Shiv Dayal, J.
1. This is a petition under Article 226 of the Constitution for quashing the assessment order dated 1st April, 1968, passed by the Assistant Commissioner of Sales Tax, Jabalpur, imposing a penalty under Section 8(2) of the M.P. General Sales Tax Act, 1958, (hereinafter called the Act), and for directions to restrain the respondents from taking action under the said Section 8(2) in future. The petitioner's contention is that Section 8(2) is ultra vires the Constitution as it infringes the petitioner's fundamental right under Article 19(1)(g) and is also violative of articles 301 and 304 of the Constitution.
2. Section 6 of the Act provides for imposition of sales tax and section. 7 provides for purchase tax. Section 8 (as it stood at the relevant time) enacted as follows :
8. Rate of tax for raw material. (1) Notwithstanding anything contained in Section 6 or Section 7 but subject to such restrictions and conditions as may be prescribed, the rate of tax payable on the sale to or purchase by a registered dealer of .any raw material for the manufacture of other goods for sale in the State of Madhya Pradesh or in the course of inter-State trade or commerce shall be one per cent, of the sale or purchase price of such raw material.
(2) Where any raw material purchased by a registered dealer under Sub-section (1) is utilised by him for any purpose other than a purpose specified in the said sub-section, such dealer shall be liable to pay as penalty an amount not less than the difference between the amount of tax on the sale of such raw material at the full rate mentioned in column (3) of Schedule II and the amount of tax payable under Sub-section (1) and not exceeding one and one-quarter times the amount of tax at such full rate as the Commissioner may determine having regard to the circumstances in which such use was made :
Provided that no such penalty shall be imposed on a registered dealer where any raw material purchased by him under Sub-section (1) is sold by him, subject to such restrictions and conditions as may be prescribed, to another registered dealer, for the purpose specified in that sub-section :
Provided further that where such registered dealer subsequently purchasing the raw material as aforesaid, utilises it for any purpose other than the purpose specified in Sub-section (1), he shall be liable to pay the penalty specified under Sub-section (2).
3. The petitioner is a registered partnership firm carrying on business, inter alia, of bidi manufacturers at Sagar in the State of Madhya Pradesh and other places, It is registered as a 'dealer' under the Act. It has its branches at other places in the State of Maharashtra. For the purpose of carrying on business of manufacturing bidis, the petitioner buys raw material, particularly tendu leaves in which tobacco is rolled for making hand-made bidis. The petitioner purchased tendu leaves for the purpose of manufacturing bidis from the Forest Department of the Government of Madhya Pradesh and paid sales tax at the concessional rate of one per cent, of the sale price.
4. For the period from 25th October, 1965, to 12th November, 1966, the Assistant Commissioner of Sales Tax assessed the petitioner to sales tax and, while computing the taxable turnover, he imposed a penalty in the sum of Rs. 93,511.88-under Section 8(2) of the Act, holding as under:
The dealer has transferred bidi leaves worth Rs. 12,46,824.62 to his branches outside the State. The bidi leaves have been purchased by the assessee at the concessional rate of 1 per cent, from the Forest Department on production of declarations in form XII-A. The dealer...has stated that he has not committed any breach of the provisions of Section 8(1) because the bidi leaves have been utilised for the purpose of manufacturing bidi outside the State. The reply is not to the point because the concessional rate is for sales within the State or in the course of inter-State. The dealer has made himself liable for penalty under Section 8(2). As the dealer has knowingly done this, the case calls for maximum penalty at 7 1/2 per cent. Penalty imposed amounts to Rs. 93,511.88.
The petitioner's contention is that the imposition of the penalty under Section 8(2) is without Any authority of law.
5. Shri Chitaley, learned counsel for the petitioner contended that having purchased the bidi leaves, it was the right of the petitioner to deal with it in any manner it liked, as a fundamental right, guaranteed under article 19(1)(g) of the Constitution. It, therefore, cannot be punished for something which is its right to do. The petitioner was thus entitled to freely remove the goods to its branch offices outside the State. Secondly, it was urged that the restriction imposed by Section 8(2) is an unconstitutional embargo on the free right of trade, and is thus violative of articles 301 and 304 of the Constitution. Learned counsel stated that if it was a 'tax' there could be no objection, but what Section 8(2) imposes is not 'tax', but 'penalty'.
