Excel Assay and Hallmarking Centre v. Commercial Tax Officer, 1st Circle, Thrissur; Inspecting Assistant Commissioner (Recovery), Commercial Taxes, Thrissur; Commissioner, Commercial Taxes, Thiruvananthapuram; State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE ANTONY DOMINIC** ## **THURSDAY, THE 28TH DAY OF FEBRUARY 2013/9TH PHALGUNA 1934** ## **WP(C).No. 8739 of 2010 (N)** **--------------------------------------** **PETITIONER:** - **-------------------** **EXCEL ASSAY AND HALLMARKING CENTRE, 10/1134/1, ERINJERY ANGADI, NEW CHURCH ROAD, THRISSUR, REPRESENTED BY ITS MANAGING PARTNER J.SUNIL.** **BY ADVS.SRI.V.V.ASOKAN, SRI.K.I.MAYANKUTTY MATHER.** **RESPONDENTS:** - **-----------------------** **1. COMMERCIAL TAX OFFICER, 1ST CIRCLE, TRICHUR.** **2. INSPECTING ASSISTANT COMMISSIONER,** - **(RECOVERY), COMMERCIAL TAXES, TRICHUR.** **3. COMMISSIONER, COMMERCIAL TAXES, THIRUVANANTHAPURAM.** **4. STATE OF KERALA, REPRESENTED BY CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM.** **BY GOVERNMENT PLEADER SRI. SHAIJ RAJ.T.K.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 28-02-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Prv.** ## **W.P.(C). NO.8739/2010-N:** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** |**EXT.P.1:**|**COPY OF THE PROCEEDINGS OF THE BUREAU OF INDIAN STANDARDS,**| |---|---| ||**SOUTHERN REGIONAL OFFICE DTD. 26/08/2005.**| |**EXT.P.1.A:**|**COPY OF THE RECOGNITION CERTIFICATE GIVEN TO THE PETITIONER**| ||**DTD. 16/09/2008.**| |**EXT.P.2:**|**COPY OF THE LICENCE GIVEN TO THE JEWELLERY-**| ||**M/S. G.R. THANKAMALIGAI & SONS, CHENNAI DTD. 20/10/2009.**| |**EXT.P.2.A:**|**COPY OF THE LICENCE GIVEN TO THE JEWELLERY – FASHION**| ||**JEWELERS, KOLLAM DTD. 16/02/2009.**| |**EXT.P.2.B:**|**COPY OF THE LICENCE GIVEN TO THE JEWELLERY – M.T. GOLD LAND,**| ||**MALAPPURAM DTD. 17/11/2009.**| |**EXT.P.3:**|**PRINT OUT OF THE LAZER MARK BEING PUT ON TO THE ORNAMENT BY**| ||**THE HALL MARKING AGENCY DTD. NIL.**| |**EXT.P.4:**|**COPY OF THE STATEMENT REGARDING PAYMENT OF ROYALTY**| ||**DTD. 14/03/2006.**| |**EXT.P.4.A:**|**COPY OF THE RECEIPT GIVEN BY THE BUREAU OF INDIAN STANDARDS**| ||**DTD. 21/03/2006.**| |**EXT.P.5:**|**COPY OF THE MONTHLY STATEMENT FILED BY THE PETITIONER**| ||**DISCLOSING THE HALL MARKING DONE BY THE PETITIONER FOR THE**| ||**MONTH OF MARCH, 2006 DTD. 03/04/2006.**| |**EXT.P.6:**|**COPY OF THE SERVICE TAX REGISTRATION CERTIFICATE**| ||**DTD. 08/12/2005.**| |**EXT.P.6.A:**|**COPY OF THE RENEWED CERTIFICATE OF REGISTRATION**| ||**DTD. 10/07/2007.**| |**EXT.P.7:**|**COPY OF THE CHALAN EVIDENCING REMITTANCE OF SERVICE TAX**| ||**(OCTOBER TO DECEMBER 2005).**| |**EXT.P.7.A:**|**COPY OF THE CHALAN EVIDENCING REMITTANCE OF SERVICE TAX**| ||**(JANUARY TO MARCH 2006) DTD. NIL.**| |**EXT.P.8:**|**COPY OF THE DEPARTMENTAL PROCEDURE OF GOLD ASSAYING AND**| ||**HALL MARKING DTD. NIL.**| |**EXT.P.9:**|**COPY OF THE RECEIPT ISSUED BY THE PETITIONER TO KALYAN**| ||**JEWELLERY DTD. 09/02/2006.**| **Prv.** ## **W.P.(C).NO.8739/2010-N:** - **EXT.P.9.A: COPY OF THE RECEIPT ISSUED BY THE PETITIONER TO KALYAN JEWELLERY DTD. 07/03/2006.** - **EXT.P.9.B: COPY OF THE RECEIPT ISSUED BY THE PETITIONER TO KALYAN JEWELLERY DTD. 07/02/2006.** - **EXT.P.9.C: COPY OF THE RECEIPT ISSUED BY THE PETITIONER TO KALYAN JEWELLERY DTD. 10/02/2006.** - **EXT.P.10: COPY OF THE INVOICE ISSUED BY THE PETITIONER TO KALYAN JEWELLERS DTD. 09/02/2006.** - **EXT.P.10.A: COPY OF THE INVOICE ISSUED BY THE PETITIONER TO KALYAN JEWELLERS DTD. 07/03/2006.** - **EXT.P.10.B: COPY OF THE INVOICE ISSUED BY THE PETITIONER TO KALYAN JEWELLERS DTD. 07/02/2006.** - **EXT.P.10.C: COPY OF THE INVOICE ISSUED BY THE PETITIONER TO KALYAN JEWELLERS DTD. 10/02/2006.** - **EXT.P.11: COPY OF THE SHOP INSPECTION REPORT DRAWN BY THE INTELLIGENCE OFFICER, SQUAD I, TRICHUR DTD. 23/03/2006.** - **EXT.P.11.A: COPY OF THE RECEIPT ISSUED BY INTELLIGENCE OFFICER PERTAINING TO THE RECORDS TAKEN INTO CUSTODY BY THE INTELLIGENCE OFFICER DTD. 23/03/2006.** - **EXT.P.12: COPY OF THE COMPOUNDING APPLICATION FILED BY THE PETITIONER DTD. 17/06/2008.** - **EXT.P.12.A: COPY OF THE ORDER PASSED BY THE INTELLIGENCE OFFICER, SQUAD I, TRICHUR DTD. 18/06/2008** - **EXT.P.13: COPY OF THE REPLY GIVEN BY THE PETITIONER TO THE PRE ASSESSMENT NOTICE DTD. 30/12/2009.** - **EXT.P.14: COPY OF THE REPLY GIVEN BY THE PETITIONER TO THE PRE ASSESSMENT NOTICE (2005-2006 CST). DTD. 29/01/2010.** - **EXT.P.14.A: COPY OF THE ADDITIONAL REPLY GIVEN BY THE PETITIONER TO THE R.1. DTD. 15/02/2010.** - **EXT.P.15: COPY OF THE ASSESSMENT ORDER (2005-2006 KVAT) DTD. 27/02/2010.** **Prv.** ## **W.P.(C).NO.8739/2010-N:** **EXT.P.16: COPY OF THE ASSESSMENT ORDER (2005-2006 CST) DTD. 27/02/2010. EXT.P.17: COPY OF THE RECTIFICATION PETITION FILED BY THE PETITIONER ALONG WITH THE ANNEXURE DTD. 10/03/2010.