Holding

Section 78(5) is a valid ancillary provision within the State’s legislative competence to prevent sales‑tax evasion and the 30% penalty may be imposed without discretion.

Summary

The Rajasthan Sales Tax Act, 1994 requires transporters to carry declaration Form ST‑18A and other documents under Section 78(2). A truck of Mis D.P. Metals was stopped at a check‑post without the form, seized and a penalty of 30% of the goods' value was imposed under Section 78(5). The respondents challenged the constitutionality of Section 78(5) before the High Court, which held it ultra‑vires. On appeal, the Supreme Court examined whether the State has legislative competence under Entry 54 of List II to levy such a penalty as a measure to prevent tax evasion. Relying on earlier decisions upholding similar provisions in other states, the Court held that the power to impose penalties for non‑compliance with document requirements is ancillary to the power to levy sales tax and is therefore within the State’s competence. The Court also found that failure to produce documents or submission of false documents demonstrates mens rea, justifying the fixed 30% penalty without discretion to reduce it. Consequently, the Court set aside the High Court’s decision and allowed the appeals, except for one which was dismissed.

Issues considered

The validity of Section 78(5) of the Rajasthan Sales Tax Act, 1994 on the ground of legislative competence under Entry 54 of List II of the Constitution.
Whether the penalty of 30% of the value of goods under Section 78(5) is constitutionally valid and proportionate.
Whether the presence of mens rea is required for the levy of penalty under Section 78(5).

Legislation cited

Constitution of Indias. Entry 54, List II, Seventh Schedule
Rajasthan Sales Tax Act, 1954s. 22-A, s. 22-B
Rajasthan Sales Tax Act, 1994s. 78(2), s. 78(5), s. 78(8)

Subjects

sales taxpenaltylegislative competenceEntry 54check‑postmens reatax evasionconstitutional validitynatural justice

Judgment

A STATE OF RAJASTHAN AND ANR.
v.
MIS. D.P. METALS

OCTOBER 4, 2001

B [B.N. KIRPAL, N. SANTOSH HEGDE AND B.N. AGRAWAL, JJ.]

Sales Tax:

Rajasthan Sales Tax Act, 1994-Section 78(2) & (5)-/nspection of
documents at check-post-Non-production of declaration Form ST 18k
c
Levy of penalty-Validity and legislative competence of State on levy of
penalty-Held, the levy is valid as State has legislative competence to check
evasion of sales tax-Constitution of India, 1950-Entry ~4 in List II o.f Seventh
Schedule-Rajasthan Sales Tax Act, 1954 (since repealed)-Sections 22-A &
22-B.
D
Levy o.f Penalty at 30% after issuing show-cause notice-Discretion of
Revenue not to levy or levy lesser penalty-Existence o.f mens rea-Held, on
.facts, necessary documents not produced even after affording opportunity to
produce them-Hence, mens rea existed-No discretion given by Legislature to
E Revenue not to levy or levy lesser penalty.

A truck carrying goods of respondent-dealer was stopped at a check-
post by Sales Tax authorities and on finding that the person incharge of the
goods was not carrying declaration Form ST 18A as required under Section
78(2) of the Rajasthan Sales Tax Act, 1994, the department seized the
F goods. A show~cause notice was issued by Revenue to the· respondent•
dealer. After hearing, Revenue levied penalty at 30% of the value of the
goods under Section 78(5) of the Act. Similar action was taken by Revenue
against other respondent-dealers. The respondents filed applications before
Taxation Tribunal challenging the provisions of Section 78(5) of the Act
G and claiming consequential relief of the quashing of penalty orders. Pursuant
to abolition of the Taxation Tribunal, the applications were transferred to
High Court as Writ Petitions. High Court allowed the Writ Petitions of the
respondents holding Section 78(5) of the Act as unconstitutional and ultra
vires.

H In appeal to this Court, the appellant-State contended that the power
572
STATE v. D.P. METALS 573
to levy penalty under Section 78(5) of the Act is meant to check evasion of A
sales tax and is incidental to the power of levy of sales tax which is within ·
the legislative competence of the State under Entry 54 of List II of the
Constitution; and that similar provisions existed in the Sales Tax Actc; of
other States also.
B
The respondent-dealers contended that Section 78(5) of the Act is
ultra vires being beyond the legislative competence of the State; that the
penalty imposed under the section has no nexus with the evasion of sales
tax; and that in the absence of mens rea, a mere technical breach, which is
unintentional and bona fide, should not by itself invite penalty under the
Section. c
Allowing the appeals, the Court

HELD : 1.1. It is settled law that provisions to check evasion of sales
tax are within the legislative competence of the States under Entry 54 in
D
List II of the Seventh Schedule of the Constitution. The provisions to make
the imposition of tax efficacious or to prevent evasion of tax are within the

.. legislative competence. The persons referred to in Section 78(2) of the
Rajasthan Sales Tax Act, 1994 are persons concerned with the movement
of goods, which are sold or likely to be sold. With there being no valid
challenge to Sectim. 78(2) of the Act, a provision contained in Section E
78(5), which provides for levy of penalty in case of non-compliance
of Section 78(2), can only be regarded as consequential and valid. H there
was legislative competence to enact Section 78(2), then the same power
contained in Entry 54 in List II could enable the State Legislature to
provide for consequence of non-compliance by incorporating sub-section F
(5) therein. Section 78(5) and Section 78(8) of the Act are part of an
integral scheme and deal with two separate classes of people referred to in
Section 78(2). [597-G-H; 598-A-B]

Sodhi Transport Co. & Ors. v. State of U.P. & Ors., [1986] 2 SCC 486;
Delite Carriers (Regd.) v. State of Haryana & Ors., (1990) 77 STC 170 and G
Tripura Goods Transport Association & Am: v. Commissioner o.f Taxes & Ors.,
[1999] 2 sec 253, relied on.

The Check Post Officer & Ors. v. K.P. Abdulla & Bros., [1970] 3 SCC
355 and State of Haryana & Ors. v. Sant Lal & Am:, [1993] 4 SCC 380, H
574 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A distinguished.

2._1. Under Section 78(5) of the Act, levy of penalty is only on the
person incharge of the goods. It is he who should have all the requisite
documents relating to the title or sale of the goods which are ~eing
transported. Penalty under Section 78(5) of the Act is leviable under two
B
circumstances. Firstly, if there is non-compliance with Section 78(2)(a) i.e.
not carrying the. documents mentioned in that sub-clause or secondly, if
false or forged documents or declaration is submitted. This sub-section
cannot relate to personal belongings which are not meant for sale but
would relate to those types of goods in respect of which documents referred
C to in Section 78(2)(a) exist or can exist. [598-C-D] ·

2.2. Submission of false or forged documents or declaration at the
check-postor even thereafter can safely be presumed to have been motivated
by desire to mislead the authorities. Hiding the truth and tendering falsehood
D would per se show existence of mens rea even if required. Similarly where,
despite opportunity having been gran_ted ll:"der Section 78(5), if the requisite
documents referred to in sub-clause 2(a) are not produced, even th~ugh
the same should exist, would clearly prove the guilty intent. It is not
acceptable that the breach referred to in Section 78(5) of the Act can he . _....
regarded as technical or venial. Once the ingredients ~f s~ztion 78(5) are
E established, after giving a hearing and complying with the principles of
natural justice, there is no discretion not to levy or levy lesser amount of
penalty~ If by mistake some of the documents are not readily available at
the_ time of checking, principles of natural justice may requi_re some
opportunity being given to produce the same. This provision cannot be
F read as to imply that the penalty of 30% is the maximum and lesser
penalty can be levied. The legislature thought it fit to specify a fixed rate of
penalty: and not give any discretion in lowering the rate of penalty. The
penalty so fixed is meant to be a deterrent and there is nothing wrong in
this. The quantum of penalty under the circumstances enumerated in
Section 78(5) cannot be regarded as illegal. The legislature in its wisdom
G
has thought it appropriate to fix it at 30% for the value of goods and it had
the competence so to fix. There cannot be any valid challenge to the rate of
penalty provided for in Section 78(5) of the Act. [598-E-H; 599-C]

Rai Ramakrishna & Ors. v. The State of Bihar, [1964] 1 SCR 897, relied
H on.

