State of Kerala Vs. Cello Household Appliances (Pvt.) Ltd. - Court Judgment

G. Sivarajan, J.

1. The matter arises in proceedings Under Section 29A(2) and (4) of the Kerala General Sales Tax Act, 1963 (for short, 'the Act'). This revision is filed by the State against the order dated February 29, 2000 passed by the Kerala Sales Tax Appellate Tribunal, Additional Bench, Thiruvananthapuram in T.A. No. 274 of 1999. The respondent herein is the appellant in the said appeal. The respondent M/s. Cello Household Appliances (Pvt.) Ltd., Mumbai consigned 2790 American serving sets at the rate of Rs. 53 per set totaling Rs. 1,47,870 to M/s. Rockman Enterprises, Karamana, Thiruvananthapuram as per invoice No. 7222 dated February 6, 1998 through Fast and Safe Transport (Pvt.) Ltd. The above goods packed in 93 boxes reached the parcel office of the carrier at Thiruvananthapuram after passing through the border check-post of Kerala and the same were kept in the parcel office of the said carrier at Thiruvananthapuram. On February 17, 1998 the Intelligence Inspector, Squad No. 111, Thiruvananthapuram at Neyyattinkara inspected the parcel office and on checking the consignment in question found that the transport of the same was not accompanied with the original of the invoice and on physical verification it was found that the quantity transported was 2,788 sets as against 1,790 sets declared in the bills accompanied. He had accordingly estimated the value of the goods at Rs. 3,20,620, i.e., at the rate of 115 per set. He thereafter issued a notice Under Section 29A(2) of the Act on February 17, 1998 demanding a security deposit of Rs. 64,124 being double the tax for release of the said goods. The said notice, it is stated, was issued to the consignor as well as the consignee through the parcel office but the same was not responded till March 15, 1998 and another notice dated March 16, 1998 was also issued. Then the Rockman Enterprises, Karamana, Thiruvananthapuram the consignee filed a reply dated April 24, 1998 wherein it is stated that the American serving sets transported as per invoice dated February 6, 1998 was 2,790 in number valued at Rs. 53 per set. The original of the invoice was also produced. It was stated that the number of sets shown in the invoice copy as 1,790 is mistake and the actual number is 2,790. It was further stated that the Inspecting officers have no authority to estimate the value of goods covered by documents and further stated that the local sale value per piece is Rs. 100 as directed by the consignor. The Intelligence Officer thereafter issued a notice dated May 12, 1998 proposing to impose penalty Under Section 29A(4) of the Act. M/s. Rockman Enterprises has filed a reply dated May 25, 1998 on the same premise as in the reply mentioned above. The Intelligence Officer did not accept the explanation of the consignee and took the view that the correction in the copy of the sale bill was made with the willful intention of evading payment of tax legitimately due to the Government. He accordingly imposed a penalty of Rs. 64, 124 as originally proposed. It was also ordered that the penalty so imposed should be paid as specified in the demand notice attached as otherwise the goods kept at the office of the parcel office will be seized and sold for realisation of penalty as provided under Sub-section (9) of Section 29A of the Act and the Rules. The consignee did not file any appeal against the said order. However, M/s. Cello Household Appliances (P) Ltd., Mumbai has filed appeal against the said order before the Inspecting Assistant Commissioner, A & I in full additional charge of the Appellate Assistant Commissioner of Commercial Taxes, Thiruvananthapuram, who dismissed the appeal. The consignor then filed appeal before the Tribunal and the Tribunal by the impugned order has allowed the said appeal holding that neither the Intelligence Inspector nor the Intelligence Officer has jurisdiction to issue notice Under Section 29A(2) and impose penalty Under Section 29A(4) of the Act. In that view of the matter, the Tribunal did not go into the merits of the imposition of penalty.

2. The learned Government Pleader appearing for the revision petitioner submits that the Tribunal had erroneously held that the Intelligence Inspector and the Intelligence Officer did not have the authority to initiate proceedings Under Section 29A of the Act when the goods are in the parcel office. The Government Pleader submits that under the provisions of Section 29A of the Act both the aforesaid authorities have power to initiate proceedings under the aforesaid provisions and to impose penalty. According to the learned Government Pleader the transport of goods contemplated Under Section 29A of the Act ceases only by the delivery of the goods by the parcel service to the consignee and that till such time it must be deemed to be in the course of transportation of the goods. The Government Pleader further submits that this has been made explicit by incorporating such a provision in Section 29 of the Act [Explanation II to Section 29(2) added by the Kerala General Sales Tax (Amendment) Act, 2000]. The Government Pleader also relied on the decision of this Court in Pavithran v. Poulose [1978] 42 STC 27 ; 1978 KLT 431 and the decision of the Supreme Court in Tripura Goods Transport Association v. Commissioner of Taxes [1999] 112 STC 609.

3. In order to appreciate the rival contentions it is necessary to refer to the relevant provisions of the Act. Section 29 of the Act provides for establishment of check-post and inspection of goods in transit. Under the said section if the Government considers that with a view to prevent or check evasion of tax under the Act in any place or places in the State it is necessary so to do, they may by notification in the Gazette direct setting up of check-posts at such place or places, and define the boundaries of such check-posts and notify the area of the check-posts included within such boundaries, and demarcate such boundaries by means of barriers or otherwise for the purpose of regulating the passage of goods across the notified area. Sub-section (2) of Section 29 provides that no person shall transport within the State across or beyond the notified area any consignment of goods exceeding such quantity or value as may be prescribed by any vehicle or vessel, unless he is in possession of (a) either a bill of sale or delivery note or way bill or certificate of ownership containing such particulars as may be prescribed, and (b) a declaration in such form and containing such particulars as may be prescribed when the vehicle or vessel enters or leaves the State limits. Sub-section (3) of section 29 provides that at any place within the notified area or at any other place when so required by any officer empowered by the Government in this behalf, the driver or any other person in charge of any vehicle or vessel shall stop the vehicle or vessel and keep the vehicle or vessel, as the case may be, stationery as long as may be required by the officer in charge of the notified area or the officer empowered as aforesaid and allow and enable such officer to inspect the goods under transport and to examine the bill of sale or delivery note or way bill or certificate of ownership relating to the goods, which are in the possession of such driver or person in charge of the goods, who shall, if so required, give his name and address, the name and address of the owner of vehicle or vessel and the name and address of the owner of the goods and in the case of a vehicle or vessel entering or leaving the State limits the declaration also. Sub-section (4) of Section 29 provides that where the goods transported exceed the quantity or value prescribed-under subsection (2), the officer in charge of the notified area or the officer empowered in the preceding Sub-section shall have power to detain or seize and confiscate the goods, (a) which are being transported by a vehicle or vessel and not covered by a bill of sale or delivery note or way bill or certificate of ownership and where the vehicle or vessel enters or leaves the State limits, the declaration referred to in clause (b) of Sub-section (2) also, or (b) where the declaration is false or is reasonably suspected to be false in respect of the particulars furnished therein. However, before taking action for the confiscation of goods under this section, the officer shall give the person in charge of the goods and the owner, if ascertainable, an opportunity of being heard and make an enquiry in the manner prescribed.

4. Section 29A of the Act provides the procedure for inspection of goods in transit through notified areas. Under Sub-section (1) of Section 29A the driver or other person in charge of a vehicle or vessel shall stop the vehicle or vessel and any person referred to in subsection (2A) of Section 29 shall stop at any place with a notified area when so required by the officer in charge of that notified area or at any other place when so required by any officer empowered by the Government in that behalf, for the purpose of enabling such officer to verify the documents required by Sub-section (2) of Section 29 to be in the possession of the person transporting the goods and to satisfy himself that there is no evasion of tax. Sub-section (2) provides that if such officer has reason to suspect that the goods under transport are not covered by proper and genuine documents or that any person transporting the goods is attempting to evade payment of the tax due under this Act, he may, for reasons to be recorded in writing, detain the goods and shall allow the same to be transported only on the owner of the goods, or his representative or the driver or other person-in-charge of the vehicle or vessel on behalf of the owner of the goods, furnishing security for double the amount of tax likely to be evaded ; as may be estimated by such officer. The proviso also gives power to such officer to permit such goods to be transported on the owner of the goods or his representative or the driver or other person-in-charge of the vehicle or vessel executing a bond with or without sureties for securing the amount due as security. The second proviso also gives the power to such officer to allow the goods to be transported after realising the tax on the turnover of the goods under transport in cases where the documents produced in support of the transport of goods evidence defects of a minor or technical nature only. Sub-section (2A) provides for detention and seizure of the vehicle carrying the goods detained also where it is found that there is collusion between the owner of the goods and the owner of the vehicle and to release the vehicle only on the owner, driver, or person-in-charge of it furnishing the security provided in Sub-section (2) and on a failure to take the vehicle to the nearest police station or to any check-post of the department for safe custody of the goods or the vehicle or both. Sub-section (3) of Section 29A also provides that the officer detaining the goods shall record the statements, if any, given by the owner of the goods or his representative or the driver or other person-in-charge of the vehicle or vessel and shall submit the proceedings along with the connected records to such officer not below the rank of Sales Tax Officer as may be authorised in that behalf by the Government, for conducting necessary inquiry in the manner. It also provides that where tax is collected under the second proviso to Sub-section (2) or under Sub-section (2B), no enquiry under this Sub-section shall be necessary and the officer detaining the goods shall submit the proceedings along with the connected records to the concerned assessing authority. Sub-section (4) provides for adjudication which provides that the officer authorised under Sub-section (3) shall, before conducting the inquiry serve notice on the owner of the goods and give him an opportunity of being heard and if, after the enquiry, such officer finds that there has been an attempt to evade the tax due under this Act, he shall, by order, impose on the owner of the goods a penalty not exceeding twice the amount of tax attempted to be evaded, as may be estimated by such officer. Sub-section (6) provides that if the owner of the goods or his representative or the driver or other person-in-charge of the vehicle or vessel does not furnish security or execute the bond as required under Sub-section (2) within fourteen days from the date of stopping the vehicle or vessel under Sub-section (1), the officer referred to in that Sub-section may, by order, seize the goods, and in the event of the owner of the goods not paying the penalty imposed under subsection (4) within thirty days from the date of the order imposing the penalty, the goods seized shall be liable to be sold for the realisation of the penalty in the manner provided in Sub-section (9).