** **EXT.P.18: COPY OF THE ORDER PASSED BY THE R.1. ON THE RECTIFICATION PETITION DTD. 11/03/2010.** ## **RESPONDENTS' EXHIBITS: NIL.** ## **//TRUE COPY//** **P.A. TO JUDGE** ## **Prv.** ## **ANTONY DOMINIC, J** - - - - - - - - - - - - - - - - - ## W.P.(C).8739/2010 - - - - - - - - - - - Dated this the 28[th] day of February, 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ## **JUDGMENT** Heard the learned counsel for the petitioner and the learned Government Pleader appearing for the respondents. 2. Exts.P1 and P1(a) are the licences issued by the Bureau of Indian Standards recognizing the petitioner as an Assay and Hallmarking Centre subject to terms and conditions that are incorporated in Ext.P1(a). This activity of the petitioner, being a taxable service as provided in the Finance Act, 1994, petitioner has obtained Ext.P6 certificate of registration from the Superintendent of Central Excise. 3. In this writ petition, there are mainly two prayers. First one is to quash Exts.P15 and P16, the assessment orders passed against the petitioner under the KVAT and CST Acts for the year 2005-06. The second prayer is to declare that Section 15(2)(xi) of the KVAT Act requiring the Hallmarking units to obtain registration under the KVAT Act to be unconstitutional. I shall deal with the second prayer first. **W.P.(C).8739/10** 2 4. Section 15(1) of the KVAT Act occurring in Chapter IV provides for registration of dealers and states that every dealer, whose total turnover in a year is not less than Rs. 5Lakhs, shall and any other dealer may, get himself registered under the Act. Sub section (2)(xi) provides that notwithstanding anything contained in sub section (1) “any hallmarking unit” shall get itself registered under the Act. 5. Case of the petitioner is that in a Hallmarking Unit, there is no sale or delivery of any goods and that therefore, it is not liable to get itself registered under the Act. In support of this contention, learned counsel for the petitioner relied on the principles laid down in the Apex Court judgment in **Bharat Sanchar Nigam Ltd v. Union of India (2006 (145) STC, 91)** . On the other hand, learned Government Pleader contended that the validity of the provisions should be judged in the light of Entry 54, List II to the 7[th] schedule of the Constitution. It is stated that requirement that Hallmarking Units shall obtain registration is fully covered by Entry 54 of List 2 and therefore Section is not an ultra vires piece of legislation calling for interference by this **W.P.(C).8739/10** 3 Court. 6. I have considered the respective contentions raised. 7. As already seen, the contention of the counsel for the petitioner is that there is no transfer of goods or title that takes place in the process of hallmarking in a Hallmarking Unit where quality of the ornaments are certified by the petitioner by a mechanical process. Therefore, in the absence of any sale or delivery of goods, according to the petitioner, entry 54 does not authorise the State to legislate requiring the petitioner to obtain registration under the Act. This contention was sought to be substantiated by relying on the judgment of the Apex Court in **Bharat Sanchar Nigam Ltd v. Union of India (2006 (145 STC, 91)** where, after examining the constitutional scheme which obtained prior to the 46[th] amendment and subsequent thereto, the Apex Court held in paragraphs 35, 44, 45 and 46, thus:- _35. Prior to the 46[th] Amendment composite contracts such as works contracts, hire purchase contracts and catering contracts were not assessable as contracts for sale of goods. The locus classicus holding the field was State of Madras v. Gannon Dun kerley & Co. [1958] 9 STC 353 (SC). There this_ **W.P.(C).8739/10** 4 _Court held that the words “sale of goods” in entry 48 of List II, Schedule VII to the Government of India Act, 1935 did not cover the sale sought to be taxed by the State Government under the Madras Generala Sales Tax Act, 1939. The classical concept of sale was held to apply to the entry in the legislative List in that there had to be three essential components to constitute a transaction of sale - namely (i) an agreement to transfer title, (ii) supported by consideration and (iii) an actual transfer of title in the goods. In the absence of any one of these elements it was held that there was no sale. Therefore, a contract under which a contractor agreed to set up a building would not be a contract for sale. It was one contract, entire and indivisible and there was no separate agreement for sale of goods justifying the levy of sales tax by the Provincial Legislatures. “Under the law therefore, there cannot be an agreement relating to one kind of property and a sale as regards another.” parties could have provided for two independent agreements one