GRACY Vs. INTELLIGENCE OFFICER

JUDGEMENT

(1.) These Writ Petitions are filed by various Railway officials challenging penalty orders issued by the Intelligence Officers of Sales Tax Department under various provisions of the Kerala General Sales Tax Act, 1963, hereinafter called the 'KGST Act'. Penalty levied is either under Section 45A, 29A(4) or Section 45B of the KGST Act on the allegation of evasion of sales tax in respect of goods transported through Railways. All the Writ Petitions except OP 18234 of 1999 were posted for hearing on 9.6.2004. Sri.K.V. Sadananda Prabhu, appeared and argued for petitioners - Railway officials, and Sri.Raju Joseph, Special Government Pleader appeared and argued for the respondents. However, all those O.Ps. were again posted along with OP 18234 of 1999 on 10.12.2004 and counsel were again heard. After hearing both sides and after going through the orders under challenge and the circumstances under which those orders were issued, which are discussed below, I feel the orders against individual Railway Officials in any case are not sustainable and therefore there is no need to go into the propriety, legality or correctness of each and every order challenged in the OPs. However, what is required in the interest of the Railways and the State Government and in public interest is to clarify the powers and jurisdiction of the Officers under the KGST Act to enforce statutory provisions against the Railways and the extent of immunity available to the Railways from interference with their operations by the officials of the Sales Tax Department so that omissions and violations do not take place in future and violations in the future are handled properly. For this purpose also, the facts and allegations raised generally have to be gone into. The allegations leading to the orders impugned in the OPs. are transport of goods namely, rubber, and spices like pepper, ginger etc., from Kerala to outside the State through Railways by dealers in Kerala without paying sales tax and without being accompanied by documents prescribed under the KGST Act and Rules and similarly bringing goods to Kerala through Railways from outside State in the name of unregistered or non-existing or bogus dealers leading to evasion of sales tax. The Railways have no case that there is compliance of statutory provisions by the owners of goods who are dispatching goods from Kerala through Railways or receiving goods in Kerala from other States through Railways and their claim is total immunity from scrutiny, by Officers of Sales Tax Department, of goods or documents pertaining to it while in the custody of the Railways either during transit or in their godowns. In other words, the allegation of massive evasion of sales tax taking place on goods taken out of the State or goods reaching the State is not denied by the Railways. It is common knowledge that rubber is an industrial raw material and is transported from Kerala to outside the State for sale to industries for use in manufacture of rubber products. Since natural rubber in all forms is taxable under the KGST Act at the point of last purchase in the State, it's transport outside the State by dealers after purchase in Kerala either for sale outside the State or as inter-state sale to outside dealers should be made on payment of sales tax in Kerala and if transaction is not accounted, there is loss of tax to the State. Similarly, though spices like pepper, ginger, etc. are consumer goods, no one transports the same through Railway parcel service for own use. Therefore transport of these goods through Railways are always in trade quantities and in the course and for the purpose of trade. Such transport by dealers after purchase in Kerala are either as inter-state sales to outside parties or as stock transfer for sale in States outside Kerala. All these commodities are taxable at the point of last purchase in the State and therefore any of these goods transported outside Kerala attracts sales tax in Kerala. Therefore when rubber and spices are transported through Railways without proper documents prescribed under the KGST Act and Rules then presumption of evasion of sales tax in Kerala is inescapable and Railways should not promote it's business at the cost of legitimate revenue due to the State. Even though collection of sales tax is the responsibility of the authorities under the KGST Act, the statutory safeguards provided to prevent evasion of sales tax apply to all against whom they are directed including Railways howsoever inconvenient those provisions are to such authorities. Of course, the Legislature has not provided detailed or specific provisions in the KGST Act for inspection and detention of goods while under transport by Railways probably because they do not expect the Railways to violate general provisions applicable for transport of goods and to promote it's business by encouraging smuggling of goods by unscrupulous dealers. Therefore the question is as to what extent the Railways should conform to the requirements of the existing statutory provisions and what are the immunities available to the Railways for transport of goods without scrutiny and interference by the Sales Tax Department. In this regard the main question to be considered is whether the Railways can dispense with documents prescribed under the KGST Act and Rules which dealers are required to use for transport of goods throughout Kerala, while permitting transport through Railways, and if so, the powers of the Officers authorised under the KGST Act to enforce compliance by dealers to prevent evasion of tax. I feel reference to facts, documents and counter affidavit in OP 24930 of 1998 will be sufficient for the purposes of disposal of all the cases. Therefore all references to documents hereinafter made are those produced in O.P.No. 24930 of 1998.

(2.) Counsel appearing for the Railways contended that Railway is rendering all assistance to the Sales Tax Department to check evasion of sales tax in Kerala and in this regard instructions are issued to all the Railway Officials to permit Sales Tax Department to collect details from Railway records. He has also pointed out that inspection of goods should be carried out by the Sales Tax Department before arrival of goods at the parcel office of the Railways and similarly inspection of goods reaching Kerala should be done after goods are released from the Railways. He has relied on Ext.P1 issued by the Railway Board authorising State Government and municipal authorities to collect information and extracts from the records pertaining to goods-transport maintained by the Railways. Therefore according to him it is for the Sales Tax Department to collect information from the Railways and proceed against evadors of tax. His contention is that goods under the custody of the Railways whether it be in the parcel office or in transit should not be inspected or detained as the same will affect the Railways' business--operations. The Special Government Pleader appearing for the respondents contended that statutory authorities under the KGST Act are entitled to inspect the goods at the Railway Godowns and while in transit and the said powers cannot be restricted by the Railways. He pointed out that when goods are transported under bogus records there is no point in collecting details from the Railway records and conducting enquiry based on it as apparent consignors or consignees in documents are not the actual owners despatching or receiving goods. Therefore according to him unless statutory documents are used for transport of goods through Railways, transactions cannot be traced to dealers and evasion of tax, if any, cannot be detected. While the contention of the Railway is that Railway is bound by the provisions of the Railways Act, the contention of the Special Government Pleader is that KGST Act applies to all goods moved all over Kerala including through the Railways and department is entitled to order detention of goods while in the custody of Railways and if released in violation of such orders, penalty can be levied on Railways and it's officials helping evasion of sales tax.

(3.) The first question to be considered is whether the Railway is immune from the application of the KGST Act and Rules. I do not find any immunity granted to the Railways either under the Railways Act or under the KGST Act. On the other hand, Section 93(d) and (e) of the Railways Act visualize a situation where goods under transport by Railways are subject to seizure or detention by the State Government or it's officers or under any other legal process. The relevant provisions of Section 93 are extracted hereunder for easy reference.