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Sodhi Transport Company and anr. Vs. the State of U.P. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAllahabad High Court
Decided On
Case NumberCivil Miscellaneous Writ No. 544 of 1980 connected with Nos. 252, 253, 294 to 301, 329, 334, 362, 36
Judge
Reported in[1983]52STC440(All)
AppellantSodhi Transport Company and anr.
RespondentThe State of U.P.
Appellant AdvocateR.K. Agrawal, Adv.
Respondent AdvocateStanding Counsel
DispositionPetition allowed
Cases ReferredChowringhee Sales Bureau (P.) Ltd. v. Commissioner of Income
Excerpt:
- - in the case of failure to do so presumption would be drawn that the goods brought in such consignment have been sold by the transporter within the state. wherever the intention to impose liability is clear, courts ought to have no hesitation in giving what we may call a common sense interpretation to the machinery sections so that the charge does not fail. 10. the next line of challenge to the validity of section 28-b is based on the reasoning that in the latter part of the provisions a presumption of sale is raised on the failure to produce the transit pass or verify the goods thereby extending the meaning of the word 'sale'.it is contended that the presumption raised is conclusive and it becomes a substantive provision of law and not a rule of evidence. by the latter part of.....k.n. seth, j. 1. by means of these petitions the petitioners have challenged their liability to tax under the u. p. sales tax act (hereinafter referred to as the act) principally on the ground that section 28-b of the act and rule 87 of the u. p. sales tax rules are ultra vires the powers of the state legislature.2. the case set up by the petitioners is that they carry on the business of transporting goods from one state to another throughout the territory of india either in vehicles owned by them or hired from others. the petitioners' offices outside the state of uttar pradesh book goods of various customers for transportation to various states other than the state of uttar pradesh. the vehicles carrying these goods transported from a state outside the state of uttar pradesh to a.....
Judgment:

K.N. Seth, j.

1. By means of these petitions the petitioners have challenged their liability to tax under the U. P. Sales Tax Act (hereinafter referred to as the Act) principally on the ground that Section 28-B of the Act and rule 87 of the U. P. Sales Tax Rules are ultra vires the powers of the State Legislature.

2. The case set up by the petitioners is that they carry on the business of transporting goods from one State to another throughout the territory of India either in vehicles owned by them or hired from others. The petitioners' offices outside the State of Uttar Pradesh book goods of various customers for transportation to various States other than the State of Uttar Pradesh. The vehicles carrying these goods transported from a State outside the State of Uttar Pradesh to a different State pass through the State of Uttar Pradesh. Sometimes when the journey of the vehicles is too long from one State to another State, the goods brought in by the vehicles are unloaded in the State of Uttar Pradesh and reloaded on different vehicles and despatched to the destination States. For the goods booked by the petitioners from various places outside the State of Uttar Pradesh the petitioners issue chalans containing the details of the goods booked by them to be delivered to different places in different States. The goods transported by the petitioners do not belong to them and they do not carry on the business of purchase or sale of the goods directly or indirectly, through the agents or otherwise. The petitioners are paid only transportation charges. They are not dealers within the meaning of the Act and have no turnover of any kind as contemplated by the Act and consequently the petitioners are neither required to get themselves registered in the manner prescribed nor are liable to tax under the Act. The petitioners have been made liable to tax under the Act by enacting Section 28-B and rule 87 which are beyond the legislative competence of the State Legislature or unreasonable and unworkable and hence violative of Articles 14 and 19(1)(g) of the Constitution and are also violative of Article 301 of the Constitution. It has also been asserted that the petitioners are not dealers and consequently not liable to tax.

