Gopalan Nambiyar, J.
1. These writpetitions have been placed before a Full Bench, as they raise certain important questions regarding the vires of Section 29 of the Kerala General Sales-tax Act 1963 (hereinafter referred to as the Act), and Rule 35 framed thereunder. The question has, in a way, been pronounced upon earlier, by a Division Bench of this Court in Sree Narayana Transports v. State of Kerala (1965) 16 STC 659 (Ker). But as correctness of that nil-ing was itself assailed, it was felt desirable that the matter be placed before a larger bench with greater freedom of action.
2. O. P. No. 4977 of 1967 may be taken as representative of the facts relating to the other writ petitions. The petitioner herein is a firm of dealers in that part of Mahe, which was originally French territory, and now, part of the Union Territory of Pondi-cherry administered by the Government of India. It claims to have been engaged in sending goods to places outside the Pondi-cherry and Kerala States. The territory of Mahe aforesaid is land-loclced on all sides by frontiers of the Kerala State. Nearly five miles to the north of it, lies Tellicherry,and about six or seven miles to the south of it lies Muttungal, where a check-post hasbeen established under the provisions of Section 29 of the Act The petitioner is possessed of registration certificates issued under the Central Sales-tax Act 1956, and under the Pondicherry General Sales-tax Act, 1967 which came into force on 20-11-1967. (vide Exs. P and P (a)). In August 1967 a vehicle which was carrying certain goods of the petitioner was intercepted at the Muttungal ceck-post and Ext. P-1 notice dated 31-8-1967 was issued threatening confiscation of the goods as the transport was not accompanied by proper documents as required by the Act. The petitioner appeared with its accounts, and by Ext. P-2 order dated 1-9-1967, after verification of the accounts, the goods were ordered to be released. A second consignment of goods was intercepted with a similar show cause notice (vide Ext. P-1 (a)) dated 20-9-1967 and was followed by a similar release order (Ext. P-2 (a) dated 25-9-1967), again, after production of accounts and verification of records. The third consignment sent in November 1967, was also intercepted by a similar show cause notice, (Ext. P-4 dated 17-11-1967). The petitioner was asked to produce all accounts and bills relating to the business for the current year for verification, and the necessary evidence to show that he had business in pepper at Mahe and was a registered dealer in that area, The notice stated that Invoice No. 96 which accompanied transport of goods (Ext. P-3 (b)) was found to be suspicious. Ext. P-3 (b) shows at its top, the number and date of the registration certificate issued to the petitioner under the Central Sales-tax Act. The petitioner produced its accounts, and, by Ext. P-5 notice dated 21-11-1967, was informed that as Mahe is a small territory where pepper was grown only on a small scale, the names and particulars shown in the purchase bills, appeared to be fictitious, that it was suspected that the purchases were effected at Tellicherry and that there was manipulation of accounts. As the genuineness of the purchases had to be verified and further time was required for the purpose, the petitioner was informed that it might get the goods released on payment of cash security amounting to double the amount of tax on the goods under Rule 35 (15) of the Rule's framed under the Act. Ext. P-4 (a) dated 18-11-1967 is copy of a notice in respect of another consignment covered by invoice Nos. 94 and 95 (Exts. P-3 and P-3 (a)). It is a close replica of Ext. P-4. After production of the petitioner's accounts, Ext. P5 (a) dated 21-11-1967 was issued on the same terms as Ext. P-5. Ext. P-4 (b) is copy of yet another notice dated 20-11-1967 on the same terms as Exts. P-4 and P-4 (a) and in respect of Invoice No. 1 (Ext. P-3 (c)). Ext, P-5 (b) is a copy of tho notice dated 21-11-1967 issued. after checking accounts and on the same terms as Exts. P-5 and P-5 (a). Ext. P-6 dated 22-11-1967is a copy of the notice on the same terms as Ext. P-4 series in respect of Invoice No. 8 (Ext. P-7). Ext. P-10 series filed with the reply-affidavit of the petitioner are the relative 'C' forms in respect of the inter-State sales evidenced by Exts. P-3 (b) and P-3 (c). The petitioner has sought to quash the notices, Ext. P-4 series, Ext. P-5 series and Ext, P-6, besides getting Section 29 of the Act and Rule 35 of the Rules framed thereunder declared unconstitutional and invalid.
3. It is unnecessary to quote Section 29 of the Act and Rule 35 thereof in extenso, as they are both far too long, and the Rule largely repeats the terms of the section. Clause (1) of Section 29 authorises the Government, with a view to prevent or check the evasion of tax under the Act, to set up check-posts at such place or places as they deem necessary. Clause (2) of the section reads:
'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 nole 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.
Explanation :-- The term 'goods' referred to in the sub-section shall not include luggage of persons who cross the notified area.' Clause (3) requires the driver or any other person in charge of the vehicle or vessel, to stop the vehicle or vessel and keep the same stationary, on being required, and as long as may be required, by any Officer empowered by the Government to do so, within the limits of the check-posts, and to allow the officer to inspect the goods and to examine the documents which should accompany the transport under Rule 2. Till such inspection and examination the driver is to keep the vehicle or vessel stationary. Clauses (4) to (6) are as follows:
'(4) 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-hill or certificate of ownership and where the vehicle or vessel enters or leaves the Stale limits, the declaration referred to in Clause (b) of Subsection (2) also, or
(b) where the declaration is false or is reasonably suspected to be false in respect of the particulars furnished therein:
Provided that before takmg action for the confiscation of goods under 'this section, theofficer shall give the person in charge of the goods and the owner, if ascertainable, anopportunity of being heard and make an enquiry in the manner prescribed,
(5) Whenever confiscation is authorised by this section, the Officer adjudging it shall give the owner or the person in charge of the goods an option to pay, in lieu of confiscation, a penalty not exceeding double the amount of tax calculated at the rates applicable to the goods liable to confiscation:
Provided that the officer may release the goods on cash security being furnished by the person concerned to the extent of the penalty leviable if, in the opinion of the officer, further time is required to arrive at a correct finding as to whether a penalty is to be imposed or not and that the security so furnished shall be adjusted towards the penalty in case it is payable or returned to the party, if otherwise.