relating to the labour and work involved in the execution of the work and erection of the building and the second relating to the sale of the material used in the building in which case the latter would be an agreement to sell and the supply of materials there under, a sale. Where there was no such separation, the contract was a composite one. It was not classifiable as a sale. The court accepted the submission of the assessee that the expression “sale of goods” was at the time when the Government of India Act, 1935 was enacted, a term of well recognised legal import in the general law relating to sale of goods and must be interpreted in entry 48 in List II of schedule VII of the 1935 Act as having the same meaning as in the Sale of Goods Act, 1930. According to this decision if the words “sale of goods have to be interpreted in their legal sense, that sense can only be what it has in the law relating to sale of goods. To use the language of the court:_ _“To sum up, 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._ **W.P.(C).8739/10** 5 _In a building contract which is as in the present case,, one entire and indivisible- and that is its norm, 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 a contract treating it as a sale”._ _44. Gannon Dunkerley survived the 46[th] Constitutional Amendment in two respects. First with regard to the definition of “sale” for the purposes of the Constitution in general and for the purposes of entry 54 of List II in particular except to the extent that the clauses in article 366 (29A) operate. By introducing separate categories of “deemed sales” the meaning of the word “goods” was not altered. Thus the definitions of the composite, elements of a sale such as intention of the parties, goods, delivery etc., would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remain static. Courts must move with the times. But the 46[th] Amendment does not give a licence for example to assume that a transaction is a sale and then to look around for what could be the goods. The word “goods” has not been altered by the 46[th] Amendment. That ingredient of a sale continues to have the same definition. The second respect in which Gannon Dunkerley has survived is with reference to the dominant nature test to be applied to a composite transaction not covered by article 366 (29A). Transactions which are mutant sales are limited to the clauses of article 366(29A). All other transactions would have to qualify as sales within the meaning of the sales of goods Act, 1930 for the purpose of levy of sales tax._ _45. Of all the different kinds of composite transactions the drafters of the 46[th] Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases,_ **W.P.(C).8739/10** 6 _where splitting of the service and supply has been constitutionally permitted in clauses (b) and (f) of clause (29A) of article 366, there is no other service which has been permitted to be so split. For example the clauses of article 366 (29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/'her client? Strictly speaking with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases._ _46. The reason why these services do not involve a sale for the purposes of entry 54 of list II is as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley's case [1958] 9 STC 353 (SC), namely if there is an instrument of contract which may be composite in form in any case other than the exceptions in article 366(29A), unless the transaction in truth represents two district and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service and impose tax on the sale. The test therefore, for composite contracts other than those mentioned in article 366(29A) continues to be - did the parties have in mind or intend separate rights arising out of the sale of goods, if there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is as to what is “the substance of the contract”. We will, for the want of a better phrase, call this the dominant nature test._ 8. Although the contention of the learned counsel for the **W.P.(C).8739/10** 7 petitioner is unexceptionable, in my view, the vires of Section 15 (2)(ix) of the KVAT Act has to be judged in the light of the legislative entry namely entry 54 of List II of the 7[th] Schedule to the Constitution, which authorizes the State Legislature to levy tax on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. 9. I shall proceed to examine whether Section 15(2) (ix) of the KVAT Act, requiring the Hallmarking Units in the State to obtain registration under the Act, to be a valid piece of registration. In my view, this issue is fully covered by the authoritative pronouncements of the Apex Court and I shall refer to those judgments. The question whether the constitutional disability of a State to tax a person, will prevent it from requiring a dealer to get itself registered or to file returns, came up for consideration of the Apex Court in its judgment in **A.V. Fernandez v. The State of Kerala (AIR 1957 S. C, 657)** and this question has been answered thus in paragraph 44. _“This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of_ **W.P.