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2000 Supreme(P&H) 1584
PUNJAB AND HARYANA HIGH COURT
G.S. Singhvi and Nirmal Singh, JJ.
Amrit Banaspati Company Ltd. - Petitioner
Versus
The State of Punjab - Respondents
C.W.P. No. 304 of 2000.
Decided On : 22 December, 2000
For the Petitioner:Mr. M.L. Sarin, Senior Advocate with Mr. Hemant Sarin, Advocate and Mr. B.K. Jhingan, Mr. Avnish Jhingan, Mr. D.S. Brar, Mr. K.L. Goyal, Mr. G.R. Sethi, Mr. Kishan Singh, Mr. M.K. Dogra and Mr. S.N. Chopra, Advocates.
For the Respondents:Mr. Rupinder Khosla, Deputy Advocate General, Punjab.
The power to enact laws for the prevention of evasion of tax is within the legislative competence of the State under Entry 54 of List-II of the Seventh Schedule of the Constitution.
Headnote:
Whether the amendment made in Section 14-B of the Punjab General Sales Tax Act, 1948 (for short, the 1948 Act) vide notification dated 29.9.1999 to check the evasion of tax by the dealers in connivance with the transporters are ultra vires to these legislative powers of the State under Article 246(3) read with Entry 54 of List-II of the Seventh Schedule of the Constitution and are violative to the petitioners fundamental right to trade and business guaranteed under Article 19(1)(g) of the Constitution of India or infringe their right to freedom of trade, commerce and intercourse guaranteed under Article 301 of the Constitution, is the main question that arises for consideration in these petitions filed for grant of a declaration that sub- sections (6)(ii) and 7(iii) of Section 14-B of the 1948 Act are unconstitutional and also for quashing of the action taken by the authorities of the Excise and Taxation Department, Punjab, to detain their goods/vehicles.
Fact of the Case:
The petitioners, who are dealers and transporters, challenged the constitutional validity of sub-sections (6)(ii) and (7)(iii) of Section 14-B of the Punjab General Sales Tax Act, 1948 (the 1948 Act), as amended by a notification dated September 29, 1999. They argued that these provisions were ultra vires to the legislative powers of the State under Entry 54 of List-II of the Seventh Schedule of the Constitution and violative of their fundamental right to trade and business under Article 19(1)(g) of the Constitution. They also contended that the impugned provisions were confiscatory in nature and imposed unreasonable restrictions on their freedom of trade and commerce. The State, on the other hand, contended that the impugned provisions were necessary to prevent evasion of tax and were within the legislative competence of the State. The State also argued that the provisions were not confiscatory and did not impose unreasonable restrictions on the petitioners' freedom of trade and commerce.
Finding of the Court:
The Court held that sub-section (6)(ii) of Section 14-B of the 1948 Act was intra vires to the provisions of the Act, as it was within the legislative competence of the State to enact laws for the prevention of evasion of tax. However, the Court held that sub-section (7)(iii) of Section 14-B was partly unconstitutional, as it made the imposition of a penalty equivalent to 50% of the value of the goods mandatory, irrespective of the nature of the transaction under which the goods were being transported. The Court also held that the impugned provisions were not confiscatory in nature and did not impose unreasonable restrictions on the petitioners' freedom of trade and commerce.
Issues: 1. Whether sub-sections (6)(ii) and (7)(iii) of Section 14-B of the Punjab General Sales Tax Act, 1948 (the 1948 Act), as amended by a notification dated September 29, 1999, were ultra vires to the legislative powers of the State under Entry 54 of List-II of the Seventh Schedule of the Constitution? 2. Whether the impugned provisions were violative of the petitioners' fundamental right to trade and business under Article 19(1)(g) of the Constitution? 3. Whether the impugned provisions were confiscatory in nature and imposed unreasonable restrictions on the petitioners' freedom of trade and commerce?
