Full Judgment Text
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CASE NO.:
Appeal (civil) 12060 of 1996
Appeal (civil) 2000 of 1996
PETITIONER:
STATE OF WEST BENGAL & ORS.
Vs.
RESPONDENT:
MD. KHALIL
DATE OF JUDGMENT: 08/05/2000
BENCH:
S.V.Patil, S.S.M.Quadri
JUDGMENT:
L.....I.........T.......T.......T.......T.......T.......T..J
SYED SHAH MOHAMMED QUADRI, J.
Leave is granted in the connected matter S.L.P.©
No.19573 of 1996. These two appeals raise an identical and
interesting question of law. C.A. No.12060 of 1996 is
filed by the State of West Bengal challenging the validity
of the judgment of the West Bengal Taxation Tribunal (for
short the Tribunal) in Case No.20(T) of 1994 dated January
11, 1996, by which the application filed by the respondent
was allowed and the impugned demand of tax and penalty was
quashed. That judgment was followed by the Tribunal in Case
No.RN-192(T) of 1995, filed by the respondent which was
allowed quashing the demand of tax and penalty on February
20, 1996 which is assailed in C.A.No....of 2000 @ S.L.P.©
No.19573 of 1996. Adverting to the facts giving rise to
C.A.No.12060 of 1996, the Entry Tax Authority ( for short,
the Authority) carried out a raid on the cold storage of
M/s. Pratap Company at 15/16 Botanical Garden Lane, Howrah,
(for short, the cold storage) and seized its record. On
examination of the record, it was noticed that 158 persons
deposited dry fruits in the cold storage. The verification
of the depositors showed that only 24 out of 158 were in
existence. The assessing officer issued notice under
Section 14(3) of the Taxes on Entry of Goods into Calcutta
Metropolitan Area Act, 1972 (hereinafter referred to as the
Entry Tax Act). The respondent challenged the validity of
that notice in writ petition in the High Court at Calcutta.
The High Court declined to grant stay of further proceedings
pursuant to the impugned notice and by an interim order
directed the respondent to pay the tax as assessed by the
Authority and observed that payment of penalty, if imposed,
would depend upon the final determination of the writ
petition. The Authority assessed entry tax on the cold
storage and its partners as well as on the depositors,
including the respondent. After the constitution of the
West Bengal Taxation Tribunal under the West Bengal Taxation
Tribunal Act, 1987, the application of the respondent
alongwith other similar applications was transferred to the
Tribunal. Before the Tribunal, the respondent and others
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questioned the imposition of tax and penalty under the Entry
Tax Act. The case of the respondent before the Tribunal was
that he purchased the goods from the local market and
deposited the same in the cold storage. The goods suffered
the entry tax in the name of Keshordeo Sonthalia and others.
He denied that he is a dealer within the meaning of
Section 2(c) of the Entry Tax Act. The appellant denied
having levied tax on the goods in respect of which tax was
already imposed. The name of the respondent, it is stated,
was found in the registers of the cold storage and that he
having purchased the goods from outside West Bengal, caused
their entry into Calcutta and stored them in the cold
storage. The goods (dry fruits) in such huge quantity could
not have been purchased locally and the respondent failed to
furnish the particulars as to from whom he purchased the
goods. The Tribunal took the view that the burden of
proving that the goods were brought into Calcutta
Metropolitan Area from outside and it was the respondent who
so brought those goods lies on the Authority and that the
respondent cannot be called upon to prove that he did not
bring the goods from outside into Calcutta Metropolitan
Area. There is no provision in the Entry Tax Act placing
the burden of proof on the possessor of specified goods to
show that he has not brought the goods from outside.
