BUISHI YADA MOTORS Vs. STATE OF ARUNACHAL PRADESH

JUDGEMENT

(1.) As a functionary of the State Government, it is essential for a Government servant to be vigilant and ensure that no evasion of tax takes place, but while attempting to stop such evasion of tax, the Government servant must know what his powers under the law are and if he has such powers, its exercise must not be arbitrary; otherwise, a Writ Court is bound to interfere and correct the position.

(2.) Viewed dispassionately, the case of the petitioner emerges to be as follows:- The petitioner is an authorized dealer having service centre of Maruti Udyog Ltd., at Naharlagun, in the State of Arunachal Pradesh. As a dealer of the Maruti Udyog Ltd. the petitioner carries on the business of selling and servicing of motor vehicles of the said company. The petitioner sells motor vehicles of the said company in the State of Arunachal Pradesh as well as in the course of inter-State trade and commerce. The sale of motor vehicles within the State of Arunachal Pradesh are taxable at the rate of 12% under the Arunachal Pradesh Sales Tax Act, 1999 (hereinafter referred to as "the Act of 1999"). The State Government, in exercise of its powers under Section 8(5)(b) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the Act of 1956") directed, vide notification No. TAX/436/95/Part III, dated 2.5.2001 (Annexure A), that Central Sales Tax in respect of motor vehicles sold to any person, in course of inter-State trade and commerce by any dealer having his place of business in the State of Arunachal Pradesh and dealing with such motor vehicles, shall, with immediate effect, be calculated at the rate of 2% on the turnover of such sale. The petitioner, which also sells motor vehicles aforementioned, in course of inter-State trade and commerce, charged, in the light of the aforesaid notification, dated 2.5.2001 (Annexure A), central sales tax at the rate of 2 % on the sale of motor vehicles made to various persons outside the State of Arunachal Pradesh. However, by letter No. S-TAX-2- 2000, dated 7.2.2002 (Annexure B) the petitioner was directed by respondent No. 5, namely, Additional Deputy Commissioner cum Superintendent of Tax and Excise, Papumpare district, to stop selling motor vehicles to the customers outside the State with immediate effect. From the said letter, dated 7.2.2002, it is clear that the same was issued in pursuance of another letter, dated 6.2.2002, bearing No. Tax-16/2001/411 issued by the respondent No.2, namely, Commissioner of Taxes and Excise, Government of Arunachal Pradesh, to the respondent No. 5. The petitioner vide letter, dated 25.2.2002 (Annexure C) requested the respondent No. 5 to review and re-examine the directions issued to stop sale of motor vehicles to customers outside the State. Similar letter (Annexure D) was also addressed to the respondent No. 2. Thereafter, by letter, dated 27.2.2002 (Annexure E) respondent No. 5 informed the petitioner that he was only the implementing agency and not the policy maker and directed, therefore, the petitioner to write to the respondent No. 2, namely, Commissioner, Taxes and Excise, for re- examination of the matter and for necessary action, whereupon respondent No. 3, namely, Assistant Commissioner (Legal) Tax and Excise vide letter dated 14.3.2002 (Annexure F) directed the respondent No. 5, namely, Additional Deputy Commissioner cum Superintendent of Taxes, Tax & Excise, to inform the motor vehicle dealers of his district that the inter-State sale of motor vehicles at the rate of 2% would not be allowed pending decision of the Government in the matter. It was further stated therein that the motor vehicle dealers were free to sell motor vehicles to the outside at the rate of 12 % local sales tax. The respondent No. 3, namely, Assistant, Commissioner of Taxes(Legal), Tax & Excise, vide letter dated 7.5.2002 (Annexure G) communicated to the respondent No. 5, namely, Additional Deputy Commissioner cum Superintendent of Taxes and Excise the decision of the Government that the sale of motor vehicles, not being sale in course of inter-State trade and commerce, Arunachal Pradesh Sales Tax at the rate of 12 % shall be charged from the buyers coming from outside the State. The petitioner submitted another representation, dated 15th May, 2002, to the respondent No.4, namely, Deputy Commissioner, Tax and Excise, praying for, inter-alia, enforcement of the notification, dated 2.5.2001 (Annexure A) in letter and spirit and also not to levy tax at the rate of 12% on the inter-State sale of vehicles. Although no express order was passed by the authority rejecting the representation, which was improperly treated as an appeal, the said representation should be deemed to have been rejected, when the respondent No. 5 issued a notice, dated 27.5.2002 (Annexure H) directing the petitioner to show cause as to why local sales tax amounting Rs.2,94,19,896/- only, paid in short, should not be recovered within one month therefrom and as to why penalty should not be imposed under Section 22(G) of the Act of 1999. The show cause notice, dated 27.5.2002, aforementioned was issued mainly on three broad grounds, namely, (i) that there must exist a bond between the contract of sale and actual transportation outside the State by way of a specific purchase order, contract or agreement, (ii) the sale must be made to the dealers and not to the Individual and 'C' form must be produced in support of the sales made in course of inter-State trade and commerce. By making the present application under Article 226 of the Constitution of India, the petitioner has, now, approached this Court challenging legality of the impugned directions/ communications and the show cause notice aforementioned.