(6) Nothing contained in Sub-section (4) or Sub-section (5) shall apply in the case of goods transported which arc exempted from, tax under any of the provisions of this Act without any condition or restriction.'
Turning now to Rule 35, Clause (2), except for specifying the limit of the value of the goods referred in Clause (2) of Section 29 as not exceeding Rs. 5/-, practically repeats the provisions of Clause (2) of the section. Clause (3) of the Rule again, practically repeats Clause (3) of Section 29. Clause (5) of the Rule reads:
'(5) If on such examination any such officer finds that any consignment of goods (the value whereof exceeds rupees five) or the entire goods are not covered by proper documents or that the documents carried by the driver or any other person in charge of the vehicle or vessel are defective or suspects that the documents are bogus or false, the said Officer shall immediately issue a notice to the said person to show cause why further steps should not be taken against him under Section 29. If the Officer is satisfied as to the reason or reasons for the omission or the defects as the case may lie, he may allow the goods to pass through the notified area after recording his findings therefor. If he is not satisfied with the reasons, he shall proceed to unload, seize and confiscate the goods after following the procedure laid down in Sub-rules (6) to (8).'
Clauses (6), (7) and (8) of the Rule provide for confiscation. These clauses do not carry the matter much further than what has been provided for by the section. Clause (9) provides that the goods confiscated shall be sold in public auction. Clause (11) provides that if any order directing confiscation is reversed in appeal, the goods confiscated. if they had not been sold before the reversal comes to the knowledge of the person concerned, released, or if they have been sold, the proceeds thereof, shall be paid, to the owner of the goods. Clauses (12) and (15) of Rule read:
'(12) Where a confiscation was ordered for the reason that the owner was not ascertain-able and the goods have not been disposed of in auction the owner or any person on his behalf may appear before the officer ordering the confiscation and satisfy him with relevant records regarding the bona fides of the transport of goods in question. If the Officer is satisfied that there has been no evasion of tax, he may, for reasons to be recorded in writing order, the release of the confiscated goods. The Officer shall also specify in his order the amount due, to be recorded in writing order, the release of the confiscated goods for the safe custody of the goods and other incidental charges and on payment of such charges the Officer shall re-lease the goods. If the Officer is not so satisfied, he may after recording the reasons therefor, order that the sale under Sub-rule (9) be proceeded with'.
'(15). Whenever confiscation is authorisedby these Rules, the Officer adjudging it shallgive the owner, if ascertainable, or the person in charge of the goods, an option topay, in lieu of confiscation, a penalty not exceeding double the amount of tax calculatedat the rate or rates applicable to the goodsconfiscated and release the goods on payment of the said penalty.
Provided that the Officer may release the goods on cash security being furnished by the person concerned to the extent of the penalty leviable, if in his opinion further time is required to arrive at a correct finding as to whether a penalty is to be imposed or not and that the security so furnished shall be adjusted towards the penalty in case it is payable or returned to the person concerned if otherwise,'
4. We have set out the relevant parts of the section and the Rule which have been attached before us. The grounds of attack against these provisions are: (1) that they violate the freedom of trade enjoined by Article 301 of the Constitution and are bad for want of Presidential sanction under Article 304(b) of the Constitution, quite irrespective of whether they can be regarded as reasonable restrictions in the interests of the general public; (2) that the power to confiscate goods conferred by the section and the Rule is beyond the limits of Entry 54 of List II of Schedule VII of the Constitution which authorises the levy of a tax on sale or purchase of goods (except certain except-ed items), and even beyond the powers incidental and ancillary thereto; (3) that the power of confiscation offends Articles 14 and 19(1)(f) and (g) of the Constitution; and (4) that Rule 35 (5) in any event, goes beyond the limits of Section 29 of the Act. We shall proceed to deal with these objections.
5. Article 301 of the Constitution of India which occurs in Part XIII thereof, provides that, subject to the other provisions of that Part, trade and commerce throughouttie territory of India shall be free. Article 304(b) which is relevant for our purpose enacts:
'304. Restrictions on trade, commerce and intercourse among States -- Notwithstanding anything in Article 301 or Article 303 the Legislature of a State may by law-
(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest:
Provided that no Bill or amendment for the purpose of Clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.'
