1. The applicants in all the three cases are the same. The points involved are identical. The cases, therefore, have been heard analogously and this judgment shall govern all of them.
2. RN-1 of 1989 is an original application filed before the Tribunal.
The other two cases arise out of two writ applications under Article 226 of the Constitution of India filed before the High Court which have since stood transferred under the provisions of the West Bengal Taxation Tribunal Act, 1987.
3. The case of the applicants in RN-1 of 1989 may be briefly stated thus : The applicant No. 1 is an existing company within the meaning of the Companies Act, 1956, having its registered office in Bombay. The company carries on business as manufacturer and seller of various consumer goods as also of industrial products. It has its factories all over India including three in West Bengal and branches in Calcutta, Delhi, Madras and Bombay. The company has appointed a number of clearing and forwarding agents in each State where goods are stored and then despatched to different destinations as per company's instructions. The godowns of the clearing and forwarding agents are duly recorded as places of storage in the registration certificate of the company. Even the goods manufactured in its other factories located outside the State of West Bengal or goods stored in the godowns of the various clearing and forwarding agents, have to be brought for distribution through the marketing network by way of branch transfers involving inter-State carriage of goods. The petitioner-company is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the BFST Act, 1941"), West Bengal Sales Tax Act, 1954 (hereinafter called "the Act of 1954") as also under the Central Sales Tax Act, 1956 (hereinafter called "the CST Act").
4. The company in the regular course of the business has to transfer goods from its factories or clearing and forwarding agents' godowns situated outside the State to the clearing and forwarding agents in or around Calcutta. Between 26th January, 1989, and 10th February, 1989, four consignments of detergent powder and cakes were being transferred from the applicant-company's factory at Chindwar, Madhya Pradesh to Calcutta, The said consignments were accompanied by respective consignment notes and other related documents which clearly indicated not only the quantity and value of the goods transported but also that the consignments were only the branch transfer, no sale being involved at all.
5. In accordance with Rule 15A of the West Bengal Sales Tax Rules, 1954, framed under the Act of 1954, a registered dealer is authorised to obtain form IV-B from the appropriate Commercial Tax Officer. By reason of the company's huge turnover and substantial contribution by way of sales tax and its unimpeachable records of compliance of all statutory requirements, it has been enjoying the facility of obtaining declaration forms in form IV-B commonly known as blank permits.
6. The practice usually followed is that when trucks carrying goods in the course of inter-State movement, enter into the territory of West Bengal, the driver of the vehicle carrying goods sent by the company by way of stock transfer, would report to the agent of the company at a spot near the check-post. The said agents have with them the permits to be used by the company at the check-post. The driver shall collect a signed declaration form from the agent with regard to consignments being carried in the truck and it is then presented along with other relevant documents to the check-post authority. The practice is approved by the authorities.
7. In the instant case the consignments were being carried by new transporters and the drivers being unaware of the system of operation, reached the check-post carrying the consignments without, however, contacting the applicants' agents and the agents not knowing of the arrival of the vehicles, could not take steps for making out the road permits on the blank forms already issued by the authorities to the applicant-company. As a result, although the consignments were accompanied by all other relevant documents, the drivers could not produce the declaration form or permit in form IV-B before the check-post authority at the time of entry.
8. On the 26th January, 1989, 8th February, 1989, and 10th February, 1989, the trucks along with the goods were seized at the Duburdih check-post, Asansol charge, allegedly on the ground of absence of import permits. The seizures were purported to be made by the respondent No. 3 under Section 7(1)(ii) of the Act of 1954, for contravention of Section 6 of the said Act and the rules framed thereunder. After such seizure the Commercial Tax Officer at the check-post issued notices under Rule 17A(2) of the West Bengal Sales Tax Rules, 1954, for determination of value of seized notified commodities and showing cause why penalty under Section 7(2) of the Act shall not be imposed. The seizures were made in clear contravention of Section 7(1)(ii) of the Act of 1964. The respondent No. 3 acted on a mere inference or suspicion that there had been a sale which was wholly unwarranted. There was no question of evasion of tax. The details of the consignments were fully disclosed and the transaction was merely a branch transfer, the consignor and the consignee being the same.
9. The applicants contend that the provisions of Sections 6 and 7 of the Act of 1954, and the rules 14 to 17 framed thereunder authorising interception, search, seizure, detention and imposition of penalty, are beyond the legislative competence of the State Legislature. The provisions also interfere with the applicants' right to carry on trade and business guaranteed under Article 19(1)(g) of the Constitution and the freedom of trade and commerce guaranteed by Article 401 read with Article 404 of the Constitution. There is no specific provision either in the Act or in the Rules for adjudication as to whether there was any evasion of tax or attempts to avoid tax which is a condition precedent for the application of the provisions of Sections 6 and 7 of the Act.
The provisions in the aforesaid sections are contrary to the principles of natural justice, perverse, unreasonable and liable to be struck down.
10. The applicants have, therefore, prayed for a declaration that Sections 6 and 7 of the Act of 1954 and rules 14 to 17A of the Rules framed thereunder are ultra vires the Constitution and are liable to be struck down. They have also prayed for an order commanding the respondents to recall, rescind and cancel the impugned order of the seizure made by the respondent No. 3 in connection with seizure case Nos. 659(54/88-89), 693(54/88-89), 694(54/88-89) and 697(54/88-89) and the relative notices issued under Rule 17A(2) relating thereto and to forbear from giving any effect or further effect thereto, and to desist from interfering in any manner whatsoever with the inter-State movement of goods made by way of branch transfer by the applicant company and not to insist on the provision of permit at the check-post.
11. The applicants also prayed for an interim order directing the respondents to forthwith release the trucks as well as the goods and restraining the respondents from taking any action pursuant to the notices issued to the applicants.
12. The interim order prayed for was allowed vide our order dated 6th March, 1989, on condition of the applicants furnishing bank guarantee.
13. RN-18(T) of 1989 arises out of Matter No. 2977 of 1988 of the High Court at Calcutta since transferred to this Tribunal. In this case the seizures made on 28th May, 1988 and 30th May, 1988, by the Inspector of Commercial Taxes, Chichira check-post, Midnapore, in seizure case Nos.
162(54)/CCP of 1988-89 and 164(54)/CCP of 1988-89, in respect of two consignments of Sunlight detergent powder being transferred from the manufacturing unit of the applicants at Bangalore to the godown at Calcutta, have been challenged. The grounds of challenge are almost identical as in the other case.