(
STATE v. D.P. METALS [KIRPAL, J.] 575
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5085 of 2000. A
From the Judgment and Order dated 16.8.2000 of the Rajasthan High
Court in D.B.C.W.P. No. 1902 of 1999.

WITH

C.A. Nos .. 5086, 5087, 5088, 5763, 576412000 and 1321, 17~6, 1737, B
1738, 1739, 1740, 1741, 1742, 1743, 1744, 1745, 1746, 1747, 1748, 1749,
1750, 1751, 1752, 1753, 1754, 1755, 1756, 1757, 1758, 1759, 2893, 2557,
3424, 3425, 3426, 3427, 3697, 4033 of 2001.

Harish N. Salve, Solicitor General, Sushi! Kumar Jain, Ms. Anjali Doshi,
A.P. Dli;-mija, A. Raghunath, Manish Singhvi, Vineet Kothari, Anjay Kothari, c
K.K. Gupta, M.P. Jha, Ram Ekbal Roy and Anil K. Chopra for appearing
parties.

The Judgment of the Court was delivered by

KIRPAL, J. The State of Rajasthan has filed these appeals against the D
decision of the High Court which had, while allowing the Writ Petition of the
respondents, held that Section 78(5) of the Rajasthan Sales Tax Act, 1994 was
unconstitutional and ultra vires.

In order to P,Xamine the issues arising in this case, we may briefly refer
to the facts of the case of Mis D.P. Metals. Mis D.P. Metals carries on the E
business of manufacturing stainless steel sheets and had been registered under
the provisions of the Rajasthan Sales Tax Act and the Central Sales Tax Act.
On 22nd January, 1997 a truck was seized by the Assistant Commercial Taxes
Officer, Jodhpur and as the same was found not to be carrying the declaration
Form ST 18A, a show cause notice was issued to Mis D.P. Metals. After p
hearing, a penalty of Rs. 63,200 was levied under Section 78(5) of the 1994
Act.

Mis D.P. Metals and other dealers, against whom similar action has been
taken, filed applications before the Rajasthan Taxation Tribunal, Jaipur, inter
alia, impugning the provisions of Section 78(5) of the 1994 Act and claimed G
consequential relief of the quashing of the penalty order.

Pursuant to the abolition of the Taxation Tribunal, the applications were
transferred to the Rajasthan High Court and they were regarded as writ petitions.
The contentions on behalf of the respondents before the High Court were that
Section 78(5) was ultra vires being beyond the legislative competence of the H
576 SUPREME COURT REPORTS [2001) SUPP. 3 S.C.R.
A State and also on the ground of being excessive, arbitrary and unreasonable
and, therefore, violative of Articles 14, 19(l)(g), 301and304 of the Constitution.
The Division Bench of the High Court in relation to the validity of Section
78(5) came to the following conclusion;-

"(i) the parent provision of the Section 78 as far as it requires carrying
B the documents mentioned under sub-section (2) by the transporter
whose position ordinarily does not go beyond a witness about goods
carried through them, for the purpose of divulging detailed information
about the goods carried out by the transporter and about the consignor
and the consignee itself at the check post or barrier to any authorised
c officer under Section 78 as part of machinery provision for collecting
evidence about goods coming in or going out of or moving within the
State, can be considered as intended to prevent and check evasion and
avoidance of tax and in aid of making effective the levy which has
arisen or likely to arise within the State, are provisions incidental and
ancillary in aid of main subject levy and collection of sales tax.
D.
(ii) Provision as to notice before imposing penalty is not an empty
formality for imposing penalty, for non production or production of
incomplete documents, but is intended to give an effective opportunity
of hearing to show that no penalty is at all Jeviable. If it is reasonably
E established that such default is not with any intention to evade or avoid
tax, but is bonafide default, the breach for which it is not compulsory
to impose penalty. Such question has to be determined in each case on
its own facts and circumstances.

(iii) No opinion is expressed on the validity of requirement to carry
F declarations in Form ST 18 A or ST 18 AA with goods, in view of no
challenge made in the petitions.

(iy) The provisions for carrying declaration of the importer in the Form
No. ST 18 A and 18 AA by the transporter or carrier is not treated to
be mandatorily required and it is held that the production of such
G
declaration later on during the course of enquiry even by the importer
is substantlal compliance of the provision.

(v) Lastly, the penalty under Section 78(5) linked with value of goods
equal to 30% thereof imposable on person incharge of the goods in
H transit who is not owner of the goods and who is also not a dealer in
STATE v. D.P. METALS [KIRPAL, J.] 577
the goods for breach of obligation of divulging information and A
particulars relating to goods in his charge and the consignor and the
consignee is highly unreasonable having no reasonable and proximate
nexus with the obligation cast on transporter and the object of the

- provision, the same, therefore, is unconstitutional, (Santlal's case).

(vi) However a reasonable penalty is imposable on transporter as a B
consequence for breach of obligation to divulge such information truly
and faithfully which is in his possession and can reasonably be required
of them to obtain from other sources while booking goods for transport.
Until any specific provision for levy of tax is enacted by the legislature,
he may be subjected to penalty as envisaged under Section 68 of the C
Act."

The High Court then held Section 78(5) of the Act to be unconstitutional
and ultra vii-es . .

In these appeals, it was contended by learned counsel for the appellants D
that the High Court erred in coming to the conclusion that Section 78(5) was
ultra vires. It was submitted that the power contained in Section 78(5) was
incidental to the power of levy of sales tax and was within the legislative
competence of the State under Entry 54 of List II of the Constitution. It was
submitted that Rajasthan as well as other States had enacted provisio~s in the
Sales Tax Acts with a view to check evasion of taxes by transporters who were E
found carrying goods with fake bilties, incomplete documents and under
suspicious names. Similar provisions had been upheld by this Court and,
therefore, the decision of the High Court is not correct.