3. Section 3 of the Act is the charging section. It makes a dealer liable to pay tax for each assessment year at the rates provided by or under Section 3-A or Section 3-D on his turnover of sales or purchases, as the case may be. With a view to prevent evasion of tax or other dues payable under the Act various provisions have been made in the Act. In respect of sale of goods within the State after their import into the State, the State Government by Section 28 of the Act is empowered, by notification in the Gazette, to direct the establishment of check posts or barriers at such places within the State as may be specified in the notification. Section 28-A is concerned with a case where any person intends to bring, import or otherwise receive, into the State from any place without the State, any goods liable to tax under the Act in such quantity or measure or of such value as exceeds the quantity, measure or value notified by the State Government in that behalf, in connection with business. Section 28-B deals with transit of goodsby road through the State. Section 28-B with which we are concerned in these petitions provides :

When a vehicle coming from any place outside the State and bound for any other place outside the State passes through the State, the driver or other person-in-charge of such vehicle shall obtain in the prescribed manner a transit pass from the officer-in-charge of the first check post or barrier after his entry into the State and deliver it to the officer-in-charge of the last check post or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle

4. Entry 54 of List II of the Seventh Schedule to the Constitution authorises the State Legislature to legislate in respect of taxes on the sales or purchase of goods, as relied by the Supreme Court in the Check Post Officer, Coimbatore v. K. P. Abdulla and Bros. [1971] 27 STC 1 (SC), 'A legislative entry does not merely enunciate powers : It specifies a field of legislation and the widest import and significance should be attached to it. Power to legislate on a specified topic includes power to legislate in respect of matters which may fairly and reasonably be said to be comprehended therein.' A taxing entry, therefore, confers power upon the legislature to legislate for matters anciliary or incidental including provisions for preventing evasion of tax. Section 28 enables the State Government to establish check posts or erect barriers with a view to prevent evasion of tax under the Act. In a case falling under Section 28-B the driver or other person-in-charge of such vehicle is required to obtain in the prescribed manner a transit pass from the officer-in-charge of the first check post or barrier after his entry into the State and deliver it to the officer-in-charge of the last check post or barrier before his exit from the State. Rule 87 requires the driver or other person-in-charge of a vehicle, in order to obtain a pass under Section 28-B, to submit an application in triplicate in form XXXIV to the officer in-charge of the entry check post or barrier. The officer-in-charge of the entry check post is required, after examining the documents and after making such enquiries which he deems necessary, to issue a pass on the duplicate and triplicate copies of the application, retaining the original himself. The exit check post or the barrier of the State to be crossed by the vehicle and the time and date up to which it should be so crossed are specified in the pass. The driver or the person-in-charge of the vehicle has to stop his vehicle at such exit check post, surrender the duplicate copy of the pass and allow the officer-in-charge of the check post to inspect the documents, consignments and goods in order to ensure that the consignments being taken out of the State are the same for which pass has been obtained. The officer-in-charge of the exit check post issues a receipt on the triplicate copy of the pass for the duplicate copies surrendered by the driver or other person in-charge of the vehicle. The rule also empowers the officer-in-charge of the exit check post to detain, unload and search the contents of the vehicles.

5. One of the modes adopted for evading tax could be by showing ostensible destination of goods in other States but delivering them within the State. In order to check this mode of evasion Section 28-B was enacted which required a declaration being made with necessary details in the prescribed form XXXIV and obtaining the transit pass from the officer-in-charge of the entry check post under rule 87. The transporter is required to surrender before leaving the State a copy of such transit pass at the exit check post in token of the fact that the consignments that were brought in Uttar Pradesh were actually taken out of Uttar Pradesh and had not been delivered or unloaded here. In the case of failure to do so presumption would be drawn that the goods brought in such consignment have been sold by the transporter within the State.

6. It is thus obvious that the impugned provisions are incidental and ancillary to the power of taxation covered by entry 54 and have been enacted with a view to prevent evasion of tax. As observed by the Supreme Court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 20 STC 453 (SC); AIR 1968 SC 59 in the case of a taxing statute, it is open to the legislature to enact provisions which would check evasion of tax.