6. Notwithstanding the unqualified nature of the provisions of Article 301, it has been ruled that provisions merely regulating, as distinct from restricting the free flow of trade do not offend the Article, and that only provisions which directly and immediately affect the free flow of trade or the movement part of the trade, would come into clash with it. (vide Atiabari Tea Co. Ltd. and Khyerbari Tea Co. Ltd. v. The State of Assam, AIR 1961 SC 232.) The principle of the above case was affirmed, and extended so as to save both regulatory and compensatory taxes, hampering the free flow of trade, in the judgments delivered in the Rajasthan Transport case, AIR 1962 SC 1406, Whether both compensatory and regulatory measures of taxation are outside the purview of Article 301, or only regulatory measures stand outside its fold, is probably a matter on which a final pronouncement by a Larger Bench of the Supreme Court might well be necessary. (See Khverbari Tea Co. Ltd. v. State of Assam, AIR 1964 SC 925 at p. 938). As the Act has not received any Presidential sanction, for purposes of the argument based on -Article 301, we are concerned with the only question whether the impugned provisions are regulatory of the free flow of trade or whether they restrict the same. If the former, they are not hit by Article 301, and if the latter, they are, The other controversies, as to the reasonableness of the restrictions, or their being in public interest, or the Act being regulatory or compensatory, need not detain us, though the reasonableness of the restrictions, if such they are, will have to be considered with respect to the attack based on Article 19(1)(f) and (g).
7. The distinction between a regulation and a restriction has been pointed out in numerous decisions. In the Rajasthan Transport case, AIR 1962 SC 1406, Das, J., speaking for the majority of the Court observed:
'that which in reality facilitates trade and commerce is not a restriction, and that which in reality hampers or burdens trade and commerce is a restriction. It is the reality or substance of the matter that has. to be determined. It is not possible a priori todraw a dividing line between that which would really be a charge for a facility provided and that which would really be a deterrent to a trade but the distinction, if it has to be drawn, is real and clear.'
Subba Rao, J. who agreed with the majority in the Rajasthan Transport case, AIR 1962 SC 1406, observed:
'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. Regulations such as provision for lighting, speed, good condition of vehicles, timings, rule of the road and similar others, really facilitate the freedom of movement rather than retard it. So too, licensing system with compensatory fees would not be restrictions but regulatory provisions; for without it, the necessary lines of communication, such as roads, water-ways and airways, cannot effectively be maintained and the freedom declared may in practice turn out to be an empty one, So too, regulations providing for necessary services to enable the free movement of traffic, whether charged or not, cannot also be described as restrictions impeding the freedom.'
The above observations of Subba Rao, J. were approved by a Full Court in State of Mysore v. H. Sanjeeviah, AIR 1967 SC 1189, to which we shall refer in some detail, later.
8. With respect to Section 92 of the Constitution of Australia which guarantees freedom of trade and commerce in more absolute terms than its Indian counterpart, Latham, C. J. in Australian National Airways Ltd. v. Commonwealth, (1947) 71 VCLR 29, observed:
I venture to repeat what I said in the former case: 'One proposition which I regard as established is that simple legislative prohibition (Federal or State), as distinct from regulation, of inter-State trade and commerce is invalid. Further, a law which is 'directed against', inter-State trade and commerce is invalid. Such a law does not regulate such trade, it merely prevents it, But a law prescribing rules as to the manner in which trade (including transport) is to be conducted is not a mere prohibition and may be valid in its application to 'inter-State trade, notwithstanding Section 92.'
(The former case referred to herein is Milk Board (N. S. W.) v. Metropolitan Cream Pvt. Ltd. 62 C. L. R. 127). These observations were approved by the Privy Council in Commonwealth v. Bank of New South Wales, 1950 AC 235 with the following observations:
'With this statement which both repeats the general proposition and precisely states that simple prohibition is not regulation, their Lordships agree'
Earlier, their Lordships observed:
'Through all the subsequent cases in which Section 92 has been discussed, theproblem has been to define the qualification of that which in the Constitution is left unqualified. In this labyrinth there is no golden thread. But it seems that two general propositions may be accepted: (i) that regulation of trade, commerce and intercourse among the States is compatible with its absolute freedom, and (ii) that Sec. 92 is violated only when a legislative or executive act operates to restrict such trade, commerce and intercourse directly and immediately as distinct from creating some indirect or consequential impediment which may fairly be regarded as remote. In the application of these general propositions, in determining whether an enactment is regulatory or something more, or whether a restriction is direct or only remote or incidental, there cannot fail to be differences of opinion. The problem to be solved will often be not so much legal as political, social or economic, yet it must be solved by a court of law. For where the dispute is, as here, not only between Commonwealth and citizen but between Commonwealth and intervening States, on the one hand, and citizens and States, on the other, it is only the court that can decide the issue. It is vain to invoke the voice of Parliament.'
We need not encumber this judgment further, with citation of authorities under Section 92 of the Australian Constitution.
9. Proceeding to examine the impugned provisions in the light of the above principles, it appears to us that they cannot be regarded as merely regulatory of the free flow of trade. Sub-section (2) of Section 29 ordains that no person shall transport goods across a check-post unless the transport is accompanied by certain documents. The prohibition is directly against transport. Had the matter rested with the mere obligation to produce certain documents for examination at the check-post, we would have upheld it as a mere regulation, such as a provision for demanding a driving licence or fit-nes.s certificate in respect of a vehicle. But Sub-section (3) further ordains that the driver or any person in charge of the vehicle is to stop the same on demand by any Officer empowered by the Government at the check-post and to keep the vehicle or vessel stationary 'as long as required', and allow the Officer to inspect the goods and examine the documents. Rule 35 (4) confers the power of stopping the vehicle or vessel for a period not exceeding ten minutes, even on a Peon on duty at the check-post or barrier, where the Officer is not present, in order to enable the Officer at the check-post to come to the spot and proceed to examine the goods and the records. If the Officer is satisfied that the goods are not covered by the documents specified, or that the documents are false, he has power to confiscate the goods. These appear to us to directly and immediately affect the transport or the movement of the goods. Especially do they appear to be so as we cannot totally discount theprospect of several vehicles turning up at a check-post either simultaneously or in rapid succession, or even the same vehicle or goods of the same owner, having to pass through the same check-post at frequent intervals. As example, we need only recall the fact we have set out in O. P. No. 4977 of 1967, where goods of the petitioner having been passed after examination of docu-ments on 31-8-1967 and 1-9-1967, were detained on 17-11-1967, 18-11-1967, 20-11-1967 and 22-11-1967, against notices for production of accounts. Even granting that the accounts in respect of the first three notices were produced only on 21-11-1967, (vide Exts. P5 series), the petitioner is asked by Ext. P6 notice dated 22-11-1967, to bundle its accounts again to the check-post, a place mostly ill-suited and ill-equipped for such examination and for the quasi-judicial adjudication to follow thereafter. Nor can we rule out altogether --although we do not envisage or presume such conduct--the prospect that such stoppage and checking can well be repeated at successive check-post, at each of which the petitioner will have to allay the suspicion of the Officer at the spot, in regard to the documents accompanying the transport or otherwise. For, as it is, neither the Act nor the Rules afford any guarantee that clearance at one check-post will afford a sufficient passport at another, at least in respect of the matters checked and verified.
10. Counsel appearing for the Respondents drew our attention to the observations in certain decisions that sales tax laws normally and generally do not violate Art. 301 of the Constitution. No exception can be taken to the statement in that form. But where any particular provision operates as a restriction on the free flow of trade, there can be little doubt that, if enacted by a State Legislature, it should pass the test of Article 304(b).
11. We may now refer to the decision in AIR 1967 SC 1189. The same was concerned with the validity of the Rules under the Mysore Forest Act to regulate the transit of forest produce. Section 37 (1) of the Mysore Forest Act authorised the framing of rules to regulate such transit, and Clause (2) permitted Rules to prohibit inter alia the moving of forest produce without a pass from an Officer authorised to issue the same-otherwise than in accordance with the conditions of such pass. Rule 2 framed in exercise of the power under Section 37 (2) contained two provisos which prohibited transport between the hours of sunset and sunrise in certain areas, subject to the condition that the restriction may be relaxed between the hours of sunset and 10 P. M. if the person wishing to transport deposited cash security of Rs. 1,000. It was held that the power to impose restriction of the type contemplated by the two provisos to Rule 2 could not bo traced to any of the clausesof Section 37 (2), and that Clause (1) of the said section expressly authorised only the making of rules to regulate the transit. The provisos were therefore held to be beyond the scope of Section 37. The alternative argument that they offended Article 301 was also accepted with the following observations:
'The provisos are undoubtedly restrictive of trade and commerce and on that account would prima facie be void, as derogating from the freedom declared by Article 301. It has been held by this Court in Automobile Transport Rajasthan Ltd.'s case, 1963-1 SCR 491 = (AIR 1962 SC 1406) that regulatory measures which do not hamper trade, commerce and intercourse, but facilitate them, are not hit by Art. 301 of the Constitution, But it cannot be said of the two provisos, that they are in any sense regulatory.'
In the face of the above ruling, we are of the opinion that Clauses (3) and (4) of Section 29 of the Act, and Clauses (3) to (12) of Rule 35 framed thereunder, are violative of Article 301.
12. It was contended that there is no direct and immediate violation of the free flow of trade', and that the Kerala General Sales Tax Act, 1963 being within the powers of the State Legislature under Entry 54 of List II, of Schedule VII, any violation of Article 301, could, if at all, be only indirect, incidental, and remote. Such a contention has been effectively answered in the Atia-bari Tea Co.'s case, AIR 1961 SC 232, Gajendragadkar, J., speaking for the majority, observed:
'In the course of arguments the learned Attorney-General invited us to apply the test of pith and substance and he contended that if the said test is applied the validity of the Act can be sustained. In support of his argument he has relied on the observations made by Das, C. J, in the case of State of Bombay v. R. M. D. Chainar-baugwala, 1957 SCR 874 = (AIR 1957 SC 699). In that case the Court was called upon to consider the validity of the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act 1952. The challenge to the Act proceeded on two grounds, (1) that it violated the fundamental right guaranteed under Article 19 (1) (g) and (2) that it offended against the provisions of Article 301. The challenge on the first ground was repelled because it was held that gambling cannot be treated as trade or business under Article 19(1)(g). This conclusion was sufficient (o repel also the other ground on which the validity of the Act was challenged because, if gambling was not trade or business under Article 19(1)(g), it was also not trade or commerce under Article 301. On the conclusion reached by this Court that gambling is not a trade this position would be obvious. Even so, the learned Chief Justice incidentally applied the test of pith and substance, and observedthat the impugned Act was in pith and substance an Act in respect of betting and gambling, and since betting or gambling was not trade, commerce or business 'the validity of the Act had not to be decided by the yardstick of reasonableness and public interest laid down in Articles 19(6) and 304.'
'In this connection it may, with respect, be pointed out that what purports to be a quotation from Lord Porter's Judgment in 1950 AC 235, has not been accurately reproduced. In fact, referring to phrases such as 'pith and substance' Lord Porter has observed that:
'They no doubt raise in convenient form an appropriate question in cases where the real issue is one of subject-matter, as when the point is whether a particular piece of legislation is a law in respect of some subject within the permitted field. They may also serve useful purpose in the process of deciding whether an enactment which works some interference with trade, commerce and intercourse among the States is nevertheless untouched by Section 92 as being essentially regulatory in character.'