Mr. Manish Singhvi, counsel appearing for the respondents, submitted
F
that the penalty sought to be imposed under Section 78(5) had no nexus with
the tax evaded. The effect of this provision, it was contended, was that even
when there was total absence of mens rea and the breach is unintentional and
completely bona fide still an innocent transporter can be subjected to penalty
under Section 78(5) of the 1994 Act. It was submitted that Section 78(5) was
analogous to Section 38 of the Haryana General Sales Tax Act, 1973 which had G
been held to be ultra vires by this Court in State of Haryana and Ors. v. Sant
Lal and Am: 1• It was urged that the breach of obligation of carrying the
documents over wqich the transporter may have no control cannot be attributed

1. [I993J 4 sec 380. H
578 SUPREME COURT REPORTS [2Q01] SUPP. 3 S.C.R.
A to him and levy of penalty @ 30% merely on account of such breach is harsh
and oppressive. Penalty under Section 78(5) could not be regarded as being
linked with evasion of tax; It was further contended that the only way in which
the validity of Section 78(5) can be upheld is to read into it the element of mens

B
rea as a precondition for imposition of penalty and mere technical breach
without any mens rea should not by itself invite penalty under Section 78(5).
While referring to a decision in the case of The Check Post Officer and Ors.
-
v. K.P. Abdulla and Bros: 2 It was submitted even in cases like carrying personal
goods for consumption penalty under Section 78(5) would be leviable because
of alleged breach of Section 78(2) even though sale of goods is not involved.
Section 78(5), it was submitted, contained n6 guidelines saving such bonafide
C cases from the vice of Section 78(5) and, therefore, was violative of Article 14
of the Constitution.

The Rajasthan Sales Tax Act, 1954 was a precursor to the 1994 Act. In
the 1954 Act, Section 22A(7) was the provision which enabled the appellant
to .impose penalty in the event of the person in charge of the goods not
D possessing or. producing mandatory documents or if a false declaration was
made. Section 22A(7) of the 1954 Act reads as follows:

"(7)(a) The Officer incharge of the check-post or barrier or any other
officer not below the rank of an Assistant Commercial Taxes Officer,
empowered in this behalf may, after giving the ow~er or person
E
incharge of the goods a reasonable opportunity of being heard and after
holding such further enquiry as he may deem-fit, impose on him for
possession of goods not covered by goods vehicle record, and other
documents prescribed under sub-section (3) or for submission of false
declaration or documents a penalty (equal to five times of the rate of
F tax notified under section 5 of the Act, for such goods or) (30%) of
the value of suchI
goods, as may be determined by such officer
(whichever is less).

(Provided that where the goods are being carried without proper
documents as required by sub-section (3) or with any false declaration
G or statements and the owner or the incharge or the driver of the vehicle,
boat, or animal carrying such goods is found in collusion for such
carrying of goods, the vehicle, boat or animal shall also be seized by
the officer empowered under sub-section (7), and such officer, after

H 2. [t970J 3 sec 355.

I --
STATE v. D.P. METALS [KIRPAL, J.] 579
affording an opportunity of being heard to such owner, incharge or A
driver may impose a penalty not exceeding 30% of the value of the
goods carried and shall release the vehicle, boat or animal on the

-
payment of the said penalty or on furnishing such security in such form
as prescribed under Clause (b) of sub-section (7):

Provided further that when an owner, incharge or driver of a · B
vehicle, boat or animal is found guilty second time of the offence
mentioned in the preceding proviso, he shall be liable to a maximum
penalty as mentioned in the preceding proviso and the vehicle, boat or
animal carrying the goods may be kept seized and detained for a period
not exceeding 30 days after the date of the payment of the penalty or C
furnishing of the security.

(Provided also that where a transporter is found to be in collusion
with a trader to avoid or evade tax <luring the course of movement of
the goods through his vehicle, such vehicle may, after an opportunity
---11 of being heard has been afforded, be confiscated by the Commercial D
Taxes Officer of the area in whose jurisdiction the case was detected
with the prior approval in writing of the Deputy Commissioner
(Administration) having jurisdiction and in case of confiscation of the
vehicle no penalty shall be imposed in the preceding first proviso)

(b) Such officer may release any of the goods seized under sub-section E
(5) or sub-section (6) on payment of the penalty under Clause (a) or
on furnishing such security in such form as may be prescribed for the
payment thereof, as he may consider necessary.

[(c) Such officer may, for sufficient reasons, release any of the goods
F
seized as aforesaid even before proceeding under Clause (a) or during
the course of proceeding under that clause, on furnishing of security
of an amount equal to the estimated value of the goods to be released
if he considers it necessary so to release the goods.]"

With the repeal of the 1954 Act, a provision similar _to Section 22A(7) G.
of the old Act was incorporated as Section 78(5). Itwill, however, be appropriate
to refer to Section 78. Section 78 provides for establishment of check-post and
inspection of goods while in movement. The said section, along with
incorporation of sub-sections (11) and (12) in 1999 reads as follows:

"78. Establishment of check-post and inspection of goods while in H
580 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A movement.- (1) The Commissioner may, with a view to prevent or
check avoidance or evasion of tax, by notification in the Official
Gazette, direct the setting up of a cl)eck-post at such place and for such

B
period as may be specified in the n?tification, and every officer or
official who exercises his powers and discharges his duties at such
check-post by way of inspection of documents produced and goods
being moved, shall be its Incharge.
-
(2) The driver or the person incharge Of a vehicle or carrier or of goods -....
in movement shall-

(a) . carry with him a goods vehicle ~ecord including 'challans' and
c billies', bills of sale or despatch memos and prescribed declaration
forms;

(b) stop the vehicle or carrier at every check-post set up under sub-
section (1);
D
(c) produce all the documents including prescribed declaration forms
relating to the goods before the Incharge of the check-post;
--
E
(d) give all the information in his possession relating to the goo~s;
and

(e) allow the inspection of the goods by the Incharge of the check-
-
post or any other person authorised by such Incharge.

Explanation-For the purposes of this Chapter-

F (i) 'vehicle· or carrier' shall include any means of transportation
including an animal to carry goods from one point to another
point;

(ii) 'goods' shall include animals also, and
-
G (iii) 'goods in movement' shall means-

..
(a) the goods which are in the possession or control of a transporting
agency or person or other such bailee;

(b) the goods which are being carried in a vehicle or carrier belonging
H to the owner of such goods; and
STATE v. D.P. METALS [KIRPAL, J.] 581
(c) the goods whic,h are being carried by a person. A
(3) Where any goods are in movement within the territory of the State
of Rajasthan, an officer empowered by the State Government in this
behalf may stop the vehicle or the carrier or the person carrying such
goods, for inspection, at any place within his jurisdiction and the
provisions of sub-section (2) shall mutatis mutandis apply. B
(4) Where any goods in movement, other than exempted goods, are
without documents, or are not supported by documents as ·referred to
in sub-section (2), or documents produced appear false or forged, the
In charge of the check-post or the officer empowered under sub-section
(3), may - c
(a) direct the driver or the person incharge of the vehicle or carrier
or of the goods not to part with the goods in any manner including •
by retransporting or rebooking, till a verification is done or an
enquiry is made, which shall not take more than seven days;
D
(b) seize the goods for reasons to be recorded in writing and shall
give a receipt of the goods to the person from whose possession
or control they are seized;

(c) release the goods seized in Clause (b) to the owner of the good
or to anybody else duly authorised by such owner, during the E
course of the proceeding if the adequate security of the amount
equal to the estimated value of the goods is furnished.