7. Section 28-B of the Act and rule 87 are machinery provisions. The Supreme Court in India United, Mills Ltd. v. Commissioner of Excess Profits Tax AIR 1955 SC 79 in which Section 15 of the Excess Profits Tax Act came up for consideration observed thus:

That section is, it should be emphasised, not a charging section, but a machinery section. And a machinery section should be so construed as to effectuate the charging sections.

8. This principle was followed by the Supreme Court in later decisions and recently reiterated in Associated Cement Company Limited v. Commercial Tax Officer, Kota [1981] 48 STC 466 (SC); (1981) 4 SCC 578 in these words:

It is the duty of the Court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purposes having a full view of it. Wherever the intention to impose liability is clear, courts ought to have no hesitation in giving what we may call a common sense interpretation to the machinery sections so that the charge does not fail.

9. It cannot, therefore, be successfully urged that Section 28-B and rule 87, in so far as they require the driver or other person-in-charge of the vehicle to obtain a transit pass, are beyond the legislative competence.

10. The next line of challenge to the validity of Section 28-B is based on the reasoning that in the latter part of the provisions a presumption of sale is raised on the failure to produce the transit pass or verify the goods thereby extending the meaning of the word 'sale'. It is contended that the presumption raised is conclusive and it becomes a substantive provision of law and not a rule of evidence. We find no merit in the contention. Jowitt's Dictionary of English Law, Second Edition, notes three types of presumptions : (1) Irrebuttable or conclusive presumptions are absolute inference established by law; they are called irrebuttable because evidence is not admissible to contradict them. Irrebuttable presumptions are more properly called rules of law or fictions of law, according to as the fact presumed is probably true or is known to be false. (2) Inconclusive or rebuttable presumptions of law are inferences which the law requires to be drawn from given facts, and which are conclusive until disproved by evidence to the contrary. (3) Presumptions of fact that are inferences which the tribunal (a jury) is at liberty, but not compelled to draw from the facts before it. By the latter part of Section 28-B a presumption is drawn on the failure of the driver or other person-in-charge of the vehicle to produce the transit pass that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle. This is inconclusive or rebuttable presumption. If evidence is led that the goods that entered the State of Uttar Pradesh have in fact been transported to a place outside the State of Uttar Pradesh, the presumption of sale is rebutted. Even in a case of unrebuttable presumption it is not always correct to say that all rules prescribing unrebuttable presumptions are rules of substantive law. The Supreme Court in Izhar Ahmed Khan v. Union of India AIR 1962 SC 1052 dealing with this question ruled thus :

In deciding the question as to whether a rule about irrebuttable presumption is a rule of evidence or not, it seems to us that the proper approach to adopt would be to consider whether fact A from the proof of which a presumption is required to be drawn about the existence of fact B, is inherently relevant in the matter of proving fact B and has inherently any probative or persuasive value in that behalf or not. If fact A is inherently relevant in proving the existence of fact B and to any rational mind it would bear probative or persuasive value in the matter of proving the existence of fact B, then a rule prescribing either a rebuttable presumption or an irrebuttable presumption in that behalf would be a rule of evidence. On the other hand, if fact A is inherently not relevant in proving the existence of fact B or has no probative value in that behalf and yet a rule is made prescribing for a rebuttable or an irrebuttable presumption in that connection, that rule would be a rule of substantive law and not a rule of evidence. Therefore, in dealing with the question as to whether the given rule prescribing a conclusive presumption is a rule of evidence or not, we cannot adopt the view that all rules prescribing irrbuttable presumptions are rules of substantive law.

11. It cannot be seriously contended that when goods have been brought in a vehicle into the State of Uttar Pradesh under a transit pass but the goods are not accounted for when the vehicle carrying the goods passes through the exit check post, this fact is inherently irrelevant in accepting that the goods have been sold within the State of Uttar Pradesh. Such a presumption is a rule of evidence and not a rule of substantive law. In fact that would be a natural and relevant inference to be drawn in those circumstances.