(C).8739/10** 8 _its disability in the matter of the imposition of sales tax by virtue of the provisions of Act.286 of the Constitution may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in th dealer's turnover._ _Such inclusion, however, for the purposes aforesaid would not affect the non-liability of these transactions to levy or imposition of sales tax by virtue of the provisions of Art.286 of the Constitution and the corresponding provision enacted in the Act, as above.”_ 10. This judgment was followed by the Apex Court in **M/s Hoechst Pharmaceuticals Ltd. And Others v. State of Bihar and Others (1983 (4) SCC 45)** wherein it has been held thus:- _In the penultimate paragraph in Ferenandez case, the court after laying down that the non obstante clause in Section 26 had the effect of taking sales in the course of inter-State trade and outside the State out of the purview of the Act with the result that the dealer was not required nor entitled to include them in computation of the turnover liable to tax thereunder, observed :_ _This position is not at all affected by the provision with regard to registration and submissions of returns of the sales tax by the dealers under the Act. The legislature, in spite of its disability in the matter of the imposition of sales tax by virtue of the provisions of Article 286 of the Constitution, may for the purposes of the registration of a dealer and submission of the returns of sales tax include these transactions in the dealer's turnover. Such inclusion, however, for the_ **W.P.(C).8739/10** 9 _purposes aforesaid would not affect the nonliability of these transactions to levy or imposition of sales tax by virtue of the provisions of Article 286 of the Constitution and the corresponding provision enacted in the Act, as above._ _The decision in Fernandez case, is therefore clearly an authority for the proposition that the State legislature notwithstanding Article 286 of the Constitution while making a law under Entry 54 of List II of the Seventh Schedule can, for purposes of the registration of a dealer and submission of returns of sales tax, include the transactions covered by Article 286 of the Constitution._ ## 11. Subsequently, in the judgment in **Tripura Goods** = **Transport Association and Another (1999 (112) STC, 609)** **(1999 (2) SCC 253)** , the question which arose before the Apex Court was whether the provisions of the Tripura Sale Tax Act, requiring the transporters in Tripura to obtain certificate of registration and to comply with various other formalities prescribed under the Sales Tax Act and the Rules, was beyond the legislative competence of the State legislature. The contention raised was that the obligation cast under the Tripura Sales Tax Act could only be on dealers and that since transporters are engaged neither in sale nor purchase of any goods, they are not dealers under the Act and therefore, the provisions lacked legislative **W.P.(C).8739/10** 10 competence. This question was considered by the Apex Court and the constitutional validity of the provision was upheld thus:- _Thus, the question for consideration with respect to the first submission is whether such provisions could be held to be beyond the legislative competence of the State Legislature? The law in this regard is well-settled if any Legislature makes any ancillary or subsidiary provision which incidentally transgresses over its jurisdiction, for achieving the object of such legislation then it would be a valid peace of legislation_ _In Express Hotels Private Ltd v. State of Gujarat [1989] 74 STC 157 : (1989) 3 SCC 677, this Court held :_ _“We are dealing with an entry in a legislative List. The entries should not be read in a narrow or pedantic sense but must be given their fullest meaning and the widest amplitude and be held to extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them”_ _In Elei Hotels and Investments Ltd v. Union of India [1989] 74 STC 146 (SC) : (1989) 3 SCC 698, this Court held_ _“............... In interpreting expressions in the legislative Lists, a very wide meaning should be given to the entries. In understanding the scope and amplitude of the expression 'income' in entry 82, List I, any meaning which fails to accord with the plenitude of the concept of 'income' in all its width and comprehensiveness should be avoided. The cardinal rule of interpretation is that the entries in the legislative Lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. The widest_ **W.P.