(5) The Incharge of the check-post or the officer empowered under
s1,1b-section (3), after having given the person incharge of the goods a
reasonable opportunity of being heard and after having held such F
enquiry as he may deem fit, shall impose on him for possession or
movement of goods, whether seized or not, in violation of the provisions
of Clause (a) of sub-section (2) or for submission of false or forged
documents or declaration, a penalty equal to thirty percent of the value
of such goods. G
(6) During the pendency of the proceeding under sub-section (5), if
anybody appears before the Incharge of the check-post or the officer
empowered under sub-section (3) and prays for being impleaded as a
party to the case on the ground of involvement of his interest therein,
the said incharge or the officer on being satisfied may permit him to H
582 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A be impleaded as a party to the case; and thereafter, all the provisions
of this section shall mutatis mutandis apply to him.

(7) The incharge of the check-post or the officer empowered under
s~•b-section (3) may release the ·goods to the owner of the goods or to
anybody else duly authorised by such owner, if seized and not already
B released under Clause (c) of sub-section (4 ), on payment of the penalty
imposed under sub-section (5) or on furnishing such security for the
payment thereof, as such incharge or officer may consider necessary.

.(8) Where the driver or the person incharge of the vehicle or the carrier
is found guilty for violation of the provisions of sub-section (2),
c subject to the provisions of sub-section (10), the incharge of the check-
post or the officer empowered under sub-section (3) may detain such
vehicle or carrier and after affording an opportunity of being heard to
s"uch driver or person incharge of the vehicle or the carrier, may impose
a penalty on him as provided in sub-section (5).
D (9) The incharge of the check-post or the officer empowered under
sub-section (3) may release the vehicle or the carrier on the payment
of the amount of penalty imposed under sub-section (8) or on furnishing
such security as may be directed by such Incharge or Officer.

(10) Where a transporter, while transporting goods, is found to be in
E collusion with a trader to avoid or evade tax, the Incharge of the check-
post or the officer empowered under sub-section (3) shall detain the
vehicle or carrier of such transporter and after affording him. an
opportunity of being heard and with the prior approval in writing of
the Deputy Commissioner (Administration) having jurisdiction, may
F confiscate such vehicle or carrier.

(11) If a transporter fails to give information as required from him
under Clause (d) of sub-section (2) about the consignor, consignee or
the goods within such time as may be specified or transports the goods
with forged documents, besides imposing the penalty under sub-section
G (5), it shall be presumed that the goods so transported have been sold
in the State of Rajasthan by him and he shall be deemed to be a dealer
for those goods under this Act.

( 12) The provisions of this Act shall, for the purpose of levy, collection
and assessment of tax, determination of interest, payment and recovery
H of tax and interest, appeal, review or revision, apply. to the transporter
STATE v. D.P. METALS [KIRPAL, J.] 583
deemed to be a dealer under sub-section (11)." A

The scheme of Section 78 is that sub-section (1) authorises the
Commissioner to set up check-posts with a view to prevent or check avoidance
or evasion of tax. These check-posts are to be set up by issuance of a notification
in that behalf and every officer appointed at the check-post shaII be the incharge
of the check-post. B

Sub-section (2) of Section 78 imposes an obligation on (a) driver; or (b)
person incharge of a vehicle or carrier (compendiously referred to as the person
incharge of the vehicle) and (c) person in charge of the goods in movement.
Persons so named in sub-se.ction (2) then have an obligation to comply with
sub-clauses (a) to (e) of Section 78(2). Such a person under Section 78(2)(a)
c
is required to carry with him (a) goods vehicle record including challans and
bilties; (b) bills of sale or despatch memos and (c) prescribed declaration forms.

Sub-section (3) of Section 78 permits an officer empowered by the State
Government to stop the vehicle or the carrier or the person for inspection of D
the goods in movement within the territory of the State of Rajasthan. In case
of goods, other than exempted goods, which are in movement are found to be
without documents or are not supported by documents referred to in Sub-
section (2) or the documents produced are false or forged, Lhen under Seclion
7.8(4) the incharge of the check-post or the empowered officer may direct non-
parting of the goods till the verification is done or an enquiry made or seize E
the goods after recording reasons for doing so or release the seized goods to
the owner or anybody authorised by him if adequate security of the amount
equal to the estimated value of the goods is furnished.

Sub-section (5) enables the levy of penalty equal to 30% of the value of
the goods being imposed for possession or movement of goods only if there F
is violation of Clause (a) of sub-section (2) or for submission of false or forged
documents or declaration. Such penalty is to be levied only after giving a
reasonable opportunity of being heard and holding such enquiry as the incharge
officer empowered may deem fit. During the pendency of the enquiry a person
having interest therein can get himself impleaded under sub-section (6). On.
G
payment of penalty imposed under sub-section (5) or on furnishing security for
payment thereof, goods can be released under sub-section (7). As sub-section
(5) expressly contemplates giving a hearing to the person incharge of the goods
before imposing penalty this means that action under Section 78(5) can only
be tak~n on the person incharge of the goods. He may, in a given case, be the
driver or any other person, if any, accompanying the goods as the incharge H
584 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A thereof.

Whereas movement of goods in violation of sub-section (2) (a) attract
the provisions of sub-section 5 in respect of vehicle or carrier which is found
guilty or violating the provisions of sub-section (2) of Section 78, Sub-section
(8) allows the detention of such vehicle or carrier. Penalty as provided under
B sub-section (5) can be imposed after hearing the driver or the person incharge
of the vehicle. Release of the vehicle is provided for by sub-section (9) and if
the transporter is found to be guilty of collusion with the trader to avoid or
evade tax, power is given under sub-section (10) for confiscation of such
vehicle or carrier.
c In K.P. Abdulla 's case (supra) this Court .considered the validity of
Sel:tion 42(3) of the Madras General Sales Tax Act, 1959 which gave the power
to the officer in charge of the check post or barrier or any other.duly authorised
officer to seize and confiscate the goods which were not covered by the
documents specified therein. It was held that the power to confiscate the goods
D carried in a vehicle cannot be said to be fairly and reasonably comprehended
:»
in the power to legislate under Entry 54 of List II in respect of taxes on sale
or purchase of goods. The reason for this conclusion was that sub-section (3)
assumed all goods carried in the vehicle as those which had been sold within
the State and authorised the check-post officer to seize them unless the specified
documents were produced at the check-post or the barrier. A provision so
E enacted ·on the assumption that goods carried in a vehicle from one State to
another must be presumed to have been transported after sale within the State
was held to be unwarranted and, therefore, the power to seize and confiscate
was struck down and was held not to be ancillary or incidental with the power
to legislate for levy of sales tax.
F
'The aforesaid decision can be of little assistance because the provisions
of Section 78(5) are radically different from Section 42(3) of the Madras Act
with which this Court was concerned in K.P. Abduila 's case (supra). Section
78(5) does not contain any power of confiscation of goods and the levy
of penalty is for carrying the goods or for submitting false or forged
G documents or declaration. The Madras Act, on the other hand contemplated
seizure and confiscation of goods if they were transported without proper
documentation.