These observations would indicate that the test of pith and substance is generally and more appropriately applied when a dispute arises as to the Legislative competence of the Legislature, and it has to be resolved by reference to the entries to which the impugned legislation is relatable. When there is a conflict between the two entries in the legislative lists, and legislation by reference to one entry would be competent but not by reference to the other, the doctrine of pith and substance is invoked for the purpose of determining the true nature and character of the legislation in question (vide Prafulla Kumar Mukherjee v. Bank of Commerce Ltd., Khulna, 74 Ind App 23 --(AIR 1947 PC 60) and Subrahmanan Che-ttiar v. Mutluswami Goundan, 1940 FCR 188 = (AIR 1941 FC 47). But even the application of the test of pith and substance yields the same result in the present proceedings. The pith and substance of the legislation is taxation on the carriage of goods and that clearly falls within the terms of Article 302'.
In the same case, Shah, J. expressed no opinion on the applicability of the 'pith and substance doctrine' to cases involving violation of Article 301. In the Rajas than Transport case, AIR 1962 SC 1406, Hidayatullah, J. (who was in a minority) observed:
'No question of pith and substance in this context arises as was pointed out by the Privy Council in the Bank's case, (1948) 76 CLR 1 but nature of the tax and its relation to trade and commerce and intercourse are the matters to consider.'
In 1950 AC 235, dealing with Section 92 of the Australian Constitution Lord Porter observed:
'An analogous difficulty in one section of constitutional law, namely, in the deter-mination of the question where legislative power resides, has led to the use of such phrases as 'pith and substance' in relation to a particular enactment. These phrases have found their way into the discussion of the present problem also and, as so vised, are the subject of just criticism by the learned Chief Justice. They, no doubt, raise in convenient form an appropriate question in cases where the real issue is one of subject-matter, as when the point is whether a particular piece of legislation is a law in respect oi some subject within the permitted field. They may also serve a useful purpose in the process of deciding whether an enactment which works some interference with trade, commerce, and intercourse among the States is, nevertheless, untouched by Section 92 as being essentially regulatory in character. But where, as here, no question of regulatory legislation can fairly be said to arise, they do not help in solving the problems which Section 92, presents. Used as they have been to advance the argument of the appellants they but illustrate the way in which the human mind tries, and vainly tries, to give to a particular subject-matter a higher degree of definition than it will admit. In the field of constitutional law--and particularly in relation to a federal constitution--this is conspicuously true, and it applies equally to the use of the words 'direct' and 'remote' as to 'pith and substance'. But it appears to their Lordships that if those two tests are applied: first whether the effect of the Act is in a particular respect direct or remote; and, secondly, whether in its true character it is regulatory, the area of dispute may be considerably narrower. It is beyond hope that it should be eliminated.'
We are of the opinion that there is no scope for applying the 'pith and substance doctrine' in the sphere of Article 301.
13. We would next refer to the Division Bench ruling of this Court in (1965) 16 STC 659 (Ker). Sections 29, 30 and 31 of the Act were attacked as offending Article 301, and also as violative of Article 14, in that. they operated only against transport operators other than railways. The challenge was unlike in the present case, by a transport operator, and not by a dealer, In repelling the challenge this Court observed:
'Both the contentions have been answered well in Rama Transport Co. (P) Ltd. v. State of Uttar Pradesh, (1957) 8 STC 725 = (AIR 1957 All 448). We are in entire agreement with the decision as well as the reasoning in that precedent. A requirement that carriers should take the documents relating to the transport, purchase or ownership of the goods in carriage to convince the authorities that the transport does not involve any evasion of legitimate taxation in the State cannot be said to offend anybody's legitimate freedom to move the goods. All freedoms are within the precincts of law, notoutside; and Article 301 of the Constitution provides no exception thereto. So long as the sales-tax law is not impugned, provisions designed for its efficient administration cannot also be impeached. Such provisions not only aid the collection of tax, but assure the fair distribution of its impact le.st a tax-evader shall steal a march over the honest tax-payer and thereby affect the latter's legitimate freedom in trade, commerce and intercourse.'
The Allahabad decision of a single Judge, which was followed, (1957) 8 STC 725 = (AIR 1957 All 448), was one rendered before the pronouncements in the Atiabari Tea Co.'s case, AIR 1961 SC 232 and the Raja-sthan Transport case, AIR 1962 SG 1406 which clarified and crystallised the distinction between regulation and restriction in the region of Article 301, Neither in the Allahabad case, nor in the Division Bench ruling of this Court, was there any discussion as to whether the impugned provisions were regulatory or restrictive of the free flow of trade. The Allahabad decision itself states that the impugned provisions only required the production of a declaration in such form and in such manner as may be prescribed. An examination of the relevant statute (The U. P. Sales Tax Act) has disclosed that there was no provision for confiscation of goods. With respect, we cannot, in the circumstances, accept the ruling of the Division Bench in Sree Narayana Transports Case, (1965) 16 STC 659 (Ker) insofar as it relates to Article 301, as correct.