(C).8739/10** 11 _possible construction, according to the ordinary meaning of the words in the entry, must be put upon them............”_ _In P.N.Krishna Lal v. Government of Kerala (1995) Suppl. 2 SCC 187, this Court held :_ _“...........The Legislature derives its power under article 246 and other related articles in the Constitution. The language of an entry should be given the widest meaning fairly capable to meet the need of the Government envisaged by the Constitution. Each general word should extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended within it. When the vires of an enactment is impugned, there is an initial presumption of its constitutionality. If there exists any difficulty in ascertaining the limits of the legislative power, it must be resolved, as far as possible in favour of the Legislature, putting the most liberal construction on the legislative entry so that it is intra vires”_ _It is now necessary to scrutinise the impugned provisions to see what are the obligations cast on the transporters, what is the purpose of such obligation, is it in any way taxing such transporters or impeding the transport business to make it beyond the legislative competence and ultra virus article 301 of the Constitution of India? Whenever any goods is sold or purchased inside or outside the State, the incidence of tax and the quantum of tax has to be ascertained under the provisions of the relevant taxing statute. For this, it is necessary to fix a dealer, the taxable goods, place of sale or purchase of such goods and the quantum of tax. If a dealer in taxable goods transaction of sale or purchase escapes attention of the taxing authority, tax on such goods escapes with resultant loss to the State revenue. To overreach this possible escape a mechanism is invariably brought in a statute to seal such loopholes of escape, of course casting obligations of goods transported into or outside Tripura in the prescribed manner and to furnish in the prescribed manner such information as the_ **W.P.(C).8739/10** 12 _Commissioner requires including filing of form XXIV is only for the said objective to be achieved with the help and aid of such transporter or carrier etc. Such obligation is cast only for identifying the consignor or consignee to fix liability on them in correlation with the goods carried by such transporter further requiring the disclosure of such goods with its quantity, value, weight to help the taxing authorities in collecting taxes, imposing penalties including punishing one for the offences committed. If such an obligation is not cast on such transporters then any dealer under a false name, can despatch his taxable goods to another person through a transporter escaping his sales tax liability on such goods. It cannot be denied that some such dealers and transporters do indulge in such illegal practices. This fact is brought in through the counter-affidavit filed by the respondents-State that some such consignments are booked with consignee as self, without disclosing the name, registration number and address of the consignee in the appropriate column of form XXIV. Incorrect incomplete declaration in such forms, if not made punishable would defeat the very purpose of enacting these provisions and would help such clandestine dealers to escape the liability of tax. So each of these provisions are brought in to help the authorities to check the evasion of tax._ _The maintenance of accounts by the transporters under section 36A is only to help the taxing authority to trace the dealer, fix the goods transported correlating with such dealers transporting such goods for fixing taxable liability in this regard. There is no provision which fixes any liability on the transporters, carries etc which is on a dealer. Liability, if at all is only if such transporters to help the authorities to collect the tax from escaping dealers which but for this, would escape. Section 29 speaks of offences covering both dealers and non-dealers as is evident by the opening word “whoever”. Sub-section (4) to which learned counsel referred to obligates a person to_ **W.P.