12. The presumption that is drawn is one of sale having the same meaning as that expression has in the Sale of Goods Act. It does not extend the meaning of the word 'sale' or give it an artificial meaning. The learned counsel for the petitioners referred to certain decisions in support of the contention that raising the presumption of sale in the circumstances mentioned in Section 28-B is beyond the legislative competence. In our opinion none of these cases supports the petitioner's contention. In Sales Tax Officer v. Budh Prakash Jai Prakash [1954] 5 STC 193 (SC); AIR 1954 SC 459 the question was whether imposition of tax on forward contracts was valid. Dealing with the scope of entry 48 in List II of the Seventh Schedule to the Government of India Act, 1935, the Supreme Court held that the entry authorises the imposition of a tax only when there is a completed sale involving transfer of title, and not when there is a mere agreement to sell and that the State Legislature cannot by enlarging the definition of 'sale' as including forward contracts, arrogate to itself a power which is not conferred upon it by the Constitution Act, and the definition of 'sale' in Section 2(h) of the U. P. Sales Tax Act must, to that extent, be declared ultra vires. The case of State of Madras v. Gannon Dunkerley and Company (Madras) Ltd. [1958] 9 STC 358 (SC); AIR 1958 SC 560 related to a building contract. The Supreme Court observed that the expression 'sale of goods' in entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building contract which is entire and indivisible there is no sale of goods and it is not within the competence of the Provincial Legislature under entry 48 to impose a tax on the supply of the materials used in such contract treating it as sale. The Supreme Court in the case of R. Abdul Quader and Co. v. Sales Tax Officer [1964] 15 STC 403 (SC); AIR 1964 SC 922 was concerned with Section 11(2) of the Hyderabad General Sales Tax Act which provided for recovery of an amount collected by way of tax as arrears of land revenue though the amount was not due as tax under the aforesaid Act. The Supreme Court ruled that though the amount may have been collected by the dealer by way of tax since it was not exigible as tax under the Act, the State cannot by law make it recoverable simply because it| had been wrongly collected by the dealer. This cannot be done directly for it is not a tax at all within the meaning of entry 54 of List II nor can the State Legislature under the guise of incidental or ancillary power do indirectly what it cannot do directly. Section 11(2) was held to be beyond the competence of the State Legislature. In the case of Bhopal Sugar Industries Ltd. v. D. P. Dube [1963] 14 STC 406 (SC) ; AIR 1964 SC 1037 the question for consideration was whether the consumption by a retail dealer himself for his own use falls within the definition of 'retail sale'. The Supreme Court took the view that in the expression 'sale of goods' four elements must exist: (1) parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer ; and (4) a price in money paid or promised. A transaction which does not conform to this traditional concept of sale cannot be regarded as one in respect of which the State Legislature is competent to enact an Act imposing liability for payment of tax. Consumption by an owner of goods in which he deals is therefore not a sale within the meaning of the Sale of Goods Act and therefore, it is not 'sale of goods' within the meaning of entry 54, List II, Seventh Schedule to the Constitution. The extended definition which includes consumption by a retail dealer himself of motor spirit or lubricant sold to him for retail sale is beyond the competence of the State Legislature and hence ultra vires. In K. L. Johar and Co. v. Deputy Commercial Tax Officer [1965] 16 STC 213 (SC); AIR 1965 SC 1082 the question was whether hire-purchase agreement is sale. It was ruled that making agreement or transactions, in which property does not pass from seller to buyer a sale is beyond the legislative competence, since the essence of( sic) under the Sale of Goods Act and entry 54 is that the property should pass from the seller to the buyer.