14. In RN-90(T) of 1989, the applicants have challenged the seizure made on 15th February, 1987, in respect of a consignment of detergent powder being transferred from the applicants' manufacturing unit at Yeotmal, outside the State of West Bengal to the godown of the clearing and forwarding agent of the applicants in Calcutta. In this case, after imposition of penalty, the applicants moved the appellate authority who, namely, the Assistant Commissioner of Commercial Taxes, Midnapore Circle, dismissed the appeal and confirmed the order of seizure and penalty. In this case also the case of the applicants are same as in Case No. RN-1 of 1989.
15. The respondents opposed the applications on the grounds stated in their affidavits-in-opposition. Their case in brief is as follows : On 26th January, 1989, 8th February, 1989, and 10th February, 1989, the applicants attempted to transport considerable quantity of detergent powder in contravention of the provisions of Section 6 of the Act of 1954. All the consignments were seized on the respective dates on the ground that they were being transported without any sales tax permit as required under the rules. The seizures were made and subsequent proceedings were taken strictly in accordance with the provisions of the Act and the Rules framed thereunder. The grounds upon which the seizures were made were clearly stated in the seizure receipts and the respondent No. 3 in making such seizures need not have reached a state of mind that the transportations were for evasion of tax as contended by the applicants. It is sufficient for the purpose of making a seizure if the authority concerned has reasons to believe that the notified commodities to be seized were being transported in contravention of the provisions of Section 6.
The question whether the consignment moved by way of branch transfer has no relevance at all in the matter of exercise of power under Section 7 of the Act. The allegations that the provisions contained in Sections 6 and 7 of the Act or the rules framed thereunder are violative of articles 14, 19(1)(g), 301, 304 and 286 of the Constitution, are misconceived and unfounded.
16. In regard to RN-18(T) of 1989, relating to seizures made at Chichira check-post on 28th May, 1988 and 30th May, 1988, the case of the respondents is the same as in Case No. RN-1 of 1989.
17. Similarly, in RN-90(T) of 1989, the respondents have opposed the prayer made by the applicants on identical grounds.
18. In all these cases the applicants have challenged the constitutionality and vires of the provisions of Section 7 of the Act of 1954 and rules 15, 16A, 17 and 17A of the Rules framed under the Act on the ground of legislative incompetence and also on the ground that they are violative of the provisions of articles 14, 19(1)(g) and 21 of the Constitution of India. Section 7 has a direct hearing on the provisions of Section 6 of the Act. It may, therefore, be convenient to bear in mind the provisions of Section 6 and relevant provisions of Section 7 and the rules referred to above. They are reproduced below : "6. Restriction on movement.--(1) No person shall transport from any railway station, steamer station, air-port, post office, or any other place whether of similar nature or otherwise, notified in this behalf by the State Government, any consignment of any notified commodity exceeding such quantities and except in accordance with such conditions as may be prescribed. Such conditions shall be made with a view to ensuring that there is no evasion of the tax imposed by this Act.
(2) The State Government may prescribe conditions for regulating transport of notified commodities from any place, other than those referred to in Sub-section (1), with a view to ensuring that there is no evasion of tax imposed by this Act," "7. Power to search, seize, impose penalty and dispose of seized notified commodities.--(1) The prescribed authority or any other officer who may be authorised by the State Government in this behalf may, for the purpose of verifying whether notified commodities are being or have been transported in contravention of the provisions of Section 6 and subject to such restrictions as may be prescribed,-- (i) (a) intercept, detain and search at any place notified under Section 6 or at any other place, any road vehicle, or rivercraft or any load carried by a person, or (b) search at any godown, warehouse or any other place in which according to his information such notified commodities transported in contravention of the provisions of Section 6 have been stored, and (a) which, in the case referred to in Sub-clause (a) of Clause (i), he has reasons to believe are being transported in contravention of the provisions of Section 6, together with any container or other materials for the packing of such notified commodities, or (b) together with any container or other materials for the packing of such notified commodities in the case referred to in Sub-clause (b) of Clause (i), where the prescribed authority or any other officer who may be authorised by the State Government in this behalf has reasons to believe that such notified commodities stored in such godown, warehouse or place have been transported there in contravention of Section 6 or that there is no claimant for ownership or possession of such notified commodities stored in such godown, warehouse or place, and that such notified commodities have been transported there in contravention of the provisions of Section (2) If any notified commodities are seized under Clause (ii) of Subsection (1), the prescribed authority may, by an order in writing, impose upon the person from whom such notified commodities are seized or the owner of such seized notified commodities (when particulars of the owner are available) or in the case of notified commodities for which there is no claimant, upon any person who subsequently claims the ownership or possession of such notified commodities as the prescribed authority considers appropriate in the facts and circumstances of the case, after giving such person or owner, as the case may be, reasonable opportunity of being heard, a penalty of a sum not exceeding twenty-five per centum of the value, determined by him in accordance with the rules made under this Act, of such notified commodities transported in contravention of the provisions of Section 6 : Provided that a penalty under this sub-section shall not be imposed in respect of the same fact for which a prosecution under Clause (b) of Sub-section (1) of Section 16 has been instituted.
(3) A penalty imposed under Sub-section (2) shall be paid by the person or the owner, as the case may be, into a Government Treasury or prescribed branch of the State Bank of India or the Reserve Bank of India by such date as may be specified by the prescribed authority in a notice issued for this purpose and the date so specified shall not be earlier than fifteen days from the date of service of the notice : Provided that the prescribed authority may, for reasons to be recorded in writing, extend the date of payment of the penalty.
(4) The notified commodities seized under Clause (ii) of Sub-section (1) shall be released in the prescribed manner on payment of the penalty imposed under Sub-section (2).
(5) If the penalty is not paid by the date specified in the notice issued under Sub-section (3), the prescribed authority may, in such manner and subject to such restrictions and conditions as may be prescribed, sell the notified commodities seized under Clause (ii) of Subsection (1) in open auction and remit the sale proceeds thereof to a Government Treasury.
(6) Notwithstanding anything contained in Sub-section (4), the appellate or revisional authority, pending final disposal of an appeal or application for revision against an order for imposition of penalty under Sub-section (2), or the prescribed authority, for reasons to be recorded in writing, may direct release of the notified commodities seized under Clause (ii) of Sub-section (1) on such terms and conditions as he may consider fit and proper," "14. (i) No person, other than a registered dealer, shall transport from any railway station, steamer station, post office or air-port in West Bengal notified under Section 6, any consignment of cigarettes or of any notified commodity despatched from any place outside West Bengal, provided that this restriction shall not apply where the consignment does not exceed-- (a) in the case of cigarettes, 200 sticks in number or 4 oz. in weight ; and (b) in the case of a notified commodity, such quantity as may be specified by the State Government by notification in the Calcutta Gazette.