5. The contention of the department is that though the provisions of sections 29 and 29A of the Act and rules 35 and 35A of the Rules only refer to the interception of the vehicle carrying goods and to demand security and to take proceedings contemplated Under Section 29A(4) of the Act the object of such interception and initiating proceedings Under Section 29A is to verify as to whether the transport of the goods is supported by proper documents as contemplated Under Section 29(2) and find out as to whether there is any attempt at evasion of tax legitimately due to the Government. The further contention of the Government Pleader is that the transport of the goods in a vehicle to a particular destination in cases where the goods are delivered to a carrier ceases only on the goods being delivered to the consignee and till such time the transport of goods contemplated Under Sections 29 and 29A will continue. The Government Pleader also contended that the sales tax authority notified Under Section 29 or 29A of the Act is fully competent to inspect the premises of the transporting company and to verify as to whether the goods consigned, transported and kept in the premises of the transporter is supported by the documents required Under Section 29(2) and in case the transport of the goods is found to be not supported by proper documents or if the officer suspects that there is an attempt at evasion of tax legitimately due to the Government such officer has full authority Under Sections 29 and 29A of the Act to proceed in accordance with the said sections. The Government Pleader in support of the above contention relied on the decision of the Supreme Court in Tripura Goods Transport Association v. Commissioner of Taxes [19991 112 STC 609 and the decision of this Court in Pavithran v. Poulose [1978] 42 STC 27 ; 1978 KLT 431. The Government Pleader further relied on the Explanation to Section 29(2) added by the Kerala General Sales Tax (Amendment) Act, 2000 also.

6. Though notice was served on the rcspondent-asscssee there is no appearance for the respondent.

7. We have already referred to the relevant provisions of sections 29, 29A of the Act and the relevant Rules. All those provisions do indicate that the power under the said sections is given to the authorities notified under the said sections only to intercept the vehicle and the goods while under transport and to demand security only in cases where the transport of the goods is not supported by proper documents contemplated Under Section 29(2) and also to find out whether there is any attempt at evasion of tax and to take further proceedings contemplated under the said sections. In the instant case the goods in question were consigned by M/s. Cello Household Appliances (Pvt.) Ltd., Mumbai to M/s. Rockman Enterprises, Karamana, Thiruvananthapuram and transported in a lorry belonging to Fast and Safe Transport (P) Ltd., Thiruvananthapuram. The goods so consigned was kept in the parcel office of the said transporting company. When the goods were kept in the said parcel office, the Intelligence Inspector, Squad No. 111, Thiruvananthapuram at Neyyattinkara inspected the said parcel office and found that 2,788 pieces of American serving Sets valued at Rs. 1,47,870 covered by invoice No. 7222 dated February 6, 1998 from M/s. Cello House Hold Appliances (Pvt.) Ltd., Mumbai-63 intended for M/s. Rockman Enterprises, Karamana, Thiruvananthapuram. On verification of the said invoice it was found that as per the invoice only 1,790 pieces are mentioned. It is in the above circumstances, the Intelligence Inspector took the view that the consignor with intent to evade the payment of tax has furnished incorrect particulars in the invoice. Though the Intelligence Inspector had issued notice Under Section 29A(2) of the Act demanding security for allowing release of the goods, neither the consignor nor the consignee got the goods released by furnishing security. The Intelligence Officer, Squad No. 111, Agricultural Income-tax and Sales Tax, Thiruvananthapuram at Neyyattinkara in proceedings Under Section 29A(4) issued notice to the consignor. The consignee has filed a reply admitting that the number of pieces dispatched are 2,790 in 93 cartons, that Section 29 of the Act does not envisage the Inspecting Officers to estimate the value of the goods covered by the documents and that the value of goods estimated at Rs. 115 per piece is without any ground. It was also pointed out that the sale value per piece is Rs. 100 as directed by the consignor. As already noted, the Intelligence officer did not accept the above contentions and imposed a penalty of Rs. 64, 124 on the consignee/ consignor.