In Sodhi Transport Co. and Ors. v. State of U.P. and Ors. 3 this Court was

H 3. ft986J 2 sec 486.
STATE v. D.P. METALS [KIRPAL, J.] 585
required to adjudicate upon the validity of Section 28-B of the U.P. Sales Tax A
Act, 1948 and U.P. Sales Tax Rules, 1948. Section 28 of the U.P. Act
contemplated establishment of check-posts and barriers while Section 28-B
made a provision for the procedure to be followed by persons who intend to
transport goods by road into the State of U.P. from places outside the State but
for the purpose of transporting them to places situated outside that State. A
B
vehicle at the time of entry was required under Rule 87 to obtain transit pass
which was to be delivered to the officer incharge of the check-post or barrier
before the exit from the State. If the driver or the person incharge failed to do
so Section 28-B presumed that the goods carried thereby had been sold within
the State by the owner or the person incharge of the vehicle and all the
liabilities under the Act regarding the levy of sales tax etc. were to arise. While c
analysing the provisions this _Court held that the presumption under Section
28-B was a rebuttable one and if it was not rebutted it was to be presumed that
the goods had been sold in the State of U.P. While upholding the validity of
Section 28-B and Rule 87 it was held that these were machinery provisions,
which did not levy any charge by themselves, but were enacted to ensure.that D
there was no evasion of tax. It was noticed that "these provisions are enacted
to make the law workable and to prevent evasion. Such provisions fall within
the ambit and scope of the power to levy the tax itself." Thus it was by
reference to Entry 54 of List II that the validity of the impugned provisions
were upheld.
E
In Delite Carriers (Regd.) v. State of Haryana and Ors. 4 validity of
Section 37 of the Harya.na General Sales Tax Act, 1973 was challenged on the
ground of lack of legislative competence. The said Section 37 reads as follows:

"37. Establishment of check-post or barriers and inspection of goods
in transit.- (1) If with a view to preventing or checking evasion of tax F
under this Act in any place or places in the State, the State Government,
considers it necessary so to do, it may, by notification direct the
establishment of a check-post or the erection of a barrier or both, at
such place or places as may be notified.

(2) The owner or person incharge of the goods and, when the goods G
are carried by a goods carrier, the driver or any other person incharge
of the goods carrier, shall carry with him a goods canier record, a trip
sheet or log-book, as the case may be, along with a bill of sale in

4. (1990) 77 STC 170.
H
586 SUPREME COURT REPORTS. [2001] SUPP. 3 S.C.R.
A respect of the goods meant for the purpose of trade and are carried by
him or in the goods carrier and produce the same before an officer-in-
charge of a check-post or barrier or any officer of the department not
below the rank of an Assistant Excise and Taxation Officer or such
other officer, as the State Government may, by notification, appoint,
for checking the goods carrier at any place.
B
(3) At every check-post or barrier or at any other place, when so
required by any officer referred to in sub-section (2) in this behalf, the
owner or person incharge of the goods shall stop and the driver or any
other person in charge of the goods carrier, entering or leaving the
c limits of the State, shall stop the goods carrier and keep it stationary,
as long as may reasonably be necessary, and allow the officer-in-
charge of the check-post or barrier, or the officer as aforesaid to
examine the goods carried by him or in the goods carrier, by breaking
open the package or packages, if necessary, and inspect all records
relating to the goods carried which are in the possession of such owner
D or person incharge of the goods or the driver or other person incharge
of the goods carrier, w.ho shall also furnish such other information, as
may be required by the aforesaid officer, who, if considered necessary,
may also search the goods carrier and the driver or other person
incharge of the goods carrier or of the goods.
E
(4) The owner or person incharge of the goods or goods carrier,
entering or leaving the limits of the State, shall furnish in duplicate a
declaration containing such particulars, as may be prescribed, of the
goods carried by him or ip such carrier, as the case may be, before the
officer-in-charge of the check-post or barrier and shall produce the
F copy of the said declaration duly verified and returned to him by the
officer-in-charge of the check-post or barrier before any other officer
as mentioned in sub-section (2).

Where it is contended by the owner of the goods that the goods were
not sold within the State after their import and were either consumed
G or exported by him or were sold in the course of inter-State trade or
commerce or in the course of export out of the territory of India, the
Assessing Authority may call for such other information and documents
as he thinks fit:

Provided that where the owner or person in charge of the goods or the
H
STATE v. D.P. METALS [KIRPAL, J.] 587
driver or the person incharge of the goods carrier bound for any place A
outside the State passes through the State, such owner or person
incharge of the goods or the driver or other person incharge of such
carrier shall furnish, in duplicate, to the officer-in-charge of the check-
post or barrier of his entry into the State, a declaration in the prescribed
form and obtain from him a copy thereof duly verified. The owner or
B
person incharge of the goods carrier or the driver or other person
incharge of the goods carrier shall deliver within twenty-four hours the
said copy to the officer-in-charge of the check-post or barrier at the
point of his exit from the State.failing which he shall be liable to pay
a penalty, to be imposed by the officer-in-charge of the check-post or
barrier of the entry, not exceeding two thousand rupees or twenty per c
centum of the value of the goods, whichever is greater:

Provided further that no penalty shall be imposed unless the person
concerned has been given a reasonable opportunity of being heard:

Provided further that where the owner or person incharge of the goods D
or the driver or other person incharge of the goods or carrier bound for
any place inside the State has to pass through another State, such owner
or person or the driver or other person shall furnish, in duplicate, to
the officer-in-charge of the check-post or barrier of his exit from the
State, a declaration in the prescribed form and obtain from him a copy E
thereof duly verified and shall deliver the same to the officer-in-charge
of the check-post or barrier of his entry into tq~ State, within four hours
of his exit from the previous barrier or check-post in the State.failing
which he shall be liable to pay a penalty to be imposed by the officer-
in-charge of the check-post or barrier of his ent1y, not exceeding two
thousand rupees or twenty per centum of the value of the goods, F
whichever is greater; unless he explains the time taken in excess to the
satisfaction of the officer-in-charge of the entry barrier or check-post.

(5) If the officer-in-charge of the check-post or barrier or other officer
as mentioned in sub-section (2) has reasons to suspect that the goods
under transport are not covered by proper and genuine documents as
G
mentioned in sub-section (2) or sub-section (4), as the case may be or
that the person transporting the goods is attempting to evade payment
of the tax due under this Act, he may, for reasons to be recorded in
writing, and after hearing the said person, order the unloading and
detention of the goods and shall allow the same to be transported only H
588 SUPREME COURT REPORTS [2001) SUPP. 3 S.C.R.
A on the owner of the goods, or his representative or the driver or other
person incharge of the goods carrier on behalf of the owner of the
goods, furnish.ing to his satisfaction a security, in the prescribed form
and manner, for an amount not less than ten per centum and not more .
than twenty-five per centum of the value of the goods:

B Provided that such officer may, if he deems fit, having regard to the
nature of the carrier or the goods and other relevant matters, allow such
goods to be transported, on the owner of the goods or his representative
or the driver or other person incharge of the goods carrier, executing,
in a prescribed manner, .a bond with or without sureties for securing
c the amount due as security:

Provided further that where any goods are detained, a report shall be
made immediately and in any case within twenty-four hours of the
detention of the goods by the officer detaining the good~ to the officer-
in-charge of the district seeking the latter's permission for the detention
D of the goods for a period exceeding twenty-four hours as and when so
required and if no intimation to the contrary is received from the latter,
the former may assume that his proposal has been accepted.