Observing that the conduct of the respondent might be highly
suspicious, the Tribunal held that no material was placed on
record by the Authority to establish that the goods in
question were brought from outside the Calcutta Metropolitan
Area and it was actually the respondent who brought the
goods in the Calcutta Metropolitan Area. In view of this
finding, the Tribunal allowed the application of the
respondent, set aside the demand of entry tax as well as
penalty and directed refund of the tax to the respondent
within 12 weeks from the date of the judgment dated January
11, 1996. Mr. Tapas Ray, learned senior counsel for the
appellants, contended that the Tribunal committed grave
error by proceeding on the basis that the burden of proof of
showing that the goods were brought within the entry tax
area and without payment of entry tax, was on the Authority
and if that were to be so, the provisions of sub-sections
(3) and (6) of Section 14 of the Entry Tax Act would become
superfluous as in no case the Authority can deal with a case
of goods which have already entered within the entry tax
area. It is further contended that under the scheme of the
Entry Tax Act when the specified goods, not produced within
Calcutta Metropolitan Area, are found stored within the said
area but without proof of payment of the entry tax or
acquisition of the goods, the Authority is entitled to draw
a rebuttable presumption that the person in possession of
the goods has brought the goods within the area without
payment of tax. Mr. Gopal Chandra Chakravarty, learned
senior counsel for the respondent, argued that any person
who possesses the specific goods cannot be said to be a
dealer within the meaning of Section 2(c) of the Entry Tax
Act and that it was for the appellants to show that the
goods were brought into the Calcutta Metropolitan Area by
the respondent without payment of tax and unless a nexus
between the possessor of the goods and the evasion of the
entry tax was established imposition of tax on the possessor
would be illegal. He argued that the import of the
specified goods into the entry tax area by a dealer and the
purchasing the goods from the local market are two different
things and the local purchasers cannot be taxed on the
ground of not proving local purchase. His submission was
that the liability to pay the tax lies on the dealer under
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Section 10 of the Entry Tax Act and even the order of the
assessment does not hold that the respondent is a dealer
as defined in Section 2 (c) of the Entry Tax Act; according
to Mr.Chakravarthy, an assessment under Section 14(3) could
be made by the Authority only when the goods are brought
from outside the Calcutta Metropolitan Area without payment
of entry tax and that there is no provision in the Act
placing the burden of proof on the possessor of the goods to
establish that he imported the goods on payment of tax and
that sub-section (3) of Section 14 is not intended to tax
such a possessor of the goods. On the above contentions,
the short question that arises for consideration is:
whether under the provisions of the Entry Tax Act, the
possessor of the goods can be subjected to entry tax in the
absence of his giving particulars of his local purchases?
For answering to this question it may be necessary to refer
to Section 6 of the Entry Tax Act, the charging section,
which reads thus: 6. (1) Save as otherwise provided in
this Chapter, there shall be levied and collected, for the
purposes of this Act, a tax on the entry of every specified
goods into the Calcutta Metropolitan Area (for consumption,
use or sale therein) from any place outside that Area, at
such rate, not exceeding the rate specified in the
corresponding entry in column 3 of the Schedule, as the
State Government may, by notification, specify.
(2) Subject to such rules as may be made by the State
Government in this behalf, no tax shall be levied and
collected under this Act on the entry of any specified goods
into the Calcutta Metropolitan Area if such goods are
brought into that area
(a) as personal luggage by a passenger and the value
or the number or quantity thereof does not exceed the
prescribed amount or limit, as the case may be, or (b) in
such circumstances and subject to such conditions and
restrictions as may be prescribed.
A perusal of this provision shows that : (i) the tax
is on the entry of every specified goods into Calcutta
Metropolitan Area; (ii) the goods must enter from any place
outside the Area; (iii) the entry of the goods may be for
consumption, use or sale; (iv) the Government may notify
the rate of tax from time to time but it should not exceed
the rate specified in column 3 of the Schedule; (v)
personal luggage by a passenger, not exceeding the
prescribed amount of limit with regard to its value, number
or quality, as the case may be, is exempt from the tax; and
(vi) the State Government is empowered to specify the
circumstances, conditions and restrictions subject to which
the goods brought into the Calcutta Metropolitan Area cannot
be taxed. Section 10 of the Entry Tax Act says that the tax
levied under the Act shall be payable by the dealer in
relation to the specified goods. The term dealer is
defined in Section 2(c) of the Entry Tax Act as follows :
2. In this Act, unless the context otherwise requires,
(a) & (b) * (c) dealer, in relation to any
specified goods entering the Calcutta Metropolitan area,
means a person, -
(i) who either on his own account or on account of a
principal [or any other person] causes such entry, or
(ii) who takes delivery, or is entitled to take
delivery, of such goods on such entry.
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Explanation I When the consignor or consignee of any
specified goods entering the Calcutta Metropolitan Area
nominates, according to such rules as may be prescribed, a
person to be the dealer for the purposes of this Act, such
person shall be deemed to be a dealer in relation to such
specified goods.