(ii) A registered dealer shall, before transporting from any railway station, steamer station, post office or air-port in West Bengal notified under Section 6 any consignment of cigarettes or any notified commodity, as the case may be, despatched from any place outside West Bengal, produce for counter-signature before the appropriate Commercial Tax Officer or Inspector the railway receipt, bill of lading, or other document required for the purpose of obtaining delivery of such consignment from the public carrier. He shall also make a written declaration in form IV in duplicate, duly signed, to the appropriate Commercial Tax Officer or Inspector and shall furnish therein the following particulars, namely :-- (a) the description, quantity and value of the cigarettes or the notified commodity to be so transported ; (b) the place from which the cigarettes or the notified commodity is being despatched ; (c) the manufacturers or dealers from whom such cigarettes or notified commodity are being purchased ; (d) the name, address and registration certificate number of the dealer transporting the cigarettes or notified commodity.
(iii) The appropriate Commercial Tax Officer or Inspector shall thereupon countersign the railway receipt, bill of lading, or other document, and shall seal it with his official seal. Both copies of the declaration made by the dealer shall be endorsed with the number of the railway receipt, bill of lading, or other document, as the case may be, and the date of counter-signature of the aforesaid document, and they shall be signed by the Commercial Tax Officer or Inspector and sealed with his official seal ; one copy of the declaration shall thereupon be returned to the dealer, and the other copy retained by the Commercial Tax Officer or Inspector." "15. (i) The State Government may set up check-posts at various places for the purpose of regulating road transport and river or canal transport, and may define the boundaries of these check-posts, notify under Section 6 the area of the check-posts included within such boundaries and demarcate such boundaries by means of barriers, or otherwise.
(ii) No person shall transport across or beyond the notified area of a check-post any consignment of cigarettes or of a notified commodity exceeding the quantity specified in Sub-rule (i) of Rule 14 by any road vehicle, or by rivercraft or other vessel or by any other means except in accordance with the following conditions, namely :-- (a) Every such consignment shall be transported by or on behalf of a registered dealer.
(b) The registered dealer who transports or on whose behalf any such consignment is being transported, shall make an application in form IV in triplicate to the appropriate Commercial Tax Officer or Inspector for a permit giving the particulars detailed in Rule 14, Sub-rule (ii), Clauses (a) to (d). The appropriate Commercial Tax Officer or Inspector, if he is satisfied with regard to the bona fides of the application, shall issue a permit in form IV-A in triplicate, two copies of which shall be made over to the applicant, the third copy being retained as an office copy." "15A. (1) Where the procedure laid down in Rule 14 or Rule 15 causes inconvenience to a dealer, such dealer may transport consignment of notified commodity despatched from any place outside West Bengal on the basis of intimation furnished by such dealer in form IV-B in accordance with the provisions contained in this rule from such railway station, steamer station, post office, air-port or any other place notified under Section 6 of the Act as may be specified in this behalf for the purposes of this rule by the prescribed authority.
(2) The dealer referred to in Sub-rule (1), who shall be registered dealer, shall obtain, subject to the provisions of Rule 15B, the form IV-B on application from the appropriate Commercial Tax Officer. The form IV-B shall be in triplicate and shall contain the following particulars, amongst others, namely :-- (a) the description, quantity and value of the notified commodity to be transported ; (b) the place from which the notified commodity is being despatched ; "17. The prescribed authority or any other officer authorised in this behalf by the State Government under Section 7, may intercept and search any road vehicle, rivercraft, or any load carried by a person and seize any cigarettes or notified commodities which he has reason to believe are being transported in contravention of the provisions of Section 6 together with any container or other material for the packing of cigarettes or the notified commodities ; Provided that, if interception, detention and search of any road vehicle or seizure of any notified commodity is made at any place, other than those referred to in Sub-section (1) of Section 6, such interception, detention, search or seizure shall not be made by any officer below the rank of a Commercial Tax Officer." "17A. (1) Where any notified commodities are seized under Section 7, for the purpose of determination of the value, referred to in Subsection (2) of that section, of such seized notified commodities, the person from whom such notified commodities are seized or the owner of such notified commodities or the person who subsequently claims the ownership or possession of such notified commodities, as the case may be, shall make a declaration in form IV within fifteen days from the date of seizure in respect of the value of the seized notified commodities and this value shall be the retail price or the aggregate of retail prices of such notified commodities at which these are likely to be sold in West Bengal at the relevant time.
Such declaration shall be submitted to the appropriate Commercial Tax Officer along with a copy of the relevant bill, invoice or consignment note issued by the consignor and other documents in support of the basis of the value declared.
(2) On seizure of notified commodities under Section 7, the appropriate Commercial Tax Officer for the purposes of Sub-section (2) of that section shall serve a notice in form VII-I upon the person from whom such commodities are seized or the owner of such notified commodities or the person who subsequently claims the ownership or possession of such notified commodities, as the case may be, as he considers appropriate in the facts and circumstances of the case,-- (a) calling upon him to produce the bill or invoice or consignment note issued by the consignor or other documents of like nature, the catalogue of the manufacturer fixing the retail price in West Bengal of the particular notified commodities ; (b) directing him to produce evidence in proof of the retail price or prices of such notified commodities in West Bengal, if he has made a declaration of the value of such commodities under Sub-rule (1), and he shall fix a date ordinarily not less than fifteen days after the date of issue of the notice, for producing such documents and evidence and for considering any objection which the person called for or the owner may prefer : Provided that the requirement of allowing fifteen days' time in the notice may be waived, upon application by the person or owner, as the case may be..........".
19. Bearing these provisions in mind let us now consider the respective contentions of the parties. Mr. Ghosh, appearing on behalf of the applicants, has substantially raised three points, namely, the legislative competence of the State Legislature in enacting the provisions of Section 7 as they are. He has also contended that the provisions contained in Sections 6 and 7 are violative of articles 14, 19(1)(g) and 21 of the Constitution of India. Finally, it was contended that the sections aforesaid having made no provision for adjudication, they are liable to be struck down on the ground of unreasonableness and arbitrariness.