(C).8739/10** 13 _produce any accounts, evidence or documents or to furnish any information as required by the concerned authority. Of course, all this would be what one is required to maintain and in the case of transporters, carries etc., what the relevant provisions require him to do. If he is required to maintain or produce some document which he has to maintain under a statute and if he does not produce it then of course, he should be made liable for offence. If is only on his failure to do this, that is treated as an offence, punishment as it is one of the legitimate weapons to enforce one to help the authorities. Such information and documents sought are either with or within the knowledge of transporter. As aforesaid, this is for the sole objective of ascertaining a consignor and consignee of the taxable goods which the transporter is carrying. Such requirement has no correlation wit the sale an purchase of the goods or to treat a transporter as dealer and consequently, no obligation is cast on him to pay any tax, interest or penalties which a dealer is required to pay. Similarly section 30 refers to offence only when a false declaration is made in connection with any proceedings under this Act, which he either knows or believes to be false, or does not believe to be true. Again the conviction under it is only for making false declaration which is within his knowledge. How can this constitute to be a ground for legislative competence? This provision is only to see that the correct statement of facts are brought out. One is punished only if he knows or believes to be false, yet does not disclose it or even does not believe to be true, but still makes statement to the contrary. Under Section 29(4) and section 30 the offences in case committed by transporter are relatable to checking of evasion of tax, when composition of offence under section 32 would also confine itself within this sphere. We do not find any of these provisions in any way placing any liability on the transporter which is otherwise on a dealer under this Act. Similarly as aforesaid, the maintenance of account by the transporters, carries etc, under section 36A is only to render help_ **W.P.(C).8739/10** 14 _to the authorities in checking the evasion of tax. This does not put any such obligation on the transporter to hold that these provisions transgress the legislative competence of the State Legislature._ _Further rule 46A read with section 38(2) requires every person transporting taxable goods t any check post or barrier referred to in such section (1) to file before the officer-in-charge of such check post or barrier a correct and complete declaration of the goods in such form and in such manner as may be required. It is by virtue of this rule 46A a transporter is required at the check post to disclose complete accounts of the goods carried by him in form XXIV. The question is why such requirement? Form XXIV which is the main plank of attack by the learned counsel for the appellants is really based on the offence under section 29(4) or section 30 in case declaration under it is found to be false now. Now we proceed to examine what is is required to be filled by the transporters in form XXIV. This form requires to disclose the name and address of the consignor, whether a registered dealer or not, place of despatch and destination of the goods, lorry number, description of consignment, quantity, weight, value consignor's invoice number and date, railway receipt or bill of lading and in case goods are sent outside the State, the permit number and date authorizing such export under rule 47C. First the question is why such information is required if necessary, what possibly is the difficulty of the transporters, finally whether any objection by them is sustainable in law? As we have said that these informations are required solely for the purpose for checking the evasion of tax. Next, we do not find any difficulty for any transporter to disclose the names and addresses of the consignor and the consignee, the place of destination, he would also be knowing the description of consignment being transported its quantity, weight and value also from the description as disclosed by the consignor. The information which the transporter has to give so far with reference to the quantity, weight and value of the goods, would be based on the basis of the_ **W.P.(C).8739/10** 15 _documents, paper etc., as disclosed by the consignor. The fear expressed by the learned counsel for the appellants that in case such description, specially with reference to its weight or value, is found to be wrong about which he would never be certain as he has to depend on what is disclosed by the consignor, he would be liable for punishment under section 30. The fear expressed by the learned counsel is without substance and is mere imaginary. We have already observed that the offence is only drawn when there is false declaration, knowing the fact to be false, makes a declaration, not believing to be true yet makes declaration to th contrary. By making truthful declaration, believing the statement to be true based on information of the consignor, the offence is not drawn unless there is connivance between the transporter and the consignor._ _He also referred to sub rule (1A) of rule 63A under which the goods are being carried in contravention of the provisions of the Act or the Rules, is liable for seizure and under sub-rule (3) the transporter is made liable to pay for