Ratio Decidendi: 1. The power to enact laws for the prevention of evasion of tax is within the legislative competence of the State under Entry 54 of List-II of the Seventh Schedule of the Constitution. 2. A provision that makes the imposition of a penalty mandatory, irrespective of the nature of the transaction under which the goods are being transported, is unconstitutional. 3. The impugned provisions were not confiscatory in nature and did not impose unreasonable restrictions on the petitioners' freedom of trade and commerce.
Final Decision: The Court declared sub-section (6)(ii) of Section 14-B of the 1948 Act to be intra vires to the provisions of the Act, and declared sub-section (7)(iii) of Section 14-B to be partly unconstitutional. The Court also directed the State to make appropriate provision for laying a time schedule for passing orders under Section 14-B(7)(iii).
G.S. Singhvi, J. - Whether the amendment made in Section 14-B of the Punjab General Sales Tax Act, 1948 (for short, the 1948 Act) vide notification dated 29.9.1999 to check the evasion of tax by the dealers in connivance with the transporters are ultra vires to these legislative powers of the State under Article 246(3) read with Entry 54 of List-II of the Seventh Schedule of the Constitution and are violative to the petitioners fundamental right to trade and business guaranteed under Article 19(1)(g) of the Constitution of India or infringe their right to freedom of trade, commerce and intercourse guaranteed under Article 301 of the Constitution, is the main question that arises for consideration in these petitions filed for grant of a declaration that sub- sections (6)(ii) and 7(iii) of Section 14-B of the 1948 Act are unconstitutional and also for quashing of the action taken by the authorities of the Excise and Taxation Department, Punjab, to detain their goods/vehicles.
2. The respondents have controverted the petitioners assertion that the State does not have the power to take the legislative measures like those contained in the notification dated 29.9.1999 by stating that the power conferred upon the State to legislate on the subject of levy and collection of sales tax includes the power to legislate on ancillary and incidental matters and the provisions made for plugging the evasion of tax by unscrupulous traders falls within the ambit of Entry 54 of List-II of the Seventh Schedule read with Article 246(3) of the Constitution.
3. According to the respondents, the amended provisions are meant for checking the evasion of sales tax by collecting information through electronic network installed at Information Collection Centres established at major and strategic places on the Inter-State Borders with the neighbouring States. These centres collect data of goods transported in and out of the State of Punjab and such datas are verified from the account books of dealers of Punjab in order to establish their accountability at the time of assessment. The respondents have also pleaded that the impugned provisions do not encroach upon the right of the petitioners to carry on trade and business or their freedom of trade and commerce.
4. Before adverting to the arguments of the learned counsel for the parties, we may notice the relevant statutory provisions. Section 14-B was inserted in the 1948 Act by Punjab Act No. 29 of 1954 with effect from December 2, 1954. This was first substituted by Punjab Act No. 28 of 1965 with effect from April 1, 1966 and again by Punjab Act No. 9 of 1974. Sub-section (6) of Section 14-B, except its proviso, was again substituted vide Punjab Act No. 1 of 1994 with effect from September 29, 1993. The last substitution has been made vide notification dated September 29, 1999. For the purpose of determining the constitutionally of Section 14-B(6)(ii) and (7)(iii), it would be useful to refer to unamended Section 14-B(6) and (7) and amended Section 14-B(1) to (7). The same read as under :-
Unamended Section 14-B (6) & (7)
"(6) If the officer incharge of the check-post or barrier or other officer as mentioned in sub-section (2) has reasons to suspect that the goods under transport are meant for trade and are not covered by proper and genuine documents as mentioned in sub-section (2) or sub-section (4), as the case may be, the driver or other person incharge of the goods vehicle or vessel required to stop the vehicle or vessel, under Sub-section (3) fails to stop the same, or that the person transporting the goods is attempting to evade payment of tax due under this Act, he may for reasons to be recorded in writing and after hearing the said person, the driver, or other person incharge of the goods vehicle, order the detention of the vehicle or vessel along with the goods for such period as may reasonably be necessary and shall allow the same to be transported only on the owner of goods or his represent