14. We shall next consider the contention that the power of confiscation is beyond Entry 54 of List II of Schedule VII relating to sale and purchase of goods, and to the powers incidental and ancillary thereto. It is well settled that legislative entries have to be considered in their widest amplitude and that a power authorising the imposition of a tax also includes a power to prevent the tax imposed being evaded, and to check such evasion, There are however certain obvious limitations to stretch the entries, and to extend the scope of the incidental and ancillary powers. Judicial decisions appear to be in conflict as to whether a power of confiscation can be said to be incidental and ancillary to a power to impose a tax on sale and purchase of goods. The Madras High Court in Jhaver's case, (1965) 16 STC 708 (Mad), held that such a power of confiscation was not incidental and ancillary to a power to tax the sale and purchase of Roods. On appeal from the said decision the Supreme Court left open the question. (See Commr. of Commercial Taxes v. Ramkishan Shrikishan Jhaver, (1967) 20 STC 453 = (AIR 1968 SC 59). The Supreme Court held that Subsection (4) of Section 41 of the Madras Act which gave the power of confiscation, and in particular, Clause (a) of the second proviso thereof, which ordered recovery of thetax even before the taxable event, namely, a sale of goods had occurred, was clearly repugnant to the general scheme of the Act, which was to provide for recovery of tax at the point of first sale in the State. As the second proviso could not be severed from the rest of Sub-section (4) of Section 41, the conclusion of the Madras High Court striking down the sub-section was sustained for different reasons. The Andhra High Court in K. S. Papanna v. Deputy Commercial Tax Officer, Guntakal, (1967) 19 STC 506 (Andh Pra) look the view that the power to confiscate is incidental and ancillary to the power conferred by Entry 54 of List II of Schedule VII of the Constitution. The ca.se was concerned with Section 28 of the Andhra Pradcsh General Sales Tax Act. This decision was noticed by the Supreme Court in (1967) 20 STC 453 = (AIR 1968 SC 59) and it was observed that there was no provision in the Andhra Act corresponding to the offending proviso in Section 41 (4) (a) of the Madras Act. Subsequent to the Supreme Court's pronouncement in Jhaver's case, (1967) 20 STC 453 = (AIR 1968 SC 59) the Andhra High Court and the Madras High Court have re-affirmed their views as to the power of confiscation being incidental and ancillary to the taxing entry under Item 54, of List II, each maintaining that its decision on (his aspect was unaffected by the Supreme Court's pronouncement in Jhaver's case, (1967) 20 STC 453 = (AIR 1968 SC 59). The Madras decision subsequent to Supreme Court's pronouncement is K. P. AbduIIa and Bros. v. Check Post Officer, (1968) 22 STC 552 = (AIR 1970 Mad 25) and the Andhra decision is Kalangi Krishna Murty and Co. v. Commercial Tax Officer, Gnntur, (1968) 22 STC 540 (Andh. Pra.). The Mysore High Court in P. Venka-tachalapathi v. Commercial Tax Inspector, (1965) 16 STC 894 (Mys) also considered the vires of the provision for confiscation of goods at check-post in the Mysore Sales Tax Act. It was of the view that the power was incidental and ancillary to the powers conferred by Entry 54 of List II (see (1965) 16 STC 894 at pp. 903, 907 and 909 (Mys)). In the view that we take regarding the validity of the provision, assuming there is power to enact it, and as the provisions have anyway to be struck down as violative of Article 301, we do not think it necessary to express a final and concluded opinion on the question.
15. We shall then turn to the attack made on the provisions as to confiscation on the basis of Article 14. Before the Mysore High Court in Venkatachalapathi's ca.se, (1965) 16 STC 894 (Mys) some argument based on Article 14 seems to have been advanced and repelled (See p. 911 of (1965) 16 STC 894 (Mys)). The Andhra High Court in Papanna's case, (1967) 19 STC 506 (Andh. Pra), and in Kalangi Krishnamurthy and Co.'s case, (1968) 22 STC 540 (Andh. Pra.) held that the corres-ponding provisions of the Andhra Pradesh General Sales Tax Act do not offend either Article 14 or Article 19(1) (f) and (g) of the Constitution. The argument before us was that the power conferred by the impugned provisions was liable to abuse, that the conditions for the exercise of the power had not been clearly defined, that safeguards against the exercise of the drastic power were inadequate, it not nil, that there was no sufficient provision for affording reasonable opportunity to the owner before being deprived of his goods, and that the scope and purpose of (he enquiry had not been defined. It has been pointed out time and again that abuse of powers even by Officers of the type empowered to take action under these provisions is not easily to be presumed land that the mere possibility of abuse is no ground to strike down a statutory provision, but rather to relieve an individual against a particular action shown to be discriminatory or arbitrary. Section 29 (4) (Proviso) and Rule 35 (6) provide for notice to the owner before seizure and confiscation, the section, if the owner is 'ascertainable', and the rule, if he is 'present'. We may well -reserve our opinion as to the effect of this disparity on arbitrariness of the action, to a case where the owner, despite being 'ascertainable', was denied notice because he was not 'present', especially, in the view that we take that these provisions anyway offend other provisions of the Constitution. We arc satisfied from an examination of the provisions of the Act and the Rules that the documents, the production of which has been insisted on by Section 29 (2) sufficiently disclose the name and particulars of the owner, and we do not expect action for confiscation of goods to be taken without notice to him. Against action taken by the Officer at the check-post there is the safeguard of an appeal under Section 34, a further appeal to the Tribunal under Section 39, and a revision to the High Court under Section 41 of the Act. The conditions for taking action are defined by Section 29 (2) and (4) of the Act, and the scope and purpose of the enquiry, are defined by R. 35 (5) in the face of which, we cannot hold as the Mysore High Court did in Venkita-chalapathy's case, (1965) 16 STC 894 (Mys) that once the absence of the documents was disclosed, confiscation was bound to follow, and there was no further scope or purpose for an enquiry. The owner is also given an option, for what it is worth, to avoid confiscation by furnishing cash security to the extent of twice the amount of the tax payable on the goods. With the safeguards thus thrown in, we find it difficult to hold that the power of confiscation violates Article 14. Whether they are as reasonable restrictions on the fundamental rights to acquire and hold property and to carry on a trade or business, is a different matter.