20. There is no dispute with the proposition that if a particular legislative provision can be shown to be in excess of the legislative competence of the State Legislature, it will be invalid and that the legislature cannot artificially enlarge the field of legislation nor can it in the guise of making provision for one particular subject purport to make provision for something that is not within the scope and ambit of the legislative entry. The relevant entry for our purposes is entry No. 54 of List II of the Seventh Schedule to the Constitution of India. Entry 54 relates to taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. Entry 92A of List I relates to taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce. In the present case, it is nobody's contention that the goods seized at the check-posts were the subject of sale or purchase in the course of inter-State trade or commerce. The case of the applicant is that the goods were being transported to West Bengal by way of stock transfer from its factory to the godown at Calcutta. Therefore, Section 92A of List I does not come into the picture. The power to tax under entry 54 can be availed of only where there has, in fact, been a sale as recognised by the general law. But under the ancillary and incidental powers, the present entry 54 is wide enough to cover and confer power to legislate for preventing evasion of tax.
21. The decision in the case of Abdul Quader, reported in [1964] 15 STC 403 (SC), was relied on by the applicant. That was a case concerning the vires of Section 11(2) of the Hyderabad General Sales Tax Act, 1950. In dealing with the question, their Lordships of the Supreme Court observed that the power to legislate on a particular subject carries with it certain ancillary and incidental powers necessary to make the exercise of power meaningful and effective. It was observed that all powers necessary for the levy and collection of tax and for seeing that tax is not evaded are comprised within the ambit of legislative entry as ancillary or incidental. It was also observed that penalties imposed under taxing statutes are generally related to attempts at evasion of taxes or default in the payment of taxes properly levied. Therefore, the important point to see is whether the provisions of Section 7 relating to interception, search, seizure and imposition of penalty, fall within the scope of ancillary and incidental powers.State of Madras v. Gannon Dunkerley reported in [1958] 9 STC 353 (SC) ; AIR 1958 SC 560, referred to by Mr. Ghosh, however, relates to a different point, namely, imposition of tax on materials supplied in a building contract. Mr. Ghosh also referred to a Division Bench judgment of the High Court of Andhra Pradesh in the case of Anantapur District Co-operative Marketing Society Ltd. v. Special Assistant Commercial Tax Officer [1972] 29 STC 649. In that case the decision in the case of Check Post Officer v. K.P. Abdulla and Bros.
[1971] 27 STC 1 (SC) [we shall have occasion to refer to this case later], was referred to and the observation of the Supreme Court was quoted at length. It would, therefore, be eminently desirable to see what is the ratio of the decision in that case.Check Post Officer v. K.P. Abdulla(SC) and Hansraj Bagrecha v. State of Bihar [1971] 27 STC 4 (SC), in support of his case. In the former case the provisions of Section 42(3) of the Madras General Sales Tax Act, 1959, was under challenge. Upon an examination of the provisions, a five-judge Bench of the Supreme Court, observed that the relevant Sub-section (3) proceeded on an assumption that all goods carried in a vehicle near a check-post are goods which have been sold within the State of Madras and in respect of which liability to pay sales tax has arisen. A provision enacted on such an assumption, it was observed, was unwarranted. Power given under Sub-section (3) of Section 42 was, therefore, held to be beyond the ancillary or incidental powers to legislate under cover of entry 64.
24. In the case of Hansraj Bagrecha [1971] 27 STC 4 (SC), Rule 31B of the Bihar Sales Tax Rules, 1959, framed under Section 42 of the Act was under challenge. It has held that Rule 31B framed by the State Government sought to prohibit transport in pursuance of transactions which are inter-State, for in terms it prohibits transporting of goods to any place outside the State of Bihar. The power of the State Legislature is restricted to legislate in respect of intra-State transactions of sale and purchase and to matters ancillary or incidental thereto ; it has no power to legislate for levy of tax on sales and purchases in the course of inter-State transactions. The rule, it was observed, authorised restrictions on inter-State transactions and was on that account unauthorised. Here in the case before us there is no provision in Section 7 of the 1954 Act or the rules framed thereunder to restrict or prohibit inter-State transactions of sale or purchase. Here the goods in question were not the subject of inter-State sale or any sale at all at the point of entry into the check-post. It was a case of branch transfer of goods of the applicants manufactured in their own factory outside the State of West Bengal and transfer thereof to godowns at Calcutta obviously for the purposes of subsequent sale within the State or elsewhere. The section and the rules provide for safeguards to prevent evasion of tax in case of sale in West Bengal. Such provisions, it seems, are within the ancillary and incidental powers of the State to levy tax on sales or purchases.
25. Mr. Ghosh also referred to certain decisions of different High Courts. The case of Dunlop India Limited v. State of Punjab [1972] 30 STC 597 (P & H), relates to the competence of the State Legislature to enact the provisions of Section 14B of the Punjab General Sales Tax Act, the provisions whereof were challenged. It was held, relying upon the ratio of K.P. Abdulla's case [1971] 27 STC 1 (SC), that the provisions of Sub-section (8) of Section 14B were ultra vires the power of the State Legislature. Another case, Kamal Kumar Goyal v. State of Orissa [1975] 35 STC 343 (Orissa), was also referred to. There a Division Bench of the Orissa High Court distinguished the provisions of the Orissa Act from the provisions of Section 42 of the Madras Act and distinguished the ratio of the decision in K.P. Abdulla's case [1971] 27 STC 1 (SC). It was held that the mischief which impressed the Supreme Court to arrive at its conclusion in K.P. Abdulla's case [1971] 27 STC 1, has been done away within the statutory provision of the Orissa Act and that confiscation is a matter incidental and ancillary to taxation and is, therefore, within the legislative competence of the State in terms of entry 54 of List II of the Seventh Schedule to the Constitution.
26. The next case referred to is the case of Mool Chand Chuni Lal v.Shri Manmohan Singh, Assistant Excise and Taxation Officer [1977] 40 STC 238 (P & H)[FB]. This case also does not seem to be of assistance to the contention urged by Mr. Ghosh. In this case the amended provision of Section 14B of the Punjab General Sales Tax Act was under consideration. It was observed that the principle laid down in K.P.Abdulla's case [1971] 27 STC 1 (SC), was no longer applicable in view of the amended provision which was not based on any assumption that the goods were transported after sale within the State. Its present basis was the attempt to evade tax and it prescribes a condition precedent to the levy of penalty. It was further observed that it cannot possibly be disputed that the prevention of evasion of sales tax is a power incidental or ancillary to the levy of sales tax and falls within the ambit of entry 54.