8. The appeals before the first appellate authority as we'll as before the Tribunal were filed by the consignor. It must be noted that neither the consignee nor the consignor had raised the question that the Intelligence Inspector and the Intelligence Officer had power to initiate proceedings Under Section 29A of the Act either before the original authority or before the first appellate authority. Those authorities considered the matter on the merits. It is only before the Tribunal the consignor has taken the contention that the provisions of Section 29 read with Section 29A of the Act has no application to a case where the transport of the goods in a vehicle ended and the same was kept in the parcel office. The Tribunal had taken the view that once the transport of the goods under consignment was over and the goods are kept in a parcel office the provisions of Section 29/29A are not attracted and there is no question of imposing any penalty.

9. True the provisions of sections 29 and 29A deal with stoppage/interception of the vehicle at the check-post or at any place within the notified area as required by an officer authorised in that behalf for the purpose of verifying as to whether the goods under transport are accompanied by proper documents contemplated Under Section 29(2) of the Act and also for ascertaining as to whether there is an attempt at evasion of tax. The true scope of the provision regarding the establishment of check-post and evasion of tax was considered by the Supreme Court in Tripura Goods Transport Association's case [1999] 112 STC 609 mentioned supra in the context of the provisions of articles 14, 19(1)(g) and 301 of the Constitution and the provisions of the Tripura Sales Tax Act which cast an obligation on the transporters to get registered under the said Act and to maintain record of goods transported and produce declaration forms and the consequences for its non-compliance. After referring to the various provisions of the Act the Supreme Court considered the contention of the counsel for the revenue that the aforesaid provisions are only to streamline assessment and to check the evasion of sales tax and the said obligation casts on the transporters to achieve such purpose is a necessary concomitant of any taxing statute to make collection of tax more effective and purposeful. The Supreme Court thereafter observed that whenever any goods is sold or purchased inside or outside the State, the incidence of tax and the quantum of tax has to be ascertained under the provisions of the relevant taxing statute, that for this, it is necessary to fix a dealer, the taxable goods, place of sale or purchase of such goods and the quantum of tax. The Court proceeded to observe that if a dealer in taxable goods transaction of sale or purchase escapes attention of the taxing authority, tax on such goods escapes with resultant loss to the State revenue and to over-reach this possible escape a mechanism is invariably brought in a statute to seal such loopholes of escape of course casting obligations on some to perform certain acts to reach this objective. Referring to the requirements cast on the transporters to maintain accounts of goods transported into or outside Tripura in the prescribed manner and to furnish in the prescribed manner such information as the Commissioner requires including filing of form XXIV is only for the said objective to be achieved with the help and aid of such transporter or carrier, etc. Such obligation is cast only for identifying the consignor or consignee to fix liability on them in correlation with the goods carried by such transporter further requiring the disclosure of such goods with its quantity, value, weight, to help the taxing authority to assess such goods on such escaping dealer. This helps the taxing authorities in collecting taxes, imposing penalties including punishing one for the offences committed and that if such an obligation is not cast on such transporters then any dealer under a false name can dispatch his taxable goods to another person through a transporter escaping his sales tax liability on such goods. It is also observed that it cannot be denied that some such dealers and transporters do indulge in such illegal practices.