Explanation II When the consignee of any specified
goods entering the Calcutta Metropolitan Area, despatched to
such Metropolitan Area by rail, road, water, air or post,
does not take delivery of such goods upon such entry and the
goods are sold under the provisions of any law, the buyer,
who takes delivery of such goods upon the goods being so
sold, shall be deemed to be dealer thereof;
The definition brings in four categories of persons
within the meaning of the term dealer : (i) a person who
on his own account or an account of principle or any other
person causes entry of specified good within Calcutta
metropolitan area;
(ii) a person who takes delivery or is entitled to
take delivery of such goods on their entry in said area;
(iii) a nominated person as a dealer in relation to
specific goods the consignor or the consignee of such goods
entering Calcutta Metropolitan Area;
(iv) a purchaser of specified goods which are sold
after entry under the provisions of any law on the consignee
of such goods not taking delivery of the goods on their
entry in the Calcutta Metropolitan Area either by rail,
road, water, air or post.
Section 13 of the Entry Tax Act imposes an obligation
on every dealer of specified goods to deliver a declaration,
in the prescribed form, on or before entry of such goods
into the Calcutta Metropolitan Area. He is exempted from
giving such a declaration if the specified goods are
exempted by sub-section (2) of Section 6, Section 7 or
Section 8 from payment of any tax leviable under the Entry
Tax Act. Section 14 of the Entry Tax Act deals with
assessment of tax. It enjoins the prescribed authority to
assess the tax leviable on the entry of such goods into
Calcutta Metropolitan Area, where a declaration has been
made under Section 13 of the Entry Tax Act by a dealer,
after making such verification of the specified goods as he
may consider necessary before assessing the tax on the
goods. Sub- section (2) takes care of the situation where
the dealer has failed or omitted to make the declaration as
required by Section 13 of the Entry Tax Act. It authorises
the prescribed authority to assess tax on such goods after
their inspection and examination and impose penalty, in the
prescribed manner, not exceeding twice the amount of tax
assessed by it. Sub-sections (3) and (6) of Section 14
which have been the subject matter of debate may be
extracted here : 14. (1) & (2) *
(3) Where any specified goods have been brought into
the Calcutta Metropolitan Area without the payment of any
tax leviable thereon under this Act, the prescribed
authority shall assess the tax leviable under this Act on
such goods and it may also impose on the dealer, in the
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prescribed manner, a penalty, not exceeding ten times the
tax assessed by it:
Provided that such assessment shall be made after
inspection and verification of such goods, but where such
goods are not available for inspection and examination by
reason of the fact that such goods have been disposed of,
concealed or mixed with any other goods, such assessment
shall be made, in such manner and within such time as may be
prescribed, to the best of the ability of the prescribed
authority:
Provided further that no penalty shall be imposed
under this sub-section except after giving the dealer a
reasonable opportunity of being heard.
(4) & (5) *
(6) The prescribed authority may, subject to such
conditions as may be prescribed, -
(a) require any dealer
(i) to produce before it any accounts, register or
document for examination; (ii) to furnish any information
relating to the stock of goods or purchases, sales or
deliveries of goods by the dealer or relating to any other
matter, as may be deemed necessary for the purpose of this
section ;
(b) require any person who has in his possession,
custody or control any specified goods or through whom the
specified goods are suspected by the prescribed authority to
have passed, to produce before it any accounts, register or
document for examination with a view to ascertaining whether
any tax leviable under this Act is being or has been
assessed or duly paid.
A perusal of sub-section (3) discloses that it is
meant to check tax evasion. It deals with a situation where
any specified goods have been brought within the Calcutta
Metropolitan Area without the payment of any tax leviable
thereon under the Entry Tax Act. In such a case, which is
treated an agravated violation of the provisions, the
prescribed authority has to assess the tax on such goods and
also to impose penalty, in the prescribed manner, not
exceeding ten times the tax assessed by it on the dealer.