13. It is apparent from the cases referred to above that the legislature attempted to enlarge the meaning of the word 'sale' by giving that word an artificial meaning and thus that went beyond' the scope of expression 'sale of goods' in entry 54 which prescribes the legislative field on that subject. It cannot be disputed that if the transaction sought to be taxed is not sale, a law which seeks to tax it, treating it as a sale, will be ultra vires. But where the transaction is one of sale of goods as known to law, the power of the State to impose a tax thereon is plenary and unrestricted subject only to any limitation which the Constitution might impose. The decisions in the aforesaid cases are of no assistance to the petitioners since under Section 28-B of the Act no extended or artificial meaning is given to the word 'sale'. What is presumed is sale as understood within the meaning of the word under the Sale of Goods Act and entry 54 of List II of the Seventh Schedule to the Constitution.

14. It was next contended that Section 28-B read with rules 83(4) and 87 is unworkable and hence unreasonable and void under Articles 14 and 19(1)(g) of the Constitution. Rule 83(4) provides that the owner, driver or any other person-in-charge of the vehicle or vessel shall, in respect of such goods carried in the vehicle or vessel as are notified under Sub-section (1) of Section 28-A and as exceed the quantity, measure or value specified in the notification, carry with him the following documents (i) declaration in form XXXI, or certificate in form XXXII or transit pass in form XXXIV, as the case may be, in duplicate; (ii) cash memo, bill of sale or chalan; and (iii) a trip sheet in triplicate. The owner, driver or any other person-in-charge of any vehicle or vessel shall in respect of all other goods carry with him a trip sheet in triplicate. The provisions contained in rule 87 have already been set out. The learned counsel contended that under Section 28-B the driver or other person-in-charge of the vehicle is required to obtain a transit pass. In the transit pass the name and address of the owner, driver of truck and the number of the vehicle are noted. The particulars of the consignment carried by the vehicle are also detailed. The scheme of transit pass becomes unworkable because the truck may be carrying goods meant for various destinations situate in different States. The modus operandi of the petitioners being that goods brought from outside the State of Uttar Pradesh are unloaded at some place in Uttar Pradesh and transferred to a number of vehicles meant for destinations outside the State of Uttar Pradesh. It is therefore, not possible for the driver or owner of the vehicle which entered the State of Uttar Pradesh and obtained a transit pass to account for all the goods that it brought into the State of Uttar Pradesh at the exit check post since the goods had been transferred from that vehicle to other vehicles. The difficulty projected by the petitioners is more imaginary than real. If the good loaded on a vehicle entering the State of Uttar Pradesh are meant for places situate in different States requisite number of transit passes are issued at the entry check post depending upon the number of exist check posts to be crossed. At the exit check posts copies of the transit pass can be surrendered which will indicate that the goods that entered through the entry check post have in fact gone out of the State of Uttar Pradesh, though in different vehicles. At the exit check post a register is maintained in which various entries are made. The number of the vehicle which brought in the goods and the number of the vehicle through which the goods were despatched outside the State of Uttar Pradesh are also marked and noted. All the information is then conveyed to the entry check post for necessary verification. This is evident from the fact set out in the supplementary counter-affidavit filed by the State. If for example a vehicle enters Uttar Pradesh through Ghaziabad check post carrying goods meant for Bihar and Madhya Pradesh and it is declared that the goods will be unloaded, say at Agra, and transferred to vehicles going to Bihar and Madhya Pradesh side requisite number of transit passes may be obtained. When the vehicle meant for Bihar passes the exit check post the number of the vehicle which originally brought the goods in Uttar Pradesh as well as the number of vehicle through which the goods are transported to Bihar and other relevant details will be noted at the exit check post and communicated to the entry check post for necessary verification. The same thing will be done in respect of the goods carried through the vehicle proceeding to Madhya Pradesh. We are not satisfied that Section 28-B and the relevant rules lay down an unworkable or unreasonable procedure. These provisions appear to be necessary to prevent evasion of tax by unscrupulous businessmen. In the absence of these provisions, by showing a wrong destination outside the State of Uttar Pradesh goods can be easily disposed of within the State of Uttar Pradesh without paying the sales tax which will not only deprive the State of its legitimate dues but also put honest businessmen in a disadvantageous position. These provisions aimed at checking evasion of tax are part of the incidental or ancillary powers to the power of taxation. There is no arbitrariness, unreasonableness or excessiveness in the measure adopted.