(6) The officer detaining the goods shall record the statement, if any,
given by the owner of the goods or his representative or the driver or
E .other person incharge of the goods carrier and shall require him to
produce proper and genuine documents as referred to in sub-section
(2) or sub-section•(4), as the case may be. If, after the enquiry, such
officer finds that there has been an attempt to evade the tax due under
this Act, he shall, by order, impose on the owner of the goods and in
F case the owner is not forthcoming or his identity is not disclosed by
the person incharge of the goods or the driver or person incharge of
the goods carrier, in which g~ods are being carried, on the person
incharge of the goods or the goods carrier or the driver, a penalty of
not less than ten per cent and not more than twentyfi.ve per cent of the
value of the goods, and in case he finds otherwise, he shall order the
G release of the goods:

Provided that no penalty shall be imposed unless the owner of the
goods or his representative or person incharge of the goods or the
goods carrier or the driver has been given a reasonable opportunity of
H being heard.
1-
1
i r

\ ',
I
STATE v. D.P. METALS [KIRPAL, J.] 589
(7) If the owner of the goods or his representative or the driver or other A
person incharge of the goods carrier does not furnish security or
execute the bond as required by sub-section (5) within ten days from

- the date of detaining the goods or goods carrier, the officer referred to
in that sub-section may order further detention of the goods, and in the
event of the owner of the goods not paying the penalty imposed
B
under sub-section (6) within twenty days from the date of the
order imposing the penalty, the goods detained shall be liable to be
sold for the realisation of the penalty in the manner provided in sub-
section (9).

(8) When any goods are detained under sub-section (7), the officer c
detaining the goods shall issue to the owner of the goods, if present
or, if the owner-of the goods is not present, to his representative or the
driver or other person incharge of the goods carrier, a receipt specifying
the description and quantity of the goods so detained and obtain an
iA I acknowledgement from such person or, if such person refuses to give
an acknowledgement, record the fact of refusal in the presence of two D
witnesses.

- (9) The goods detained under sub-section (1) shall be sold, by the
officer who imposed the penalty, by public auction in the manner
prescribed, and the sale proceeds shall be deposited in the Government
E
treasury.

(10) If the goods detained are of a perishable nature, or subject to
. speedy and natural decay, or when the expenses of keeping them in
custody are likely to exceed their value, the officer-in-charge of the
J check-post or barrier or any other officer empowered under sub- F
section (2), as the case may be, shall immediately sell such goods or
otherwise dispose them of and deposit the sale proceeds of such goods,
or the amount obtained by the disposal of such goods otherwise than
by way of sale, in the Government treasury.

(11) If the order of imposition of penalty under sub-section (6) or of G
detention of goods under sub-section (7) is in the meantime set aside
or modified in appeal or other proceedings, the officer detaining the
goods and imposing the penalty, as the case may be, shall also pass
consequential orders for giving effect to the order in such appeal or
other proceedings, as the case may be. H
STATE v. D.P. METALS [KIRPAL, J.] 591
(15) Except in accordance with such conditions, as may be prescribed, A
with a view to ensuring that there is no evasion of tax imposed by or
under this Act,

(a) no driver or person incharge of a goods carrier or any person
incharge of a place of loading or unloading of goods, other than a post
office, shall accept any consignment of such goods for transport or B
give delivery of any consignment of such goods, other than personal
luggage of goods for personal consumption;

(b) no dealer or any person including a carrier of goods acting on
behalf of a dealer, shall take delivery of, or transport from any station
of transport of goods, bus stand or any other station or place, of loading c
or unloading of goods, airport or any other place, whether of similar
nature or otherwise other than a post office, any consignment of goods
referred to above." Emphasis added

Following the decision in Sodhi Transport Company's case (supra) this D
Court in Delite Carriers case held as follows:

"We have explained in Sodhi Transport Co. v. State of U.P., [1986] 62
STC 381, decided on March 20, 1986, the object of establishing check-
posts and introducing provisions in the sales tax law of a State which
would faci 1;tate inspection of goods which are carried from one State E
to another through a third State. In the above-mentioned decision we
have upheld the provisions of Section 28-B of the U.P. Sales Tax Act,
1948 and the rules made thereunder. For the same reasons we uphold
the provisions of Section 37 of the Haryana General Sales Tax Act,
1973, rule 45 and form Nos. 38 and 39 of the Haryana General Sales
F
Tax Rules, 1975. These writ petitions are disposed of accordingly.
There will be no order as to costs."

From the aforesaid decision in Delite Carriers case (supra) it is evident
that the Court regarded Section 37 of the Haryana General Sales Tax as being
nothing more than a provision which had been enacted in the sales tax law of G
a State which would facilitate inspection of goods carried from one State to
another and would fall within the legislative ambit of Entry 54 of List II. The
said Section 37 of the Haryana Act is in pari materia with Section 78 of the
Rajasthan Act.

The provisions of Sections 22-A and 22-B of the Rajasthan Sales Tax H
592 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A Act, 1954 were the precursor to the present Section 78 of the 1994 Act. The
validity of Section 22-A and other connected provision~ were impugned in Writ
Petition Nos. 1555-56 of 1983 in Mis Indian Roadways Corporation and Am:
v. State of Rajasthan and Ors. By a short order dated 23rd April, 1986 the
validity of these provisions were t1pheld in the following words:

B "We have explained in Mis Sodhi Tran~port Co. & Anr. v. State of U.P.
& Anr., decided on March 20, 1986 the object of establishing check-
posts and introducing provisions in the sales tax law of a State which
would facilitate inspection of goods which are carried from one State
to another through a third State. In the above-mentioned decision we
c have upheld the provision of Section 28-B of the Uttar Pradesh Sales
Tax Act, 1948 and the rules made thereunder. For the same reasons we
uphold the provisions of Section 22-A and 22-B of the Rajas than Sales
Tax Act, 1954 and Rules 61, 62, 62-A, 62-B and 63 and Forms 18-A
and 18-B of the Rajasthan Sales Tax Rul!!s, 1955. These writ petitions
are disposed .of accordingly. There will be no order as to costs." ·
D
Yet another challenge to· the vires of Sections 22-A and 22-B of the
Rajasthan Sales Tax Act was made but was repelled in Civil Appeal No. 152
of 1990 in Sama Transport Corporation Y. The State of Rajasthan & Ors. by
an order dated 23rd July, 1996 which reads as follows:

E "The Writ Petition that the appellants filed in the Rajasthan High Court
sought to challenge the vires of Sections 22-A and 22-!J of the Rajasthan
Sales Tax Act, 1954. The Writ Petition was rejected.

The challenge to these Sections has been repelled by this Court by its
Order dated 23rd April, 1986 in Writ Petition Nos. 1555-56 of 1983
F - Mis Indian Roadways Corpn. & Am: v. State of Rajasthan & Ors.

Mr. Puri, learned counsel for the appellants, submitted that, nonetheless,
an order should be made in terms of an interim order made by this
Court in some matters. There is no prayer for such relief in the Writ
Petition that was filed before the High Court. Secondly, that was an
G order pending the disposal of the Civil Appeals that were then before
this Court. Such an order cannot, therefore, be passed in this matter.

The appeal is dismissed. No order as to costs."