27. Another case of the Allahabad High Court, Synthetics and Chemicals v. State of U.P. 1978 UPTC 624 referred to in [1983] 53 STC 54 (All.) (Jain Shudh Vanaspati Ltd. v. State of U.P.), was cited by Mr. Ghosh.
In this case the High Court observed that the impugned section assumed that all goods carried in a vehicle crossing the check-post were goods which had been sold within the State of U.P. and in respect of which the liability to pay sales tax had arisen. In that view of the matter, the ratio of the decision in K.P. Abdulla's case [1971] 27 STC 1 (SC), was applied. We have already indicated that in the case before us there is hardly any scope for an assumption of the nature contemplated in K.P. Abdulla's case [1971] 27 STC 1 (SC).
28. Another case of the Allahabad High Court (See Sodhi Transport Co.
v. State of U.P. [1983] 52 STC 440) which subsequently went to the Supreme Court in appeal (Sodhi Transport Company v. State of U.P.[1986] 62 STC 381), was referred to. The Allahabad High Court had felt that the provisions of Section 28-B of the U.P. Sales Tax Act contemplated a presumption that the goods carried by the vehicle at the check-post had been sold within the State by the owner or person-in-charge of the vehicle. The Allahabad High Court held that the provision raised a rebuttable presumption and not a rule of substantive law. It was accordingly held that the provision of Section 28-B was not beyond the legislative competence of the State Legislature. The Supreme Court affirmed the decision and emphasised the legal position, namely, that the presumption contemplated by Section 28-B was not a conclusive one. This position was conceded by the State of U.P.29. The next case referred to is a single Bench decision of the Calcutta High Court in the case of E.I.T.A. (India) Ltd. v. D. Dutta [1986] 63 STC 416. In this decision the provisions of Sections 6 and 7 of the West Bengal Sales Tax Act, 1954, as also the corresponding provisions of the Bengal Finance (Sales Tax) Act, 1941, were under consideration. In this case a dealer in Cochin sent a consignment of notified goods to a dealer carrying on business in Bhagalpur in the State of Bihar. The drivers of the trucks carrying the goods, however, in disobedience of the specific directions given, appear to have taken a shorter route to Bhagalpur through the State of West Bengal. The truck was detained at a check-post in West Bengal, and the consignment of goods was detained on the ground that the goods which were notified goods had been brought into the State of West Bengal without proper transport documents thereby contravening Section 4B of the Bengal Finance (Sales Tax) Act, 1941 and Section 6 of the West Bengal Sales Tax Act, 1954. On a writ petition filed by the petitioner it was held that neither Section 6 of the Act of 1954, nor Section 4B of the Act of 1941, places complete bar on movement of goods into or across the State of West Bengal. It was held that as there was no prima facie findings or evidence to show that the goods were sold in West Bengal or were meant to be sold in West Bengal, they could not be detained or any penalty imposed merely on that assumption. This was, therefore, a case of a consignment being carried from Cochin to Bhagalpur in course of the transit of which West Bengal was used merely as a corridor.
Therefore, the facts of that case are also not very relevant for our purposes.
30. The next case cited by Mr. Ghosh, namely, Harihar Prasad Debuka v.Stale of Bihar [1987] 66 STC 178 (Pat) [FB], was decided on the ratio of Hansraj Bagrecha's case [1971] 27 STC 4 (SC). We have already indicated that the facts of that case were different.
31. On the side of the respondents, however, besides distinguishing the cases referred to by Mr. Ghosh, reliance was placed on the case of R.S.Joshi, Sales Tax Officer v. Ajit Mills Ltd. [1977] 40 STC 497 (SC).
This was a judgment by a Constitution Bench of the Supreme Court consisting of seven judges. In that case the constitutionality of the provisions contained in Sections 46(2) and 37(1)(a) of the Bombay Sales Tax Act was under challenge. It was held that the provisions of the sections referred to were not ultra vires the State Legislature inasmuch as those provisions fall within the range of ancillary or incidental powers of the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution. It was further held that they also did not contravene Article 14 or 19(1)(f) of the Constitution. The forfeiture clause in Section 37(1) is a punitive measure to protect public interest in the enforcement of the fiscal legislation and it falls squarely within the area of implied powers. The notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability, but that it must be preceded by mens rea, is not correct. Therefore, it was held that the contention that Section 37(1) fastens a heavy liability regardless of fault, has no force in depriving the forfeiture of the character of penalty. The fact that the penal forfeiture can be enormous is germane to legislative policy and hot a matter for judicial compassion. In this case the decision in the case of (SC) and Check Post Officer v. K.P. Abdulla [1971] 27 STC 1 (SC), amongst others, were considered and referred to.
32. The check-post and barriers are designed and meant to prevent evasion of sales tax and other dues. From the point of view of either entry 54 or of Article 401 of the Constitution, in our view, there is no question of lack of competence in the State Legislature to setup check-posts/barriers in the borders of the State. [See (1982) 1 SCC 39 (Bishamber Dayal Chandra Mohan v. State of U.P.)]. Upon a consideration of the provisions of Section 6 of the Act of 1954 and the powers conferred by entry 64 of List II read with Article 401 of the Constitution, we find that the setting up of check-posts and barriers is within the legislative competence of the State Legislature.
33. But the more important question urged on behalf of the applicant is with regard to the provisions of Section 7 of the Act which authorises the prescribed authority, for the purpose of verifying whether notified commodities were being transported in contravention of the provisions of Section 6, to intercept, detain and search at any place, seize any notified commodity referred to in Section 6 and if such commodities are seized the prescribed authority may, in writing, impose upon the person from whom such notified commodities are seized or the owner of such notified commodities, a penalty of a sum not exceeding 25 per cent of the value determined by him in accordance with the rules made under the Act [vide Sub-section (2) of Section 7]. The main grievance of the applicants is with regard to the provisions of Section 7. It is complained that there cannot be an unqualified power to detain and search and that too for contravention "of provisions of Section 6" and thereafter without holding any adjudication proceedings invariably impose a penalty. Precisely, the contention of Mr. Ghosh is that the use of the expression "provisions of Section 6" in Sub-section (1) of Section 7 instead of "conditions of Section 6" makes a lot of difference. He also made a grievance that Section 7 does not lay down any provision for adjudication as to whether there is really any attempt at evasion of tax and, therefore, the provision for imposition of penalty without such adjudication is unreasonable, arbitrary and against the principles of natural justice. He also argued that the provisions of Section 7 may be saved if by way of interpretation some safeguards are provided for. It was argued that in several cases the Supreme Court has by way of interpretation incorporated the doctrine of natural justice for various legislative enactments so as to make the provision free from arbitrariness and that whenever a statutory provision is silent as to the principles of natural justice by implication the said principles would be deemed to be incorporated in the statutory provisions concerned. [See City Comer v. Personal Asstt.