15. There appears to be no substance in the contention that the impugned provisions are violative of Article 19(1)(g) and Article 301 of the Constitution. Section 28-B and rules 83 and 87 do not create any impediment, restriction or prohibition to carry on business or trade or exercise of right to trade, commerce or intercourse throughout the territory of India. Vehicles carrying goods from outside the State can freely enter and pass through the territory of Uttar Pradesh without any restriction or discrimination. They have only to observe the formality of obtaining the transit pass and carrying necessary documents with them pertaining to the goods transported by the vehicles. These measures are only regulatory in character. As observed by the Supreme Court in Automobile Transport Ltd. v. State of Rajasthan AIR, 1962 SC 1406 the concept of freedom of trade, commerce and intercourse postulated by Article 301 must be understood in the context of an orderly society and as part of a Constitution which enyisagesa distribution of powers between the States and the Union and if so understood, the concept must recognise the need and the legitimacy of some degree of regulatory control, whether by the Union or the States. They have only to obtain a transit pass and carry necessary documents with them pertaining to the goods transported by the vehicles. The decision in State of Mysore v. H. Sanjeeviah AIR 1967 SC 1189 is of no assistance to the petitioners. In that case two provisos appended to Rule 2 framed in exercise of the powers conferred by Section 37 of the Mysore Forest Act provided (1) that no permit shall authorise any person to transport forest produce between sun-set and sun-rise in any of the areas specified in Schedule A and (2)(i) that the party who wishes to avail of the concessions should pay a cash deposit of Rs. 1,000 as security for due compliance with the timber transit rules as in force, (ii) that the deposit may be forfeited to Government for breach of any of the conditions of the timber transit rules. Dealing with the provisions the Supreme Court observed :

Power to impose restrictions of the nature contemplated by the two provisos to Rule 2 is not to be found in any of the clauses of Sub-section (2) of Section 37. By Sub-section (1) the State Government is vested with the power to regulate transport of forest produce 'in transit by land or water'. The power which the State Government may exercise is, however, power to regulate transport of forest produce, and not the power to prohibit or restrict transport. Prima facie, a rule which totally prohibits the movement of forest produce during the period between sun-set and sun-rise is prohibitory or restrictive of the right to transport forest produce. A rule regulating transport in its essence permits transport, subject to certain conditions devised to promote transport; such a rule aims at making transport orderly so that it does not harm or endanger other persons following a similar vocation or the public, and enables transport to function for the public good.

16. The Supreme Court quoted with approval the following observation made in the case of Automobile Transport Ltd. AIR 1962 SC 1406 :

Restrictions obstruct the freedom, whereas regulations promote it. Police regulations, though they may superficially appear to restrict the freedom of movement, in fact provide the necessary conditions for the free movement.

17. It was on the finding that the two provisos in fact restricted transport of forest produce that the Supreme Court struck them down. Niether Section 28-B nor rules 83 and 87 place any such restriction on the movement of goods. They are neither discriminatory nor arbitrary or unreasonable and are not violative of Articles 14, 19(1)(g) and 301 of the Constitution.

18. It was lastly contended that the petitioners not being dealers as defined in Section 2(c) of the Act they could not be subjected to sales tax. This argument too is without any substance. Since under Section 28-B presumption of sale is validly drawn, it has to be taken to its logical conclusion and that would make the petitioners dealers within the meaning of the Act. Section 2(c) as it stood prior to the amendment introduced by U. P. Act No. 12 of 1979 read as follows:

'Dealer' means any person or association of persons carrying on the business of buying or selling goods in Uttar Pradesh whether for commission, remuneration or otherwise and includes any firm or Hindu joint family and any society, club or association, which sells goods to its members and also includes any State Government or Central Government which carries on such business and any undertaking engaged in the generation or distribution of electrical energy or any other form of power.