6. It is abundantly clear from the scheme of the Act that Sections 6 and 7 charge a dealer with liability to pay tax at the prescribed rate, which will hereinafter be called as the 'full rate'. Sub-section (1) of Section 8 then bestows a concession upon a registered dealer. The rate of tax payable on the sale to or purchase by him of any raw material for the purposes specified in the sub-section is fixed at 1 per cent, of the sale or purchase price of such raw material. The sale or purchase of the raw material must be for the manufacture of the said goods for sale in the State of Madhya Pradesh, or in the course of inter-State trade or commerce. What is intended is obvious enough. A registered dealer, who purchases raw material for either (i) manufacture within the State of M.P. and sale within the State of M.P., or (ii) manufacture within the State of M.P. and sale in the course of inter-State transaction, has been given the aforesaid concession. To avail himself of the concession, a dealer has to make a declaration in the prescribed form (Form XII-A). Thus a registered dealer, who avails himself of the concession, agrees to abide by the restriction that he has to utilise the raw material for the above purposes, or either of them, but not otherwise.
7. Where a law allows a concessional rate of tax coupled with a restriction to the availability of the concession, with a view to encourage manufacture and sale of goods within the State or in the course of inter-State transaction, the restriction must be upheld as reasonable. Where the law provides two rates of sales tax, one ordinary (i.e., full rate) and the other concessional and attaches to the latter certain conditions constituting a restriction on the utilisation of the goods, it cannot be said that the conditions attached constitute unreasonable restriction violative of either Article 19(1)(g) or articles 301 and 304 of the Constitution. It is open to any dealer to pay the ordinary tax and keep away from the restriction. When, by his own volition, a dealer obtains a certain concession provided by the statute and thus voluntarily subjects himself to the restriction, he cannot act in contravention of the conditions attached to the concession and at the same time complain that his right of free trade is infringed.
8. The imposition of rates of sales tax is normally influenced by factors, political and economic. It has to be determined from the substance of the matter whether the effect of a tax is to hinder the movement part of trade. See State of Madras v.. Nataraja Mudaliar A.I.R. 1969 S.C. 147 and Automobile Transport Ltd. v. State of Rajasthan A.I.R. 1962 S.C. 1406. It is incontestable that the State Legislature has competence to prescribe a concessional rate different from the ordinary, that is, the full rate, in order to encourage manufacture and sale of goods within the State, or in the course of inter-State transaction. The provisions in Section 8(1) of the Act are beyond challenge. Then, it is well settled that the power to make law includes the incidental power to prevent its evasion. In fact, it is a necessary measure in the public interest. Mr. Justice Hegde said in State of Madras v. Nataraja Mudaliar A.I.R. 1969 S.C. 147 as follows :
A measure which is intended to check the evasion of tax is undoubtedly a valid measure. ...It is in public interest to see that in the guise of freedom of trade they do not evade the payment of tax.
9. In order to prevent the abuse of the concession and for giving effect to Sub-section (1), it became necessary to enact Sub-section (2) to provide for a penalty as a deterrent, but for which the whole purpose of the concession given in Sub-section (1) would be defeated. Every dealer would then have taken benefit of the concession but not utilised the raw material for the specified purpose and, when detected, he would just get out by paying the difference, thereby standing to lose nothing. If initially he had not made the declaration as required by Sub-section (1), then also he would have paid the full rate. Section 8(2) of the Act must be read along with, and as an integral part of, Section 8(1). The scheme of these provisions, read with those contained in Sections 6 and 7' of the Act, is to prescribe an ordinary or full rate of sales tax and purchase tax, and then to provide for a concessional rate to a registered dealer who sells or purchases raw material for manufacture of other goods for sale in the State of M. P. or in the course of inter-State trade or commerce. Essentially, the provisions in Sub-section (2) of Section 8 are ancillary and incidental for enforcing Sub-section (1) of that section. A provision which is ancillary or incidental for the enforcement of any provision, which is legal and constitutional, cannot be assailed as being unconstitutional. The imposition of penalty is, therefore, within the legislative competence under entry 54, List II, of the 7th Schedule. In Ashoka Marketing v. State of Bihar A.I.R. 1971 S.C. 946 it is observed :
The State Legislature may, under entry 54, List II, be competent to enact a law in respect of matters necessarily incidental to 'tax on the sale and purchase of goods'.
10. There is no substance in the contention that Sub-section (2) of Section 8 imposes a penalty on 'utilising' the goods and is outside the said entry.
11. Thus viewed, Section 8(2) of the Act must be upheld as intra vires and valid. The petitioner, who transferred bidi leaves worth Rs. 12,46,824.62 to its branches outside the State, although the leaves had been purchased by it at the concessional rate of 1 per cent, from the Forest Department on production of a declaration in Form XII-A, incurred liability under Sub-section (2) of Section 8.
12. The petition is dismissed with costs. Counsel's fee Rs. 200. The outstanding amount of the security deposit shall be refunded to the petitioner.