16. We may next turn to the attack based on Article 19(1) (f) and (g). Theseclauses of the Article provide for the fundamental right to acquire, hold and dispose of property and to practice any profession or to carry on any occupation trade or business. By reason of Clauses (5) and (6) of the Article, these rights are subject to reasonable restrictions in the interests of the general public. That the impugned provisions operate as restrictions on the right to property and fo carry on trade, is clear enough. But are they reasonable restrictions in the interests of general public? Our attention was called to the report of the Nataraja Pillai Committee in this State, some time in the year 1962 that there was considerable evasion of the tax and that effective measures to check the same had to be devised. The Committee observed that the checking of goods alone was contemplated, so as to enable the Sales Tax Officers to keep track on the commodities transported and to identify their owners. Our attention was also called to the Statement of Objects and Reasons of the 1963 Act one of which was to devise sufficient safeguards to effectively check and prevent tax evasion, In answer to our enquiries, we were also informed that provision for check-posts and for confiscation of goods, have been incorporated in the sales lax legislations of the States of Andhra Pradesh, Kerala, Madras, Mysore, Orissa and Rajas than, and that in the remaining States of this country (except in the State of West Bengal) provision has been made for check-posts without any power to confiscate goods. In the State of West Bengal alone, there is no provision at all either for check-posts or for confiscation of goods. We shall have due regard to the report of the expert committee, (not forgetting that the members of the Committee were not constitutional pandits), and to the other factors referred to supra, in assessing the reasonableness of the restrictions on the rights guaranteed under Article 19(1) (f) and (g). In doing so, we shall remind ourselves of the caution administered in the classic language of Patanjali Sastri, C. J. in the State of Madras v. V. G. Row, AIR 1952 SC 196.
'It is important in this context to bear in mind that the test of reasonableness, where-ever prescribed should be applied to each individual statute impugned, and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict.'
The provisions of Section 29, and of Rule 35, have been sufficiently set out and stressed. They amply bring out that unless the owner travels with the goods, the notice providedis hardly likely to reach him in time to avoid the catastrophe of confiscation. We have already noticed the disparity between Section 29 (4) and Rule 35 (6) in providing for notice to the owner, the former directing notice if the owner is 'ascertainable', and the latter, only, if he is 'present'. The further provisions in Rule 35 (8) to ascertain the address and particulars of the owner, and afford him an opportunity, are, in the nature of things, illusory and ineffective, unless the owner travels with the goods or is near at hand to the check-post. It is little consolation for the owner that confiscation can be avoided by tendering twice the amount of tax payable on the goods, under Clause (5) of Section 29 read with Clause (15) of Rule 35. The effectiveness of these provisions as a sufficient safeguard stands considerably attenuated, if not entirely destroyed by the prospect of his having to do so at successive check-posts, or in respect of successive consignments of goods at the same check-post, to allay the suspicions of the officers in charge. Both by the terms of the section and the rule, the confiscated goods are to be sold in public auction, and all that the deprived owner can get in case he eventually succeeds in appeal against the order of confiscation would be, not even the market value of the goods, but the proceeds fetched at the auction, less the charges incurred for conduct ing the same. We have no doubt that these provisions operate as unreasonable restrictions on the fundamental right of a person with respect to his property and with respect to his right to carry on a trade or business in goods.
16A. We were pressed with the decision in Nathella Sampathu Chetly v. Collector of Customs, AIR 1962 SC 316 where a right of confiscation in respect of smuggled goods under Section 178-A of the Sea Customs Act was upheld by the Supreme Court. For one thing, we cannot equate smuggled goods with goods in respect of which sales-tax is payable, or is apprehended to be payable. On the analogy of the reasoning in Chamarbangwala's case, AIR 1957 SC 699 noticed in the passage from the Atiabari Tea Co.'s case, AIR 1961 SC 232 which we have extracted earlier, it might perhaps be argued that there is no fundamental right to trade in smuggled goods or to acquire, hold and dispose of such goods. But we doubt if the same can be posited of goods evading, or suspected to be evading, liability to sales tax. That apart, in Nathella Sampathu Chetty's ease, AIR 1962 SC 316 the Supreme Court referred to the report of the Taxation Enquiry Commission, 1953-54 which had pointed out the deleterious effects of smuggling; and then observed:
'If therefore for the purpose of achieving the desired objective and to ensure that the intentions of Parliament shall not be defeated a law is enacted which operates somewhat harshly on a small section of the publictaken in conjunction with the position that without a law in that form and with that amplitude smuggling might not be possible of being effectively checked, the question arises whether the law could be held to be violative of the freedom guaranteed by Article 19(1) (f) and (g) as imposing an unreasonable restraint. That the restrictions are in the 'interest of the general public' is beyond controversy. But is the social good to be achieved by the legislation so disproportionately small that on balance it could be said that it has proceeded beyond the limits of reasonableness? We would answer this in the negative.'