The first proviso says that the assessment of the tax has to
be after inspection and verification of such goods. It also
provides for what can be termed as the best judgment
assessment when such goods are not available for inspection
and examination for the reason that either they have been
disposed of or concealed or mixed with any other goods. The
second proviso requires that the dealer be given a
reasonable opportunity of being heard before the imposition
of penalty. A plain reading of sub-section (6) shows that
it empowers the prescribed Authority to require any dealer
to produce before it any accounts, register or document for
examination and to furnish any information relating to the
stock of goods or purchases, sales or deliveries of goods by
the dealer or relating to any other matter, as may be deemed
necessary, for the purpose of Section 14 of the Entry Tax
Act. The prescribed Authority is also empowered to require
any person who has in his possession, custody or control any
specified goods or through whom the specified goods are
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suspected by the prescribed Authority to have passed, to
produce before it any register, accounts or document for
examination with a view to ascertaining whether any tax
leviable under this Act is being or has been assessed or
duly paid. It may be noticed here that the liability to pay
the tax under sub-section (1) and the tax penalty under
sub-sections (2) and (3) is on the dealer. It is only in a
case falling under clause (b) of sub-section (6) of Section
14, that a person other than a dealer is dealt with and a
duty is cast on him is to produce documents, accounts
register etc. when he is required to do so by the
prescribed Authority. The dealer is the person required to
deliver the statutory declaration and is also answerable for
the tax as well as for the penalty imposed under the Entry
Tax Act. Therefore, the first thing we have to see whether
the respondent is a dealer within the meaning of that
term. We have extracted above the definition of the term
dealer and noted four categories of persons who fall
within the meaning of that term. A person who is in
possession of the specified goods does not fall within the
meaning of that term. It follows that the respondent is not
a dealer within the meaning of the Entry Tax Act. In the
instant case, notice was issued to the respondent under
Section 14(3) of the Entry Tax Act. It has been held that
he is not a dealer. That apart, for purposes of
assessment of specified goods, sub-section (1) of Section 14
of the Entry Tax Act provides for assessment of specified
goods on the basis of the declaration of dealer, albeit
after making such verification of the specified goods as the
prescribed Authority may consider necessary. Sub-section
(2) of Section 14 of the Entry Tax Act provides for
assessment on inspection and examination of specified goods
where the dealer has failed or omitted to make the
declaration as required by Section 13 of the Act. For
assessing entry tax under sub-section (3) of Section 14 of
the Entry Tax Act, it has to be shown : (i) the specified
goods have been brought into Calcutta Metropolitan Area;
(ii) such goods have been brought without payment of tax
leviable thereon under the Act; (iii) such goods are found
in possession of the respondent. It must be borne in mind
that before the tax could be imposed under sub- section (3)
of Section 14 of the Entry Tax Act, the authority will have
to be satisfied of the requirements noted above. Without
there being any material to show that the specified goods in
the possession of the respondent have been brought into the
Calcutta Metropolitan Area and that they were brought
without payment of any tax leviable thereon, no tax can be
levied under sub-section (3) of Section 14 even on a dealer.
It cannot be lost sight of that the tax under the Entry Tax
Act is a tax on the entry of the specified goods into the
Calcutta Metropolitan Area and not on possession of the
specified goods within the Calcutta Metropolitan Area
However, the contention of Mr.Chakravarty is that when
specified goods are found in possession of a person and when
he, on being required to produce before the Authority any
accounts, register or document under sub-section (6) of
Section 14, has failed to do so, a presumption arises that
the specified goods have been brought by him into the
Calcutta Metropolitan Area without payment of tax. We are
afraid, we cannot accede to this contention. A presumption
is a rule of law which requires the court to draw a given
conclusion on proof or existence of certain facts and leaves
it to the party disputing the conclusion to rebut the same.
Presumptions may be of fact or of law. A presumption is an
inference sanctioned by law which does not logically or
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necessarily follow from the proved facts. For raising a
presumption, as submitted by Mr.Chakravarty, there must be a
specific provision in the Entry Tax Act. No provision in
the said Act is brought to our notice which may enable the
Authority to raise the presumption that a possessor of the
specified goods, who fails to produce before the Authority
his accounts, register or document on being required to do
so, has imported the goods into the Calcutta Metropolitan
Area without payment of tax. On the facts and circumstances
of the case, it is impossible for a Court to infer that the
respondent has imported the goods into the Calcutta
Metropolitan Area without payment of tax. In the light of
the above discussion, we cannot but uphold the impugned
judgments of the Tribunal. The appeals fail and they are
accordingly dismissed with costs.