From the aforesaid decisions, it would be clear that the consistent view
H of this Court since the case of Sodhi Transport Company '.s case (supra) has been
STATE v. D.P. METALS [KIRPAL, J.] 593
that provisions similar to Section 78(5) have been held to be within the legislative A
competence of the State. In fact, validity of Sections 22-A and 22-B of the
Rajasthan Sales Tax Act which was specifically challenged in Mis Indian
Roadways case (supra) and Sarna Transport case (supra) were upheld by this
Court and the said provisions are in pari materia with the new Section 78 of
the 1994 Act.
B
Mr. Singhvi learned counsel for the respondents, however, relied upon

- a Division Bench decision of this Court in the case of Sant Lat's case (supra).
It is primarily because of this decision that the.High Court in the present case
has come to the conclusion that Section 78(5) was ultra vires. In Sant Lat's case
(supra) the challenge before the High Court, which succeeded, was to the
validity of Section 38 of the Haryana General Sales Tax Act, 1973 and Rule c
53 of the Haryana General Sales Tax Rules, 1975 framed thereunder. Section
38 required the clearing or forwarding agents etc. to furnish information and
to get a license. The same reads as follows:

"38. Furnishing of information by clearing and forwarding agents,
etc.- ( 1) Every clearing or forwarding agent, Dalal or any other person
D
transporting goods, within the State, who, during the course of his
business, handles documents of title to goods for or on behalf of any
dealer, shall furnish to the assessing authority the particulars and
information in respect of the transactions of the_ goods in such form and
manner, as may be prescribed. E
(2) No clearing or forwarding agent, Dalal or any other person
transporting goods within the State shall carry on his business unless
he obtains from the assessing authority, on payment of a fee not
exceeding fifty rupees, a license in the form and manner and subject
to such conditions as may be prescribed. F
(3) If any clearing or forwarding agent or Dalal or person transporting
goods within the State contravenes the provisions of sub-section (1)
or sub-section (2), the Commissioner or any person appointed to assist
him under sub-section (1) of Section 3 may, after giving the person
concerned a reasonable opportunity of being heard, direct him to pay G
by way of penalty, an amount equivalent to twenty per centum of the
value of goods in respect of which no particulars and information has
been furnished under sub-section (1).

Explanation.- For the purpose of this section- (i) 'Dalal' shall include
a person who renders his services for booking of, or taking delivery H
594 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A of, consignments of goods at a Railway Station, booking agency,
goods transport company office, or any place of loading or unioading
of goods or contrives, makes and concludes bargains and contracts for
or on behalf of any dealer for a fee, reward, commission, remuneration
or other valuable consideration or otherwise;

B (ii) 'person transporting goods' shall, besides the ownet; include the
manager, agent, driver, employee of the owner or person incharge of
a place of loading or unloading of goods or of a Railway out-agency,
city booking office or city booking agency, when run by a private
person under a contract with the Railways but excluding a rail head or
c a post office, or of a goods carrier carrying such goods, or a person who
• accepts consignments of such goods for despateh to other places or
gives delivery of any consignment of such goods to the consignee."

After referring to the definition of'dealer' in Section 2(c) and taking
note of the fact that Section 37 provided for the establishment of
D check-post or barrier and the inspection of the goods in transit, this ¥··
Court analysed Section 38(1) and observed as follows.:

"14. As is clear from a reading of sub-section (1) of the said Section
38, it is not every clearing or foiw(l.fding agent or 'dalal' or person
transporting goods who comes into possession of the particulars and
E information required to be furnished under the said Act and Rules for_
the sub-section itself casts that obligation only upon such clearing or
forwarding agents, 'dalals' or persons transporting goods who during
the course of their business handle 'documents of title to goods for-or
on behalf of any dealer'. It is, therefore; at best, only such clearing or
F forwarding agents or 'dalals' or other persons transporting.goods who
handle documents of title to goods for or on behalf of dealers who can
be said to have a connection with the transaction of sale thereof. It is
only such clearing or forwarding agents, 'dalals' or other persons
transporting goods who can be required to obtain from the assessing
authority under the said Act a licence for carrying on their business and
G be made liable to cancellation of such licence and penal.ty.for breach
of their obligations under the said Act. However, inasmuch as the said
Act does not define what precisely it means by the expression
'documents of title to goods', it is unclear which class of forwarding
or clearing agents or 'dalals' or persons transporting goods it intends
H to bring wi~hin the ambit thereof. To clearing and forwarding agents,
STATE v. D.P. METALS [KIRPAL, J.] 595
'dalals' and other persons transporting goods who do not handle A
documents of title to goods for or on behalf of any dealer, the provisions
of the said Act can have no application at all. In respect of such persons
the State Legislature has no power of legislation under the legislative
entry concerned. Qua them the legislation is not in respect of any
matter ancillary or subsidiary to the legislative entry which entitles the
B
State Legislature to impose a tax on the sale of goods.

15. The same point can be stated differently. A clearing or forwarding
agent or 'dalal' or person transporting goods does not necessarily
handle the booking or receipt of goods which have been sold; they
could very well be handling goods which a consignor may consign to C
himself from one town or village to another in the State. The said Act
does not take account of this and requires all forwarding and clearing
agents, 'dalals' and persons transporting goods to be licenced under
the said Act. To this extent the said Section 38 goes beyond the
ancillary and subsidiary powers of the State Legislature in. enacting a
law imposing sales tax." D

This Court then concluded as follows:

"19. There can be no doubt that the State Legislature would be entitled
to impose sales tax upon a person who carries on the business of selling
goods and who has in the customary course of business authority to E
sell goods belonging to the principal. A clearing or forwarding agent,
'dalal' or person transporting goods does not carry on the business of
selling goods and does not have, in the customary course of his
business, authority to sell goods belonging to the dealer whose goods
he books or receives. As we have already stated, there has to be a F

- reasonable and proximate connection between the transaction of sale
and the clearing or forwarding agent, 'dalal' or person transporting
goods before the State Legislature can, in exercise of the power to levy
sales tax, enact legislation concerning him. We are not satisfied that
there is such close and direct connection between the transaction of
sale of goods by a dealer and the clearing or forwarding agent or 'dalal' G
who books or receives such goods or a person who transports. such
goods within the meaning of the said Section 38."