to Collector and Additional District Magistrate AIR 1976 SC 143 and S.L. Kapoor v. Jagmohan AIR 34. Mr. Ghosh argued that unless Section 7 is interpreted to mean that something more than what is merely stated in the section is read into it, the provision would be arbitrary and unreasonable and, therefore, violative of articles 14, 19 and 21. His contention is that Section 7(2) empowers the officer at the check-post merely on the failure of the person carrying the goods or the owner thereof to produce one of the documents referred to in Section 6, the invariable result would be an imposition of penalty. This, according to Mr. Ghosh, is unfair and unjust. In support of the contention he referred to the decision in the case of Maneka Gandhi, reported in AIR 1978 SC 597. That was a case under the Passport Act, 1967. The Act empowered the authority to impound a passport without making any express provision for giving the citizen concerned an opportunity of being heard. This provision was challenged. P.N. Bhagwati, J., observed that there was no provision in the Passport Act which required that audi alteram partem should be followed before impounding a passport. It was observed further that even when the statute is silent, the law may in a given case make an implication and apply the principle even though there are no positive words requiring that the party shall be heard. It was further observed that the justice of the common law will supply the omission of legislature.
35. In the instant case before us there is, however, a provision in Sub-section (2) of Section 7 that the prescribed authority after giving such person or owner "a reasonable opportunity of being heard" impose a penalty not exceeding 25 per cent of the value. Therefore, it appears that there is express provision in Sub-section (2) of Section 7 for giving the person concerned an opportunity of being heard. But yet the question remains what is the nature of the opportunity and what is the extent to which the prescribed authority may go ; or in other words, the question is whether the prescribed authority may, in appropriate cases being satisfied that there was no question of evasion of tax at that stage or at a subsequent stage, be competent to release the good s seized by him on his own or whether the only course left to him is to impose a penalty merely because of the failure on the part of the person concerned to produce one of the many documents contemplated by Section 6 and the rules at the moment of entry into the check-post. It is argued that if he is held to be so bound, the provision must have to be struck down as arbitrary and unreasonable.
36. Mr. Ghosh also challenged the propriety of provisions contained in Section 7(1), namely, "transported in contravention of the provisions of Section 6" and argued that Section 6 read as a whole prohibits transport of a notified commodity exceeding such quantities and except in accordance with such conditions as may be prescribed and that such conditions shall be made with a view to ensure that there is no evasion of tax imposed by this Act. The argument of Mr. Ghosh is that the position might have been different if the statute had used the expression in Section 7(1) as "in contravention of the conditions of Section 6" instead of "in contravention of the provisions of Section 6". We do not, however, see much of a difference in the two expressions. The conditions contemplated by Section 6 and prescribed thereunder, are made with a view to ensure that there is no evasion of tax imposed by the Act. It does not say that the evasion must have already taken place or that the transportation of the goods by itself constitutes evasion. The conditions have been prescribed only to ensure evasion of tax at any stage after entry into West Bengal. The conditions obviously have been provided so that the taxing authority may keep track of the goods imported into the State and the same may not be sold without payment of tax. The condition that has been violated in these cases is the failure of the applicant to produce road permits at the check-post. It is the admitted case of both the parties that blank road permits are issued to the applicants so that before entry into the check-post they may be filled in and tendered at the check-post while entering it. The blank permit issued in triplicate, contains an undertaking by the transporter or the owner, as the case may be, and two copies thereof are retained at the check-post so that the ultimate destination of the goods and their disposal may be followed up. Such a provision cannot be said to be excessive legislation on the part of the State Legislature. This apart, the possibility of evasion of tax after transportation of the goods is what is sought to be prevented. Therefore, the requirement of producing a road permit is necessary in the public interest. Evasion means an act of escaping by means of an artifice ; a trick or subterfuge, In Black's Law Dictionary the expression "evasion" has been defined as an act of eluding, dodging or avoiding or avoidance by artifice......A subtle endeavour to set aside truth or to escape the punishment of law. We are unable to agree with the argument of Mr. Ghosh that if evasion means dishonest dodging, then it should ordinarily be used in relation to a present liability. While it is true that a vague apprehension that sometime in the remote future there may perhaps be an evasion of tax, is not covered by Section 6 but none-the-less it unmistakably lays down a provision to restrict importation of goods which at the hands of unscrupulous dealers may result in evasion. Therefore, in our view, the provision requiring the fulfilment of the conditions prescribed in Section 6, is neither arbitrary nor unreasonable. It will bear repetition that the use of the expression "provisions of Section 6" includes within it the conditions laid down under Section 6. A violation of any of the conditions may amount to infraction of the law thereby violating the provisions of Section 6 because the setting up of check-posts/barriers, the system of issue of permits and other conditions together form part of an integrated scheme and the violation of any of such conditions may frustrate the scheme.
"Power to search, seize, impose penalty and dispose of seized notified commodities." Mr. Ghosh contended that the power to search should not be exercised indiscriminately and that whenever there is genuine need for search, the ground for it has to be recorded prior to the search. In this connection, a reference was made to a decision of the Calcutta High Court reported in [1977] 39 STC 333 (State of West Bengal v. Oriental Rubber Works). In this case it was observed that the purpose contemplated by Sub-section (3) of Section 14 of the BFST Act, 1941, under which the search was made, is a bona fide suspicion regarding evasion or attempt to evade payments of tax and that such suspicion must pre-exist and there must be a conscious application of mind by the authority authorised to search before he proceeds to make the search.
It was further observed that the provision was never meant as an instrument for holding roving enquiries or fishing out evidences irrespective of any suspicion of evasion of payment of any taxes. This was a case of search conducted under Section 14 of the BFST Act, 1941.