The guarded language in which the above observations are couched, and the background against which they were made, taken along with the test propounded by Patanjali Sastri, C. J. in V. G. Rao's case, AIR 1952 SC 196 which we have extracted earlier, make it impossible for us to apply the same yardstick in judging the reasonableness of the restrictions to prevent evasion of sales tax. Dealers in goods, liable for payment of sales tax are by no means a 'small section of the public' such as those who traffic in smuggled goods, which were the subject-matter of decision in Nathella Sampathu Chetty's case. Nor are we satisfied that the magnitude of the evil of sales tax evasion could be met only by a law in such form and of such amplitude as has been enacted by the impugned section and Rule. We rather feel that some analogy is afforded by the decision in Hamdard v. Union of India, AIR 1960 SC 554 where, the court struck down the provision for forfeiture of certain articles on the ground that the same goes tar beyond the purpose of the Act and contained no safeguards. We are in agreement with the Mysore High Court in Ven-kitachalapathy's case, (1965) 16 STC 894 (Mys) which struck down similar provisions under the Mysore Act as violative of Article 19(1) (f) and (g). We hold that the provisions of Section 29 (4) and (5) and of Rule 35 (5) to (12) and (15) violate the rights guaranteed by Article 19(1) (f) and (g) of the Constitution and cannot be saved as reasonable restrictions on the exercise of the said rights. Some of the provisions of Rule 35 may, by themselves, be innocuousi but they are so integrally connected with the process of confiscation provided therein, that portions of them alone cannot be allowed to stand. The whole of Clauses (5) and (12) of Rule 35 must be struck down.
17. The next argument advanced by counsel for the petitioner is that Rule 35 (5) goes beyond Section 29. Sections 29 (4) authorises confiscation where transport is not accompanied by any of the documents referred to in Sub-clause (a) of Section 29 (2), namely, a Bill of Sale, a Delivery Note, a Way-Bill or a Certificate of Ownership; or, where the document referred to in Sub-clause (b) of Section 29 (2), namely the declaration, is false or is reasonably suspectedto be false. Rule 35 (5) seems to enlarge the content of the section by extending the suspicion as to the false or bogus nature, to all the documents mentioned both in Sub-clause (a) and (b) of Section 29 (2). Strictly, the complaint of the petitioner appears justified. But we are inclined to think that when Section 29 (2) and (4) referred to the documents in Clause (a) therein, they contemplate valid and proper documents and that the question as to whether they are so or not, is open to investigation. In that view, we are inclined to hold that Rule 35 (5) does not go beyond the purview of Section 29 (2) and (4); but, as the section and the rule have to be struck down on other grounds, it is not necessary to venture a final opinion.
18. We may also notice that on the facts in O. P. No. 4977/1967 which we have set out earlier, the notices Exts. P4, P4 (a), P4 (b), P5, P5 (a), P5 (b) and P6 appear to us to be quite unreasonable and unwarranted by the provisions of the Act and the Rules. We arc unable to see how by these notices, the petitioner can be called upon to produce evidence that he was a registered dealer in Mahe--especially when the invoices accompanying the transport showed the number of his registration certificate under the Central Sales Tax Act--or bow the Officer can direct an enquiry at the check post into the genuineness of the purchase purported to have been effected in Mahe. These appear to us to be wholly outside the province of the machinery of setting up check-posts for evasion of tax. These notices only confirm the apprehension expressed in several quarters and even in the Nataraja Pillai Committee's Report that these provisions have to be worked carefully, so as to avoid harassment. Quite apart from the constitutionality of the provisions impugned, on this ground again, the notices in question appear to be open to objection.
19. In the light of our discussion and conclusion, we hold that Clauses (3), (4) and (5) of Section 29 of the Act, and Clauses (3) to (12) and (13) of Rule 35 of the Rules are invalid and unconstitutional.
20. We may now proceed briefly to deal with the individual O. Ps. O. P. No. 4977/1967.
In the light of our above conclusion the proceedings evidenced by Ext. P4 series, P5 series and P6 are quashed. The goods have been released to the petitioner, pending this writ petition on its furnishing security in this Court. It is enough therefore to order that the security deposited by the petitioner will be duly released. The Original Petition is allowed as above. No costs. O. P. No. 4995/1967.
The facts are practically the same as in O. P, No. 4977/1967. The petitioner herein is an individual having business in Mahe. The proceedings sought to be impugned are Exts. P4 series and P5 series. We quashthese proceedings. As in O, P. No. 4977/ 1967, we direct that the security deposited by the petitioner in this Court pending the O. P. will duly be released. The O. P. is allowed as above. There will be no order as to costs. O. P. No. 2642/1967.
The facts in this writ petition are these. A consignment of goods of the petitioner from Kodhacherry to Chiltattukara was intercepted on the night/morning of 16/17th April 1967. The goods were released on cash security of Rs. 1000 after giving the owner the option contemplated by the section and the rule, to get them so released in lieu of confiscation. Thereafter, by Ext. P3 proceedings a penalty of Rs. 1000 is levied on the petitioner and the cash security already furnished in lieu of confiscation has been adjusted towards the penalty so levied, in accordance with the proviso to Section 29(5) of the Act. In view of our finding that Section 29 (5) is unconstitutional, we allow this writ petition and quash Ext. P3 order and direct the 1st respondent to return the cash security of Rs. 1000 furnished by the petitioner to obtain release of his goods, as referred to in Ext. P3. We make no order as to costs.