the composition of such offence in view of section 32. The aforesaid submissions for the appellants are without any force. So far as the fear with reference to form XXIV, as we have said above, he is aware of the same and the same is based on the information given by the consignor. The purpose of this form rightly is to ascertain the consignor and consignee and the details of the goods for the purpose of taking such goods under the Act. No transporter can escape this declaration as this is one of the essential mechanisms evolved to help the taxing authorities to check the evasion. Submission of the learned counsel expressing the fear that, if ultimately the statement in case is found to be incorrect as per his disclosure in form XXIV, that he would be held liable for offence is also unfounded. Apart from what we have recorded above, column 13(i) of the said form directs the declaration to be made in the following terms_ _“I/We hereby declare that the above_ **W.P.(C).8739/10** 16 _statements are true to the best of my/our knowledge and belief”._ _This itself clearly indicates when the liability of the offence punishable under section 29 or section 30 would be drawn. If only arises when such transporter deliberately makes false declaration and not when such declaration is true to his knowledge and belief. Learned senior counsel for the respondents fairly stated that the purpose mainly is to get the disclosure of the name and address etc., of the consignor and consignee. The rest of the column from 7 to 13 are primarily to be filled in on the basis of the information given by the consignor. Every taxing state has charging sections. It lays down the procedure to assess tax and penalties etc. it also provides provisions to cover pilferage of such revenue by providing such mechanism as it deem fit, in other words, to check evasion of tax and in doing so if any obligation is cast on any person having connections with consignor or consignee in relation to such goods, may be other than a dealer, to perform such obligation in aid, to check evasion and in case he is made liable for any offence, for his dereliction of duty or deliberate false act contrary to what he is obligated to do. In our opinion, it cannot be construed to be beyond the competence of State Legislature. The impugned prov ions are not charging sections, no tax liability is placed on the transporters. We find neither sections 29, 30, 32 and 36A nor rules 46A, 63A and 64A lack any legislative competence. They are within the legislative competence of the State Legislature and would fall under List II of entry 54 of the Seventh Schedule to the Constitution of India._ 12. Subsequently in **M/s. A.B.C. (India) Ltd., v. State of Assam and another (AIR 2005 SC, 3215),** the very same question arose in the context of the provisions of the Assam **W.P.(C).8739/10** 17 General Sales Tax Act where section 42 and 44 of the Act provide for furnishing of information by clearing and forwarding agents and also for production, inspection and seizure of accounts, documents, goods etc. These provisions were also challenged as lacking in legislative competence. The Apex Court examined the question and rejected the challenge thus:- _“In our view, the transporters are not strangers to the sale or purchase of goods to the contrary are parts and parcels and are directly involved in storing the goods purchased or sold by and in many cases such transactions are fictitiously carried on in false name and address besides false classifications vis-a-vis transportation of such goods in and outside of the State making themselves party to the episode of such fictitious transactions for the sole purpose of evasion of tax by the dealers purchasing and selling such goods._ _The judgment of this Court in Tripura Goods Transport Association & Anr v. Commissioner of Taxes & Ors. (supra) was cited before us. In that judgment, this Court has specifically held such agents transporting goods to be reasonably and proximately connected to the sale transaction and hence occasionally liable under the Sales Tax Laws. It is pertinent to mention that this Court while considering the Tripura's case had taken into consideration the judgment by this Court in the case of State of Haryana & Ors v. Sant Lal & Anr. (supra). The present case in our view is fully covered by the judgment rendered by this Court in Tripura's case._ _In our opinion there cannot be any irregularity to call for books of accounts documents evidence etc., as the same is necessary for the tax authorities to make proper verification and scrutiny_ **W.P.