1. All these original petitions are filed by different petitioners-some of them are assessees under the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956 in Tamil Nadu, some assessees in Karnataka are challenging the notices issued by the respondents, Sales Tax Enforcement Wing, Chennai Roving Squad.
The common question raised by the petitioners herein is validity of the notices issued under sections 42(3), 42(5) and 42(8) of the Tamil Nadu General Sales Tax Act, 1959.
3. In Original Petition Nos. 95 of 2003 and 102 of 2003, already we have passed an interim order for the release of the goods on furnishing of security, as contemplated under section 42(8) of the Act. At that stage, learned counsel for the petitioners made their submissions questioning the validity of the impugned notices issued by the respondent.
4. The petitioners in Original Petitions Nos. 167 of 2003 and 173 of 2003 have agreed to furnish security under section 42(8) of the Tamil Nadu General Sales Tax Act, 1959 and in other respects, they concur with the arguments advanced by the learned Senior Counsel.
5. At the outset, learned Senior Counsel-Thiru C. Natarajan has made it clear that his intention is only to clarify the position of law and not to support tax evasion which would impair the progress to achieve the high object of "Welfare State". Learned Senior Counsel elucidated his reasons by interpreting section 42, specially sub-sections (3), (5) and (8) of section 42 of the Tamil Nadu General Sales Tax Act, 1959 which are as follows : "Section 42. Establishment of check-post or barrier and inspection of goods, while in transit.-(1) If the Government consider that with a view to prevent or check 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 erection of a barrier or both, at such place or places as may be notified.
(a) (i) that the tax, if any, payable under this Act in respect of the sale or purchase of the goods carried, has been paid, or (ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax under this Act, been properly accounted for in the documents referred to in sub-section (5), the said officer shall release the goods vehicle or boat with the goods carried, or (b)(i) that the tax, if any, payable under this Act in respect of the sale or purchase of the goods carried, has not been paid, or (ii) that the sale or purchase of the goods carried has, for the purpose of payment of tax under this Act, not been properly accounted for in the documents referred to in sub-section (5), and if the said officer is satisfied, after making such enquiry as he deems fit, that with a view to prevent the evasion of tax payable in respect of the sale or purchase of the goods carried, it is necessary to detain the goods, he shall detain the goods and direct the driver or any other person in-charge of the goods vehicle or boat, or the consignor or the consignee.
(ii) to furnish adequate security in such form and in such manner and to such authority as may be prescribed, on behalf of the person liable to pay such tax.
Section 42(5). The documents referred to in sub-sections (2) and (3) are bills of sale, or delivery notes, or such other documents as may be prescribed.
Section 42(8) (a). If the tax directed to be paid or the security directed to be furnished under sub-section (3) is not paid or furnished, or (b) If it appears to the said officer that the driver or the person in-charge of the goods vehicle or boat is not giving the correct name and address of the owner of the goods vehicle or of the boat, or of the consignor or of the consignee of the goods, and if the said officer is satisfied after making such enquiry as he deems fit, that with a view to prevent the evasion of tax payable in respect of the sale or purchase of the goods carried, it is necessary to detain the goods, he shall detain the goods either in the check-post or elsewhere as long as may reasonably be necessary and shall ascertain the correct name and address of the owner of the goods vehicle or boat or of the consignor or of the consignee of the goods : Provided that no such goods shall be detained by the said officer for more than twenty-four hours except with the permission of the next higher authority." 6. Before going into the meaning conveyed under the said provisions, it is better to consider the arguments advanced on the side of the Revenue. Learned Advocate-General-Thiru N.R. Chandran, has contended that the enforcement authorities of the Sales Tax Department, on inspections, found certain irregularities in the transactions for which all these original petitions are filed. There are three types of cases : (i) Goods imported from foreign countries and kept in warehouses or godowns, as the case may be ; (ii) Goods intercepted at the check-posts while they were being transported ; and (iii) Goods sent by M/s. Haldia Petrochemicals Ltd., West Bengal, to their Branch at T. Nagar, Chennai-17.
M/s. Tarajyot Polymers Ltd., Bangalore, petitioners in O.P. Nos. 95, 114, 121 and 157 of 2003, M/s. Shyam Textiles Ltd., Bangalore, petitioners in O.P. No. 102 of 2003, and M/s. P.P. Products (P) Ltd., Bangalore, petitioners in O.P. Nos. 112 and 113 of 2003 are having their registration under the Karnataka Sales Tax Act, 1957 at Bangalore in Karnataka State. Learned Advocate-General has contended that in all these cases, on the basis of inspection by the enforcement wing authorities, notices have been issued to the respective owners of the goods, calling for certain records in order to verify the genuineness of the transactions. The Revenue has stated that some previous transactions by M/s. Tarajyot Polymers Ltd., Bangalore who under bill of entry Nos. 200208716 and 200208717 dated August 9, 2002 on import of the goods, effected local sales but claimed to have made sales in the course of import and the goods were delivered from the warehouse in Chennai. On the basis of the previous alleged irregularities, in order to verify the genuineness of the transactions, the authorities concerned have issued various notices to the petitioners herein.