The section relates to "production' and inspection of accounts and documents and search of premises". The question of search of premises stands entirely on a different footing from an interception and search at a check-post. An officer conducting a search in premises or a godown must necessarily have a pre-existing notion or suspicion about evasion of tax or possibility thereof before he may enter the premises for the purpose of search and seizure. The position obtaining at a check-post is, however, different. Here the question of a pre-existing suspicion can never arise. The liability of being subject to search can arise only when the necessary documents required to be produced at the check-post are wanting. Therefore, in the case of a search at the check-post the reason for the search and seizure may be arrived at in course of search or as a result of the discoveries made, namely, the failure to produce necessary documents. The other cases referred to by Mr. Ghosh, namely, AIR 1979 SC 711 (Subhayya v. State of Karnataka) and AIR 1976 SC 1207 (Additional District Magistrate v. Shivkant Shukla), also do not contemplate a situation of interception followed by search and seizure on the failure of the transporter to produce necessary documents at the check-post. Therefore, until the consignment enters the check-post and it is discovered that papers are wanting, there cannot possibly be any reason to suspect that there was contravention of the provisions of Section 6. Consequently, the contention that Clause (i)(a) of Section 7(1) confers arbitrary powers of search on the authority and that, therefore, the provision should be struck down, cannot be accepted. The power of search and seizure conferred by Section 7(1) is subject to such restrictions as may be prescribed. It was contended that Rule 17 of the West Bengal Sales Tax Rules, 1954, prescribes tinder what circumstances a vehicle may be intercepted and searched. Rule 17 provides that the vehicle may be so intercepted and searched by the prescribed authority which he has reason to believe is being transported in contravention of the provisions of Section 6. It was contended that "reason to believe" will necessarily require a recording of the reasons prior to the taking of action. In Section 7(1)(ii)(a) of the 1954 Act the power to seize is qualified by the expression that the authority has "reason to believe" that the commodities are being transported in contravention of the provisions of Section 6, that is to say, with a view to evade payment of tax imposed by this Act. It is significant to note that the expression "has reason to believe" has not been used in Section 7(1) which authorises interception, detention and search at any notified place. It follows, therefore, that the scheme of the Act is that at the moment of entry into the check-post there may not be any pre-existing suspicion but if after interception necessary documents are found wanting that may by itself afford a reason to believe that the goods were being transported in contravention of the provisions of Section 6. While interpreting the expression "reason to believe" the Supreme Court in [1971] 82 ITR 147 ; AIR 1971 SC 2451 [Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax (Central)] has held that the expression suggests that the belief must be that of an honest and reasonable person based upon reasonable grounds but not on mere suspicion, gossip or rumour. As we have already indicated, there can be no question of reason to believe that the goods were being transported in contravention of Section 6 until and unless the vehicle enters into the check-post and the transporter fails to produce the documents. In such a situation, a reason certainly arises to believe that the goods were being carried in contravention of Section 6. Mr. Ghosh referred to several other decisions in this context. For reasons already discussed, it is needless to refer to them.
38. The next part of the grievance of Mr. Ghosh is with regard to the provisions of Section 7(2) to 7(10). Precisely, his main grievance is with regard to Sub-section (2) of Section 7. The provision has been quoted earlier. It is argued that the provision is such that once the goods are seized, imposition of penalty becomes inevitable and that the only hearing contemplated by Sub-section (2) is with regard to the quantum of penalty and the valuation of the goods.
39. Mr. Ghosh contended that the legislature was oblivious of a situation where a transporter may have the necessary documents but is unable to produce the same at the moment it is demanded at the check-post. Even then, it is contended that the only result contemplated by Sub-section (2) is the imposition of a penalty irrespective of any adjudication as to whether the party had the required documents but was unable to produce at the moment of interception. In order to appreciate this point it may be convenient to bear in mind the practice obtaining at the check-posts. It is undisputed that most of the registered dealers have their offices near check-posts where the agents keep themselves prepared to fillup the blank road permits whenever a vehicle reports to the office of the agent prior to entry into the check-post. It is submitted that sometime it so happens that the carrier is not aware of the practice and inadvertently enters into the check-post without obtaining the road permit from the agent after being duly filled in. The privilege of issuing blank permits, as we have been able to understand, is not a facility made available to all and sundry. It is, therefore, contended on behalf of the respondents that a party who has the privilege of obtaining blank road permits from the appropriate Commercial Tax Officer should not have any difficulty in producing the permit at the check-post. In these three cases before us the carrier for some reason or other, failed to produce the permit at the check-post although all the other documents were there with the carrier. In these three cases the consignor and the consignee are the same. We have already stated that these were cases of branch transfer of goods manufactured by the applicant-company from their different factory sites and were being transported to West Bengal for storage in the godowns for eventual sale. The road permit which contains a declaration by the transporter or the owner, is a safeguard against possible evasion of tax after entry into the State of West Bengal, for, in that event the taxing authority can follow up and satisfy themselves that there is no evasion of tax in respect of the goods so transported. Such being the position, Mr. Ghosh contended that the provisions of Section 7 could be saved if only it provided for an adjudication as to whether or not a consignment was supported by relevant documents. A provision such as Section 7(2), it was contended, violates the constitutional mandate of articles 14 and 19(1)(g) of the Constitution of India. In this connection, a reference was made to the case of Mithu v. State of Punjab reported in AIR 1983 SC 473. In that case, the validity of Section 303 of the Indian Penal Code was considered and struck down by the Supreme Court under Article 14 as arbitrary and oppressive. Another case reported in (1986) 1 CHM 262 Gillanders Arbuthnot v. Corporation of Calcutta, was referred to. There it was submitted that a provision of law duly enacted by a competent legislature cannot be struck down under Article 14 on the ground that it is arbitrary. This proposition, however, was not accepted by the court. It was held that it does not stand to reason why, when a piece of legislation suffers from the vice of arbitrariness and unreasonableness, it cannot be struck down under Article 14.
Relying on these decisions, Mr. Ghosh argued before us that Section 7 not having provided for any contingency where, for some unavoidable reasons, the carrier may not be able to produce all the relevant documents at the check-post immediately on demand and makes provision for imposition of penalty irrespective of such considerations, is bad for arbitrariness. The argument is based upon a consideration of the different sub-sections of Section 7 which speak of determination of the value of the goods transported and of imposition of penalty, and the procedure for realisation of such penalty. It is true that Sub-section (6) lays down that notwithstanding anything contained in Sub-section (4), the prescribed authority, for reasons to be recorded in writing, may direct release of the notified commodities seized under Clause (ii) of Sub-section (1) on such terms and conditions as he may consider fit and proper. But the prescribed authority referred to in Subsection (6), is an authority different from the authorities referred to earlier in the section. Therefore, in order to avail of the benefit of Sub-section (6) the transporter will have to run to a different authority for relief, if any. It is complained that in order to be a valid and proper law there should have been some provision in Sub-section (2) itself for release of the goods in appropriate cases. Mr. Ghosh argued that if the carrier for some reason or other, fails to contact the agent near the check-post, a reasonable opportunity should be given before imposition of penalty to produce such documents. He suggests that a period of 24 hours may be adequate for the purpose. But he complains that there is no such provision and the inevitable result of the seizure is the imposition of penalty. To that extent we feel that the provision is somewhat unnecessarily stringent verging on arbitrariness and unreasonableness. But we feel that Sub-section (2) may be saved from the vice of arbitrariness if it is possible to read the word "may" in Sub-section (2) as merely directory and not mandatory.
40. In regard to the suggestion of Mr. Ghosh that a reasonable opportunity of at least 24 hours should be given, Mr. Chakraborty, appearing on behalf of the respondents, argued that this may create traffic dislocation and consequent problems arising therefrom. We do not see any force in this contention because, in any event, until the vehicle is released it is kept detained at the check-post. Therefore, detention of the vehicle after giving a reasonable opportunity to the transporter to produce his documents to the satisfaction of the authority concerned cannot, in our view, create any additional problem for the check-post authorities. We shall have occasion to consider the question as to whether the provisions of Sub-section (2) may be read as merely directory or not, a little later.
41. Mr. Ghosh also challenged the vires of Section 7 on the ground that it violates the provisions of Article 19(1)(g) of the Constitution which guarantees the fundamental right to carry on any occupation, trade or business. Clause (6) of Article 19, however, permits the State to make any law imposing reasonable restrictions on the exercise of such rights. The restrictions sought to be imposed by Section 7 with such modifications as we propose to read into the section, in our view would pass the twin tests of (i) reasonableness and (ii) public interest.
42. It appears to us that the notice that is issued to the transporter after the seizure is not for adjudication as to whether the goods are liable to be subjected to penalty or liable to be released. The notice issued under Rule 17A(2) is only a notice inviting the transporter to attend in person or by an agent for determination of the value of the seized notified commodities and to levy penalty under Sub-section (2) of Section 7 of the Act. The notice apparently suggests that the only consideration weighing with the authority concerned is to determine the value of the goods for the purpose of fixing the quantum of penalty.
There is nothing to indicate in the notice that the applicant would be entitled to produce before the authority the missing documents which could not be produced at the appropriate time or that the authority would be competent to release the goods on being satisfied that the documents were there. The notice that is issued subsequent to the seizure is to this extent arbitrary in so far as it does not provide for adjudication as to whether or not any penalty is realisable on the goods. We feel, therefore, that the form of the notice is required to be altered so as to give an opportunity to the transporter to produce relevant evidence at or before the hearing. Such an interpretation and conclusion may be arrived at if the expression "may" in Sub-section (2) of Section 7 is interpreted to be a discretionary power of the prescribed authority either to impose a penalty or to release the goods in appropriate cases without imposing any penalty. Unless such an interpretation is put to the section, the provision would be violative of Article 14 of the Constitution being arbitrary and unreasonable, if not also harsh and oppressive, Mr. Chakraborty, appearing for the respondents, made a feeble concession in this behalf by suggesting that in adjudicating the propriety of seizure in penalty proceedings, the only thing which is to be looked into is under what circumstances the contravention of the prohibitory provisions was made. It was suggested that the adjudication should be conducted to see whether the contravention could be avoided at all or not. If not, it was conceded no penalty should be imposed and in that case the seized goods have to be released. It was also conceded that in determining the quantum of penalty the degree of remissness of the offending dealer should be the lone consideration.
43. Having considered the respective submissions of the parties, we are unable to agree with the contentions made on behalf of the applicant with regard to the legislative incompetence of the State Legislature to enact Sections 6 and 7 of the 1954 Act and the relevant rules framed thereunder, but we are of the opinion that the provisions of Section 7 would be liable to be struck down as violative of Article 14 unless Sub-section (2) of Section 7 is interpreted to be a provision not conferring an unrestricted and unqualified power on the prescribed authority to impose a penalty as a matter of course after seizure only because of the violation of some prohibitory conditions and without adjudicating as to the circumstances under which the contravention took place. It is possible to save Section 7(2) by reading the word "may" as discretionary and not mandatory. Mr. Ghosh, at the initial stage of his arguments, also felt that such an interpretation may be possible but while closing his arguments he contended that reading Section 7, as a whole, such a view cannot perhaps be taken. We are unable to agree with him on this point. We hold that the word "may" in Sub-section (2) confers a power on the prescribed authority either to impose a penalty or not to impose a penalty at all, depending on the circumstances of each case. If the authority is satisfied upon hearing that no penalty should be imposed, he has the implied authority to release the goods.
If the expression "may" is read in that fashion, then the power to release the goods in appropriate cases by him must also be read into the section.
44. We, therefore, are of the opinion that Section 7(2) has to be interpreted as meaning that the prescribed authority has the power either to impose a penalty or not to do so and to release the goods but this will depend upon the result of an adjudication to be held for the purpose. The provision for giving a reasonable opportunity of being heard as contained in Sub-section (2) of Section 7, must necessarily be held to include an opportunity to show cause why no penalty should at all be imposed. We interpret Section 7(2) in the manner indicated above.
45. That being our view of the matter, we are unable to uphold the order of imposition of penalty in Case No. RN-90(T) of 1989 in the manner it has been done. We direct that an appropriate fresh adjudication should be made before imposition of any penalty at all.
The opportunity of being heard, as provided in Section 7(2), must not be confined to the question of valuation and quantum of penalty alone.
The opportunity should include an opportunity to explain the reason for failure to furnish the relevant document at the moment it was demanded and to show cause against the seizure itself. The argument of Mr. Ghosh was that Section 7(2) merely provides for penalty and the prescribed authority would have no authority to release the goods. We do not agree with the submission in this regard. If the prescribed authority is held to have the power not to impose penalty, then he must be held also to have the power to release the goods in appropriate cases. Otherwise, the discretion would be meaningless. Once he decides that there is no case for penalty, he would have no right to keep the goods under seizure. The authority to release in such circumstances is implicit.
46. Such being our conclusions, we feel that the cases ought to be allowed and they are accordingly allowed. The cases be remitted back to the prescribed authorities concerned for a fresh adjudication after giving a reasonable opportunity to the applicants of being heard.
Thereupon the prescribed authority shall pass appropriate orders in the light of the observations made above. Such orders should be passed at an early date and if not impossible, within a period of two months. The notice issued in form VII-I under Section 7(2) should, henceforth, be issued in the altered form suggested by us in the body of the judgment.
47. All interim orders are vacated. The bank guarantee be released and the money deposited with the solicitor be also returned.