended in writ petition that respondents did not in course of their business come across invoices or cash memos so that they were not in a position to ascertain value of goods booked or taken delivery of through them - Obligation imposed upon them by said Section 38 was therefore not possible of performance - Petitioners in their written statements before High Court do not appear to have controverted averment that respondents in course of their business did not get all information which they were required by said Section 38 to furnish and for breach of which obligation they were exposed to a penalty - In written statements petitioners contended that respondents were known as dalals in common parlance and carried on well established business of acting at railway stations on behalf of various types of dealers - Dealers sent their goods for booking at railway stations through dalals and all formalities were performed by dalals for sending goods to their destinations - Similarly when goods of dealers were received at railway station delivery was taken by dealers through dalals - It had been observed that generally bogus transactions were carried on by various dealers - Goods were booked in assumed names and these were addressed to consignees in assumed names and in this way revenue of State in form of tax was jeopardized - It was contended that trade of getting goods booked with railways on behalf of dealers and getting delivery of goods from railway by dealers through dalals is ancillary and incidental to business of sale and purchase of goods - State Legislature is empowered under Entry of List in Schedule to Constitution to enact law for taxation on sale or purchase of goods - Livelihood of petitioners is not taken away in any way - High Court found that respondents were admittedly neither dealers nor liable to pay sales tax under said Act - No foundation however remote had been laid in written statements to warrant finding that respondents were not strangers to sale or purchase of goods handled by them on behalf of their clients - Question therefore was whether State Legislature was competent to legislate in respect of respondents - High Court after reference to various authorities that a clearing or forwarding agent or dalal was a stranger to transaction of sale or purchase of goods - He was not liable to pay sales tax nor was he responsible for its evasion inasmuch as he was not a dealer - Held, Court part with this judgment Court must give due attention to decision of this Court in Chowringhee Sales Bureau Ltd v CIT which was cited by - This was a case where definition of dealer in Bengal Finance Act was questioned as being ultravires powers of State Legislature on ground that it purported to levy a tax on an auctioneer a person who was neither a seller nor a purchaser - It was that in view of wide amplitude of power of state Legislature to impose tax on transactions of sale of goods it was impermissible to read a restriction on power of State Legislature as would prevent it from imposing tax on an auctioneer who carried on business of selling goods and had in customary course of business authority to sell goods belonging to principal - What was sought to be taxed was transaction of sale of goods - If there was a close and direct connection between transaction of sale and person made liable for payment of sales tax statutory provision providing for such levy of sales tax was not offensive - There can be no doubt that State Legislature would be entitled to impose sales tax upon a person who carries on business of selling goods and who has in customary course of business authority to sell goods belonging to principal - A clearing or forwarding agent dalal or person transporting goods does not carry on business of selling goods and does not have in customary course of his business authority to sell goods belonging to dealer whose goods he books or receives - As Court have already stated there has to be a reasonable and proximate connection between transaction of sale and clearing or forwarding agent dalal or person transporting goods before State Legislature can in exercise of power to levy sales tax enact legislation concerning him - Court are not satisfied that there is such close and direct connection between transaction of sale of goods by a dealer and clearing or forwarding agent or dalal who books or receives such goods or a person who transports goods within meaning of said Section 38 - It is not every clearing or forwarding agent or dalal or person transporting goods who come into possession of particulars and information required to be furnished under said Act and Rules for sub-section itself casts that obligation only upon such clearing or forwarding agents dalal or persons transporting goods who during course of their business handle documents of title to goods for or on behalf of any dealer - It is therefore at best only such clearing or forwarding agents or dalals or other persons transporting goods who handle documents of title to goods for or on behalf of dealers who can be said to have a connection with transaction of sale thereof - It is only such clearing or forwarding agents dalals or other persons transporting goods who can be required to obtain from assessing authority under said Act a licence for carrying on their business and be made liable to cancellation of such licence and penalty for breach of their obligations under said Act - Appeal Dismissed