Learned Advocate-General further contended that in such circumstances, it is for the petitioners to appear before the authorities with the relevant documents to prove the genuineness of such transactions and instead, the petitioners have thought fit to challenge the notices issued by the authorities by way of writ before this Special Tribunal.
Learned Senior Counsel for the petitioners has contended that the petitioners have produced all the relevant documents to the authorities and since they are not registered assessees under the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956 in Chennai, they are unable to produce any documents to satisfy the authorities concerned. Per contra, it was argued on the side of the Revenue that the authorities must have an opportunity to verify the genuineness of the transactions which cannot be done without availing such opportunity.
7. In Original Petitions Nos. 167 and 173 of 2003, the petitioners are M/s. Sha Jagroopjee Pukhraj and Tvl. Esjaypee Impex Pvt Ltd., Chennai-1, were found transporting two consignments of spices loaded in two containers without support of any documents such as bill of sale or delivery note. The goods belonged to Karnataka State Co-operative Marketing Federation, Karnataka and they were delivered to Tvl.
Esjaypee Impex Pvt. Ltd., Chennai, a sister concern of Tvl. Sha Jagroopjee Pukhraj and doing business in the same premises. On notice, the petitioners appeared before enforcement wing officials, admitted the violation of the provisions of the Tamil Nadu General Sales Tax Act, 1959 and paid a compounding fees of Rs. 1 lakh and tax of Rs. 3,70,000. The enforcement wing officials had reasons to believe that the petitioners indulged in clandestine movement of imported goods and thereby cheated the Government its legitimate tax due on such sales. On further inspection on January 29, 2003, it came to light that the dealers have imported 2,400 bags of toor dhall and cleared the goods from the bond and moved 1,720 bags on the earlier date, leaving 680 bags in the godown. The officials issued a Goods Detention Order in G.D. No. 5/2002-2003 dated January 29, 2003 to verify the genuineness of the transactions.
8. M/s. Haldia Petro-chemicals, West Bengal, having their head office at Calcutta, transported the goods from Kolkota to Chennai. The goods were intercepted at the check-post on the ground that the goods in the vehicle were not accompanied by valid documents prescribed under the Tamil Nadu General Sales Tax Act, 1959 and there were reasons to believe that there were sales or purchase of goods liable to tax.
Therefore, in all these cases, the goods were detained only to verify the genuineness of those transactions. It was argued that in such circumstances, it is not unusual to grant a reasonable time for the authorities to verify the genuineness of the transactions and thereafter pass order as per the provisions of the Tamil Nadu General Sales Tax Act, 1959. We too feel that in the circumstances of the case, granting a reasonable time to verify the genuineness of the transactions would be appropriate.
9. It was argued on the side of the petitioners that there was no taxable event in all these transactions, that unless a sale or purchase is proved, the sales tax authorities have no jurisdiction to detain the goods as per the provisions of the Tamil Nadu General Sales Tax Act, 1959. Though the authorities have stated one or two instances of sale, they require further time to verify the taxable event in all these transactions. Therefore, before completion of the enquiry by the officials of the department, we cannot come to any definite conclusion that there was no transaction of sale or purchase in all these cases.
10. It was also contended on the side of the petitioners that in the majority of cases, the goods are kept in the bonded warehouse or godowns and that there was no sale or purchase to attract further actions by the authorities concerned. As stated supra, it is only on completion of the enquiry regarding the genuineness of the transactions, all those facts will come to light and at this stage, we cannot come to any firm conclusion regarding the sale or purchase.