(3.) The respondents have contested this case by filing their affidavit-in-opposition, their case being, briefly stated, thus: The petitioner has, in order to avoid payment of local tax, sold many motor vehicles by showing addresses of persons, who are claimed to be residents of the State of Assam, but some of these vehicles have been registered in Arunachal Pradesh. Had the transactions been really inter-State sales, as claimed by the petitioner, the vehicles, so sold, should have been registered in the Office of the District Transport Officer at the addresses mentioned in the sale certificates/invoices. The petitioner has, on the pretext of selling the motor vehicles in course of inter-State trade or commerce, reduced tax @2% of local sales and thereby short levied tax @10%. The impugned directions/communications, dated 7.2.2002 and 14.3.2002, have been issued stopping sale of vehicles to the customers outside the State as a temporary measure in order to check further evasion of sales tax by the dealer under the pretext of inter-State sale pending decision of the Government in this regard. This embargo on the sale of motor vehicles to persons outside the State is temporary and not permanent; hence, there is no violation of Articles 301 and 304 of the Constitution of India. The petitioner has preferred an appeal against the letter, dated 14.2.2002, aforementioned before the respondent No.4, namely, Deputy Commissioner, Tax and Excise, Government of Arunachal Pradesh, under Section 33(1) of the Act of 1999. This appeal, which the writ petitioner claims as a representation and not an appeal is still pending. Hence, the writ petition may not be proceeded with. As the petitioner had been avoiding payment of local sales tax, it has been served with the notice, dated 27.5.2002, aforementioned asking it to show cause as to why local sales tax short paid amounting to Rs.2,94,19,896/- only should not be recovered from the petitioner. Instead of submitting reply to the assessing authorities, the petitioner has approached this Court. Until the time the petitioner gives satisfactory documentary evidence that all sales made outside the States were in the course of inter- State trade, benefit of notification, dated 2.5.2001 (Annexure A) cannot be availed of by it. After final assessment order is issued, the petitioner, if aggrieved, can prefer an appeal. The petitioner has submitted only two documents to show that the sales, in question, took place in the course of inter-State trade or commerce. As regards remaining transactions of sale, no material has been placed to show that the same were covered by inter-State trade or commerce. In the absence of any document showing that there was an agreement between the parties for the purpose of transferring of title to the goods from the State of Arunachal Pradesh to some other State, no sale of such goods can be treated as sale taking place in course of inter- State trade or commerce. Some of the motor vehicles alleged to have been sold outside the State of Arunachal Pradesh have not moved out of Arunachal Pradesh. The letter, dated 7.2.2002 (Annexure B) was issued by the respondent No. 5 on satisfaction reached by the respondent No. 5 and hence, it is immaterial that the respondent No. 5 has issued instructions contained in the order, dated 7.2.2002, with reference to letter issued by the respondent No. 2.