It is for the aforesaid reasons that Section 38 was held to be beyond the
purview of the State Legislature and was struck down. It will be seen that while H
596 SUPREME COURT REPORTS (2001) SUPP. 3 S.C.R.
A the validity of Section 37 of the Haryana Sales Tax Act was upheld by this
Court in Delite Carriers (supra), it is Section ·38, dealing wi_th dalal or clearing
or forwarqing agents being required to take out a licence, that the court held
the section to be ultra vire~· primarily for the reason that the forwarding or
clearing agent or dalal does not carry on the business of selling goods and does
not have in the customary course of a business authority to sell goods belonging
B
to the dealer whose goods he books or receives. Section 3T{upheld in Delite
Carriers case which is siniilar to 78 here) and Section. 38 of the Haryana Act
operate differently. The two provisions are not identical and it is presumably
for this reason that there is no reference to Delite Carriers case's decision in
Sant Lal's case.
c
The applicability of the decision of Sant Lal'.s case (supra) came up for
consideration in Tripura Goods Transport A!>·sociatiOn and Anr. v. Commissioner
of Taxes and Ors. 5 . The appellants therein were an association which was doing
the business of transporting goods within and outside the State of Tripura. On
the ground that they were transporters and not dealers within the meaning of
D
the Act, the appellants therein had challenged different provisions of the Tripura
Sales Tax Act and the Rules framed thereunder which had required them to
obtain a Certificate of Regi11tration and to comply with other formalities
prescribed under the Act and Rules. Rules were framed under the Act which
were also impugned. Rule 46-A; inter alia, required the transporter to give a
E a
complete and correct account ofthe goods carried by him in prescribed form
which could be inspected by the officer incharge of the check-post or the
barrier about the correctness of the statements made therein. Rule 63-A gave
the power of search at any place to an officer incharge of the check-post;
Superintendent of Taxes or any officer specially empowered by the
F Comniissioner. In furtherance of this power, the driver or any other person in
charge of the goods vehicle could be stopped and the vehicle examined and the
records inspected. If it was found that the goods are being carried in contravention
of the provisions of t~e Act or the Rules, the officer conducting the search
could seize the goods found in the vehicle along with any container or materials
-
used for packing. Rule 64-A lay down the procedure for the registration of
G transporter etc. For the non-compliance. of the provisions of the Act and the
Rules, punishments were provided. On behalf of the appellants it was contended
that they were mainly transporters, carrying goods of the consignor to the
consignee, and they were neither a dealer nor were they doing any business of

H s. [t999J 2 sec 253.
STATE v. D.P. METALS [KIRPAL, J.] 597
sale or purchase of any goods and hence the obligations cast on them including A
punishment for the offences was beyond the legislative competence of the State
Legislature under Entry 54 of List II of the Second Schedule. While upholding
the validity of the aforesaid provisions, this Court observed as follows:

"........ Every taxing statute has charging sections. It lays down the
procedure to assess tax and penalties etc. It also prnvides provisions
B
to cover pilferage of such revenue by providing such mechanism as it
deems fit, in other words, to check evasion of tax and in doing so, if
any obligation is cast on any person having connections with the
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 C
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 the
State Legislature. The impugned provisions are not charging sections,
no tax lia_bility is placed on the transporters. We find neither Sections D
29, 30, 32 and 36-A nor Rules 46-A, 63-A and 64-A lack any legislative
competence. They are within the legislative competence of the State
and would fall under List II of Entry 54 of the Seventh Schedule of
the Constitution of India."

It also noticed the decisions of this Court in Sodhi Transport Company's E
case (supra). After referring to Sant Lal's case (supra) it was held that the same
was clearly distinguishable inasmuch as the provisions of the Haryana General
Sales Tax Act were not similar to those which were impugned in the Tripura
Association's case (supra). It appears to us that the scheme and the provisions
under the Tripura Sales Tax Act and the Rules are similar to that contained in p
Section 37 of the Haryana Sales Tax Act as well as to Section 22-A of the
Rajasthan Sales Tax Act, 1954 and Section 78 of the Rajasthan Sales Tax Act,
1994.

It is thus settled law that provisions to check evasion of tax are within
the legislative competence of the States under Entry 54 of List II. This being G
so, the provisions to make the imposition of tax efficacious or to prevent
evasion of tax are within the legislative competence. Unlike the dalals and
forwarding agents, as in Sant Lal~· case, the persons referred to in Section 78(2)
are persons concerned with the movement of goods which are sold or likely
to be sold. With there being no valid challenge to Section 78(2) a provision H
598 SUPREME COURT REPORTS [2001] SUPP. 3 S.C.R.
A contained in sub-section (5) of Section 78 which provides for levy of penalty
in case of non-compliance of Section 78(2) can only be regarded as consequential
.and valid. If there was legislative competence to enact Section 78(2) then the
same power contained in Entry 54 of List II could enable the State Legislature
to provide for consequence of non-compliance by incorporating sub-section (5)
therein. Section 78(5) and Section 78(8) ate part Of an integral scheme and deal
B
with two separate classes of people referred to in Section 78(2).

Unlike Sant Lat's case, here under Section 78(5) levy of penalty is only
on the person incharge of the goods. It is he who should have all the requisite
documents relating to the title or sale of the goods which are being transported.
C Penalty under Section 78(5) is leviable under two circumstances. Firstly if there
is non-compliance with Section 78(2)(a) i.e. not carrying the documents
mentioned in that sub-clause or, secondly if false or forged documents or
declaration is submitted. This sub-section cannot relat~ to personal belongings
which are not meant for sale but would relate to those types of goods in respect
of which documents referred to in Section 78(2)(a) exist or .can exist.
D
Such submission of false or forged documents or declaration at the
check-post or even thereafter can safely be presumed to have been motivated
by desire to mislead the authorities. Hiding the truth and tendering falsehood
would per se show existence of mens rea, even if required. Similarly where, ~
E despite opportunity having been granted under Section 78(5) if the requisite
documents referred to in sub-clause 2(a) are not produced, even though the
same should exist, would clearly prove the guilty intent. It is not possible to
agree with the counsel for the respondents that breach referred to in Section
78(5) can be regarded as technical or venial. Once the ingredients of Section
78(5) are established, after giving a hearing and complying with the principles
F
of natural justice, there is no discretion not to levy or levy lesser amount of
penalty. If by mistake some of the documents are not readily available at the
time of checking, principles of natural justice may require some opportunity
being given to produce the same. This provision cannot be read as to imply that
the penalty of 30% is the maximum and lesser penalty can be levied. The
G legislature thought it fit to specify a fixed rate of penalty and not give any
discretion in lowering the rate of penalty. The penalty so fixed is meant to be
a deterrent and we do not see anything wrong in this. The quantum of penalty
under the circumstances enumerated in Section 78(5) cannot, in our opinion,
be regarded as illegal. The legislature in its wisdom has thought it appropriate
H to fix it at 30% of the value of goods and it had the competence to so fix. As
STATE v. D.P. METALS [KIRPAL, J.] 599
held by this Court in Rai Ramakrishna & Ors. v. The State of Bihar6 at 910; A
"The objects to be taxed so long as they happen to be within the legislative
competence of the legislature can be taxed by the legislature according to the
exigencies of it~· needs, because there can be no doubt that the State is entitled
to rais~ revenue by. taxation. The quantum of tax levied by the taxing statute,
the conditions subject to which it is levied, the manner in which it is sought
B
to be recovered, are all matters within the competence of the legislature; and
in dealing with the contention raised by a citizen that the taxing statute
contravenes Art. 19, courts would naturally be circumspect and cautious" as
such there cannot, in the present case, be any valid challenge to the rate of
penalty provided for in Section 78(5) of the Act.
c
Following the decisions of this Court in cases of Sodhi Transport Co. and
Ors. (supra), Delite Carriers (supra), Indian Roadways Corporation (supra)
Sarna Transport Corporation (supra) and Tripura Goods Transport Association
(supra) we hold that the provisions of Section 78(5) of the Rajasthan Sales.Tax
Act, 1994 are valid and the impugned decision of the High Court in this regard
is not correct. These appeals, except Civil Appeal No. 1321 of 2001, are D
accordingly allowed. Civil Appeal No. 1321 of 2001 is dismis~ed. Parties to
bear their own costs.

B.S . Appeals allowed.

..

6. (1964] I SCR 897.