11. It was also contended by the learned Senior Counsel for the petitioners that in some cases in O.P. Nos. 95, 102, 113, 114 and 121 of 2003, the goods are to be transported to Bangalore where the petitioners have registration under the Karnataka Sales Tax Act and detention of such goods in the godowns will not attract section 42 of the Tamil Nadu General Sales Tax Act, 1959 and therefore the authorities under the Tamil Nadu General Sales Tax Act, 1959 have no jurisdiction to detain the goods. The question of jurisdiction over the goods imported from foreign countries came before their Lordships of the Supreme Court in the case of State of Madras v. Davar and Co. AIR 1970 SC 165 wherein it was held : "The sales in this case were effected by transfer of documents of title long after the goods had crossed the customs frontiers of India; the ships carrying the goods in question were all in the respective harbours within the State of Madras when the sales were effected by the assessee by transfer of documents of title to the buyers. The sales were therefore not effected in the course of import."Madras Marine and Co. v. State of Madras AIR 1986 SC 1760 it was held by their Lordships of the Supreme Court : "The customs barrier does not set a terminal limit to the territory of the State for sales tax purposes. A sale, therefore, beyond the customs barrier may still be a sale within the State." In Bharat Heavy Electricals Ltd. v. State of Andhra Pradesh AIR 1996 SC 1854 the Andhra Pradesh High Court held : "That Central sales tax is liable to be collected in the State from which the movement of the goods commenced. It is that State alone which has the authority to collect the tax on behalf of the Government of India. The rightful and authorised agent of the Government of India was identified by section 9(1) of the Central Sales Tax Act. If some other State assumes the role of an agent and proceeds to collect the tax, it will be outstepping its jurisdiction. Therefore, in respect of goods sent by the Hyderabad unit directly to site, albeit at the instance of the executing unit Central sales tax could be levied and collected by the State of Andhra Pradesh alone, even though the tax had been paid by the executing units in their respective States." This decision was confirmed by the Supreme Court of India, reported in the same volume at page, 373 (Bharat Heavy Electricals Limited v. Union of India).State of Tamil Nadu v. Kerala State Small Industries Development and Employment Corporation Ltd. AIR 2001 SC 1970 the respondent imported cement from abroad, took delivery of the cement at Tuticorin and delivered directly to customers in Kerala, the question arose regarding the jurisdiction of Tamil Nadu State to impose tax on the said transactions and their lordships of the Supreme Court have held : "It may also be noticed that the sales tax authorities had also come to the conclusion on the basis of record that well before the arrival of the shipment at Tuticorin port, the respondent had opened its office at Tuticorin and that no material had been produced about the non-availability of berth at Cochin when the ship reached Indian Ocean." All these decisions would affirm the view that the Tamil Nadu sales tax authorities functioning under the Tamil Nadu General Sales Tax Act, 1959 have jurisdiction to levy tax on these transactions provided, as contended by the petitioners, that there was a taxable event within the State.
12. Learned Advocate-General has contended that all these transactions are effected clandestinely in order to evade tax. Section 41(1) clearly says : "Section 41. Powers to order production of accounts, and powers of entry, inspection, etc.-(1) Any officer empowered by the Government in this behalf may, for the purposes of this Act, require any dealer to produce before him the accounts, registers, records and other documents, and to furnish any other information relating to his business." The object behind introduction of section 41 was to check evasion of tax. To satisfy the said object, it is absolutely necessary to give reasonable time to the authorities concerned to verify the genuineness of these transactions. At this stage, it was also pointed out by the learned Advocate-General the Statement of Objects and Reasons, Act No.29 of 1980 which is as follows : "In order to arrest evasion of tax, it has been found necessary to make provision for examining the goods and inspecting the records relating to their transport when the goods are kept in the custody of a carrier or bailee prior to its delivery. The Government have decided to make suitable provisions for this purpose." 13. Learned Senior Counsel for the petitioners has relied on some decisions of the Madras High Court reported in [1972] 30 STC 233 (Mad.) (W.H. Deeth And Company v. Assistant Commercial Tax Officer), AIR 1970 SC 165(Murugan Soap Works v. Assistant -Commercial Tax Officer) and (1994) 6 MTCR 222 (Mad.) (Deputy Commercial Tax Officer v. Nathan Trading Company). For the aforesaid reasons, these decisions can be considered at the appropriate stage, in case the petitioners have an opportunity to raise similar grounds again. The other decision relied on by the petitioners reported in AIR 1990 SC 1814 (Dabur India Ltd. v.State of Uttar Pradesh) can be considered at the appropriate stage.
Their Lordships of the Supreme Court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 20 STC 453, while considering section 41 of the Madras General Sales Tax Act (1 of 1959) have held: "While making a law under any entry in the Schedule to the Constitution it is competent to the Legislature to make all such incidental and ancillary provisions as may be necessary to effectuate the law ; particularly, in the case of a taxing statute, it is open to the Legislature to enact provisions which would check evasion of tax. It is under this power to check evasion that provision for search and seizure is made in many taxing statutes.
The Legislature has therefore power to provide for search and seizure in connection with taxation laws in order that evasion may be checked." In fact, the present section 41 of the Tamil Nadu General Sales Tax Act, 1959 deals with "powers to order production of accounts and powers of entry, inspection, etc". Sub-section 41(3) is as follows : "Section 41(3). If any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers, records or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers, records and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under this Act : Provided that such accounts, registers, records and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority in which case they could be retained up to a period of ninety days at a time." Therefore, the authorities are having power to check tax evasion under sections 41 and 42 of the Act. Whether they use the power in accordance with the said provisions is a question to be decided on the basis of the outcome of the detention notices already issued by them. Leaving section 41 of the Act, section 42 of the said Act gives similar powers.
14. What is prayed for by the Revenue is a fair opportunity to verify the genuineness of the transactions and the same cannot be denied. The petitioners shall have their opportunity to contest the outcome in this regard. Therefore, at this stage, the petitions are liable to be dismissed.
In the result, all these original petitions (O.P. Nos. 112, 113, 95, 102, etc.) are dismissed. Consequently, the original miscellaneous petitions do not survive.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 21st day of February, 2003.