(C).8739/10** 18 _of the genuineness of the transactions. Issuance of notice for verification of a transaction is a formal step and the same is required for proper verification and scrutiny of the genuineness of the transaction to safeguard the interest of the State revenue._ _We have carefully perused both the judgments. Both the judgments uphold the legality of the charging and penal provisions in issue. But this Court struck down the relevant provisions of the Haryana General Sales Tax Act, 1973 because of apparent ambiguity inherent therein. However in course of considering the analogous provision viz. Section 36-A and Section 38-B of the Tripura Sales Tax Act, 1976, this Court in the case of Tripura Goods Association & Anr. v. Commissioner of Taxes & Ors (supra) held that maintenance of accounts by the transporters is only to help the taxing authority to trace the dealer, fix the goods transported, corelating with the dealers transporting such goods for fixing tax liability in this regard. This Court further held as follows-_ _“If a clearing or forwarding agent or “dalal” or person transporting goods is indeed reasonably and proximately connected with the sale occasioning the liability to the sales tax, it is legitimate to licence himself under the Act and maintain and furnish such information and particulars to the assessing authority thereunder as he would in the course of his business come to possess, it is legitimate then to make him liable for such escapement of tax as has resulted from the breach by him of such obligation and to a reasonable penalty”_ _Thus, it is seen that Sections 42 and 44 of the Act do not impose any liability upon the transporter, carriers etc, to pay any sales tax under the Act. The said sections are basically meant to check the tax evasion. Thus the requirement of maintenance of document and the certificate of registration by a transporter any such agent is only for similar purpose as incorporated under Sections 36-A and 38-B of the Tripura Sales Tax Act, 1976 which has been held to be a valid piece of legislation by this_ **W.P.(C).8739/10** 19 _Court in the case of Tripura Goods Transport Association & Anr. v. Commissioner of Taxes & Ors. (supra). In our view, the present case is fully covered by the said judgment of this Court._ 13. A reading of the aforesaid principles laid down by the Apex Court in the last two judgments where provisions of Tripura and Assam Acts were upheld by the Apex Court show that the Apex Court found that the maintenance of accounts in the prescribed manner and furnishing such information as the Commissioner requires, were for achieving the object of ceiling loopholes of escape from the levy of tax and that the the incidental powers under entry 54 entitled the State legislature to legislate upon these subjects as well. 14. Turning to the provisions of the KVAT Act, it can be seen that Section 40 of the Act provides that every person registered under the Act, every dealer liable to get himself registered under this Act etc., shall keep and maintain a true and correct accounts and other such account as may be prescribed in the manner provided in the Act. Similarly Section 44 also empowers the provisions of accounts and also confers power of Entry, such as Rule 58 have been framed under the Act for the effective implementation of **W.P.(C).8739/10** 20 these statutory provisions. These provisions are incorporated in the KVAT Act with identical objects and for achieving the very same purposes which are found by the Apex Court to sustain the provisions of the Tripura and Assam Acts. Although the counsel for the petitioner made a strenuous attempt to distinguish these judgments, I am unable to agree with him. Therefore, in view of the principles laid down by the Apex Court in the aforesaid judgments, the challenge against Section 15(2)(ix) has to fail. 15. Now what remains is the validity of Exts.P15 and P16 assessment orders. Reading of these orders show that the tax has been levied on the basis that the petitioner has traded in ornaments. This finding is seriously disputed by the learned counsel for the petitioner. In my view, the correctness of levy of tax as reflected in Exts.P15 and P16 can be adjudicated only by a fact finding authority and therefore, if the petitioner is aggrieved, they should pursue the statutory appellate remedies. 16. Therefore, I leave it open to the petitioner to pursue the statutory remedy of appeal against Exts.P15 and P16 and also leave open all the contentions that are raised insofar as the 21 ## **W.P.(C).8739/10** assessment orders are concerned. Taking note of the pendency of this writ petition before this Court, it is ordered that if the petitioner files appeals against Exts.P15 and P16, within four weeks from today, the concerned appellate authority shall entertain the appeals and deal with the same on merits ignoring the delay. Subject to the above, the writ petition is dismissed. **Sd/- ANTONY DOMINIC, JUDGE** mrcs /true copy/ sd/- P.A. To Judge