19. By the Amending Act No. 12 of 1979 ' 'dealer', means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes--

(i) a local authority, body corporate, company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business ;

(ii) a factor, broker, arhti, commission agent, del credere agent, or any other mercantile agent, by whatever name called and whether of the same description as hereinbefore mentioned or not, who carries on business of buying, selling, supplying or distributing goods belonging to any principal, whether disclosed or not;

(iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not, and whether the offer of the intending purchaser is accepted by him or by the principal or nominee of the principal;

(iv) . . .

(v) every person who acts within the State as an agent of a dealer residing outside the State, and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as--

(a) a mercantile agent as defined in the Sale of Goods Act, 1930 ; or

(b) an agent for handling of goods or documents of title relating to goods ; or

(c) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or such payment;

(vi) a firm or a company or other body corporate, the principal office or head quarters whereof is outside the State having a branch or office in the State, in respect of purchases or sales, supplies or distribution of goods through such branch or office:

Provided . . .

20. This provision has been given retrospective effect. It is well-settled that the power of legislature to enact a law with reference to a topic entrusted to it being thus unqualified, subject only to any limitation imposed by the Constitution in the exercise of such a power, it will be competent for the legislature to enact a law, which is either prospective or retrospective. On this principle the Supreme Court upheld the validity of the U. P. Sales Tax (Validation) Act, 1958 (U. P. Act 15 of 1958) in J.K. Jute Mills Co. Ltd. v. State of Uttar Pradesh [1961] 12 STC 429 (SC); AIR 1961 SC 1534 following its earlier decisions reported in Union of India v. Madan Gopal Kabra AIR 1954 SC 158 and M. P. V. Sundararamier and Co. v. State of Andhra Pradesh [1958] 9 STC 298 (SC); AIR 1958 SC 468. The petitioners squarely fall within the definition of the word 'dealer' in the Act. Under the Act what is sought to be taxed is the transaction of the sale of goods. The petitioners had the custody of the goods when the sale is presumed to have taken place within the State of Uttar Pradesh. There is a close and direct connection between the transaction of sale and the person made liable for the payment of sales tax. The statutory provision providing for such levy of sales tax would not offend entry 54. We may in this connection refer to the decision of the Supreme Court in Chowringhee Sales Bureau (P.) Ltd. v. Commissioner of Income-tax, West Bengal [1973] 31 STC 254 (SC); AIR 1973 SC 376 ; 1973 UPTC 59 (SC). In that case the assessee-company was a dealer in furniture and also acted as auctioneer. The question raised was whether the definition of the word 'dealer' in explanation 2 of Section 2(c) of the Bengal Finance (Sales Tax) Act was ultra vires the power of the State Legislature on the ground that the legislature purported to levy tax on a person who was neither a seller nor a purchaser. The Supreme Court repelled the argument and held that if there was a close and direct connection between the transaction of sale and the person made liable for the payment of sales tax, the statutory provision providing for such levy of sales tax would not offend entry 48 and that it was within the competence of the State Legislature to include within the definition of the word 'dealer' an auctioneer who carried on the business of selling goods and who had in the customary course of business authority to sell goods belonging to the principal. The same principle would apply to the cases in hand since at the time of the presumed sale the petitioners were in custody of the goods and acted as agents for handling of goods or documents of title relating to goods.

22. No argument has been advanced and rightly so on the merits of the assessment orders passed in some of these cases although a prayer for quashing the assessment orders has been made in some of these cases. The remedy of the petitioners where assessment orders have been passed lies by way of appeal against the assessment orders provided under the Act.

23. In our opinion the petitions lack merit and are dismissed with costs.


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