10. This Court had occasion to consider the very question as to whether the power of verification contemplated Under Sections 29 and 29A of the Act apply to goods the possession of which was no longer with the carrier in Pavithran's case [1978] 42 STC 27 (Ker); 1978 KLT 431 mentioned supra. The question arose in the context of a challenge to the prosecution proceedings initiated against the Sales Tax Officers who stopped the complainant and directed him to produce documents and took him in a jeep to verify bills as hit by Section 51 of the Act. The question arose in that context as to whether the officers acted in accordance with the power given to them Under Section 29A read with Section 29(2) of the Act or purported to have so acted. A contention was taken by the respondent in that case that the power of verification applies to goods in the possession of the carrier at the relevant time and not to goods the possession of which was no longer with the carrier.

In other words, the power Under Section 29A does not extend to goods which were no longer in the possession of the carrier. The learned Judge, Kochu Thommen, J. (as His Lordship then was) did not agree with the interpretation sought to be put on sections 29 and 29A by the respondent. The Court observed as follows :

'Section 29 prohibits the transport of goods without the required documents. Any transportation without the necessary documents is a violation of the law. The power to verify the documents Under Section 29A is to ascertain whether Section 29(2) was in terms satisfied and whether there was any evasion of tax. It is necessary to ascertain the manner in which the goods are being carried or had been carried by the vehicle. In the case of goods which were sold and removed from the vehicle, the carrier has a duty to satisfy the officers that such goods had been carried in the lorry under proper documents and there was no evasion of tax. In regard to goods remaining in the lorry the carrier has a similar duty to satisfy the officers that the goods are being carried under necessary documents and that no tax is evaded. The officers Under Section 29A have not only the power but also the duty to verify the documents with a view to finding out whether tax has been evaded'

11. Admittedly the goods entrusted to the transporting company was transported in a lorry and kept in the parcel office of the transporter at Thiruvananthapuram. The said consignment has not been delivered to the consignee. In other words, the goods under consignment at the relevant time was with the transporting company itself. Having regard to the object with which the provisions of sections 29 and 29A of the Act are enacted we are of the view that in a case where the consignor entrusts the goods to a transporting company for onway transport to the consignee's destination and the goods are still with the transporting company at the destination point the provisions of sections 29 and 29A of the Act can be invoked to enter the parcel office and to verify as to whether the goods under consignment are supported by documents contemplated Under Section 29(2) of the Act. This is for the reason that whatever documents are delivered by the consignor while entrusting the goods for transport to the consignee must be in the possession of the transporter only till the goods are delivered to the consignee at the destination point. If the documents required Under Section 29(2) are not with the transporter, in the absence of proper explanation by the transporter the presumption is that the goods were transported without the required document. In the instant case the transporter has no case that after the goods have reached the parcel office at the destination point the documents accompanying the transport was entrusted with the consignee for any purpose. In fact a copy of the sale bill accompanying the transport was with the transporter and the verification of the same showed that the number of American serving sets mentioned in the sale bill did not tally with the number of sets found on physical verification. According to us, the Intelligence Inspector was perfectly justified in invoking the provisions of Section 29 read with Section 29A of the Act and in demanding security for the release of the said goods by the transporter. For that reason the Intelligence Officer was also justified in adjudicating the question as provided under Sub-section (4) of Section 29A of the Act. The view which we have taken as above accords with the decision rendered by the learned single Judge in Pauithran's case [1978] 42 STC 27 (Ker) ; 1978 KLT 431 mentioned supra.

12. Further an amendment was made to Section 29 of the Act by the Kerala General Sales Tax (Amendment) Act, 2000 by inserting Explanation II to Sub-section (2) as follows :

'Explanation II-For the purposes of this Act, transport of goods commences at the time of delivery of goods to a carrier or bailee for transmission and terminates at the time when delivery is taken from such carrier or bailee'.

This Explanation, though introduced only by 2000 amendment. only explains the scope of the provisions of Section 29(2) in that what was implicit as understood by this Court itself was made explicit. It does not in any way widen the scope of Section 29(2) so as to have only prospective operation.

13. Under these circumstances, we are of the view that the Tribunal has committed a serious error in holding that the provisions of sections 29 and 29A of the Act are not applicable to the said case, We accordingly set aside the order of the Sales Tax Appellate Tribunal, Since the Tribunal did not go into the question regarding the exigibility to penalty and its quantum as also other defects pointed out by the petitioner, for that reason, we remit the matter to the Tribunal for considering the said question and for rendering the decision. This will be done within a period of 3 months from the da1 of receipt of a copy of this judgment.

The tax revision case is disposed of as above.