STATE OF HARYANA Vs. SANT LAL

JUDGEMENT

(1.) This is an appeal by special leave against the judgment and order of a division bench of the Punjab and Haryana High court whereby the writ petition filed by the respondents was allowed and Section 38 of the Haryana General Sales Tax Act, 1973 and Rule 53 of the Haryana General Sales Tax Rules, 1975 were struck down as unconstitutional.

(2.) The respondents claimed in their writ petition to be clearing and forwarding agents. They rendered to their clients the service of booking and taking delivery of consignments at the railway stations at Sirsa and Hissar. On the instructions of their clients they arranged for booking of consignments to be transported by railway from the aforesaid railway stations and obtained the necessary documents in the names of their clients; similarly, they took delivery of consignments on behalf of their clients at the aforesaid railway stations and handed over the same and the documents relative thereto to their clients. For such services they were remunerated by their clients. By virtue of Ss. (1 of the said Section 38 of the Haryana General Sales Tax Act, 1973 (hereinafter referred to as 'the said Act') they were obliged to furnish information in respect of such consignments to, and by virtue of Ss. (2 they were debarred from carrying on their business unless they obtained alicence for the purpose from the assessing authority under the said Act. Ss. (3) made them liable to the imposition of a penalty in an amount equivalent to 20 per cent of the value of the goods in respect of which particulars and information had not been furnished. Rule 48 of the Haryana General Sales Tax Rules, 1975 (hereinafter referred to as 'the said Rules') was made with reference to the said Section 38. It was contended in the writ petition that the respondents did not in the course of their business come across invoices or cash memos so that they were not in a position to ascertain the value of the goods booked or taken delivery of through them. The obligation imposed upon them by the said Section 38 was, therefore, not possible of performance. The petitioners in their written statements before the High court do not appear to have controverted the averment that the respondents in the course of their business did not get all the information which they were required by the said Section 38 to furnish and for breach of which obligation they were exposed to a penalty. In the written statements the petitioners contended that the respondents were known as 'dalals' in common parlance and carried on the well-established business of acting at railway stations on behalf of the various types of dealers. The dealers sent their goods for booking at the railway stations through 'dalals' and all the formalities were performed by the 'dalals' for sending the goods to their destinations. Similarly, when goods of the dealers were received at the railway stations, the delivery was taken by the dealers through the 'dalals'. It had been observed that, generally, bogus transactions were carried on by various dealers. The goods were booked in assumed names and these were addressed to consignees in assumed names and in this way the revenue of the State in the form of tax was jeopardised. It was contended that the trade of getting the goods booked with the railways on behalf of the dealers and getting the delivery of the goods from the railway by the dealers through the 'dalals' is ancillary and incidental to the business of sale and purchase of goods. The State Legislature is empowered under Entry 54 of the List II in the Seventh Schedule to the Constitution to enact law for taxation on the sale or purchase of goods. . The livelihood of the petitioners is not taken away in any way. The High court found that the respondents were admittedly neither dealers nor liable to pay sales tax under the said Act. No foundation, however remote, had been laid in the written statements to warrant the finding that the respondents were not strangers to the sale or purchase of goods handled by them on behalf of their clients. The question, therefore, was whether the State Legislature was competent to legislate in respect of the respondents. The High court, after reference to various authorities, held that a clearing or forwarding agent or 'dalal' was a stranger to the transaction of sale or purchase of the goods. He was not liable to pay sales tax nor was he responsible for its evasion inasmuch as he was not a dealer. This apart, there was nojustification to raise a presumption of evasion of sales tax in the transactions in respect of which an agent or 'dalal' was required to furnish particulars and information under the said Section 38. Similarly, it was wrong to assume evasion of sales tax in the transactions the particulars and information of which an agent or 'dalal' had failed to furnish. Moreover, the responsibility in regard to the evasion of sales tax was that of the dealer and it could not justifiably be foisted on the agent or 'dalal'. There being no liability upon the agent or 'dalal' to pay the sales tax or an attempt on his part or suspicion against him to escape its payment, it could not be held that the provisions contained in said Section 38 were intra vires the State Legislature being ancillary and incidental to the power to levy sales tax under Entry 54, List II of the Seventh Schedule to the Constitution. The High court, therefore, allowed the writ petition and struck down the said Section 38 and the said Rule 53 as unconstitutional.

(3.) To appreciate the controversy in the appeal, the said Section 38 must be reproduced: