Ramakant Saxena (Dr.) vs State of Rajasthan and Others

Arun Kumar, C.J.—By this petition under Article 226 of the Constitution of India, the petitioner has challenged the constitutional validity of Section 77 (8) of the Sales Tax Act, 1994 on the ground that the same is violative of Articles 14 and 19 of the Constitution of India.

Briefly, the facts are that the petitioner is a medical practitioner. According to the petitioner, in the usual course of his profession certain articles and medicines remain lying at his residence. These articles are meant to be used in treatment of patients. On 24th January 2000, a survey was conducted at the residential premises of the petitioner in which certain surgical items and medicines were found. The petitioner was served with a notice for imposing penalty u/s 77 (8) of the Rajasthan Sales Tax Act, 1994 (hereinafter to be referred to as the Act, of 1994). The petitioner replied to the notice. After further enquiry, the respondent No. 2, Commissioner, Commercial Taxes, Rajasthan, passed an order on 18th April 2000, imposing a penalty amounting to Rs. 1,45,160/- on the petitioner u/s 77 (8) of the Act. This was followed by proceedings for realisation under the Rajasthan Land Revenue Act, 1956.

The main contention raised on behalf of the petitioner is that Section 77 (8) of the Act of 1994 is violative of Articles 14 and 19 of the Constitution of India and it gives arbitrary powers to the authorities for imposing penalty. It also interferes in carrying on the trade and profession by persons like the petitioner. Section 77(8) of the Act is reproduced as under:-

The assessing authority or the officer referred to in Sub-section (5) may, after having given the dealer an opportunity of being heard and after having held such further inquiry as it may consider it, impose on him, for the possession of goods not accounted for, whether seized or not under Sub-section (6), a penalty equal to the amount of five times of the tax leviable on such goods or thirty percent of the value of such goods, whichever is less, and such authority or officer may release the goods, if seized, on payment of the penalty imposed or on furnishing such security for the payment thereof as it may consider necessary."

In the writ petition, the petitioner categorically took a stand that provisions of Section 78(5) of the said Act are similar to those under challenge in the present petition i.e. Section 77(8). It was contended that since the provisions contained u/s 78(5) had been held to be ultravires the Constitution of India by a decision of the Rajasthan High Court in the case of D.P. Metals v. State of Rajasthan and Anr. (1), the provision contained in Section 77 (8) was liable to be struck down for the same reason. In this behalf it is to be noted that in the meanwhile, the decision of this Court in D.P. Metals v. State of Rajasthan and Anr. (supra), has been over-ruled by the Supreme Court in State of Rajasthan and Anr. v. D.P. Metals (2). Therefore, Shri S.M. Mehta, learned Advocate General argued that the challenge to Section 77 (8) does not survive. The Supreme Court has held that the provisions to check evasion of tax are within the legislative competence of the State Government under Entry-54 of List-II. Section - 77 (5) was consequential to Section 78(2) since what is sought to be punished is contravention of the requirement of Section 78(2). It was also observed by the Supreme Court that Section 78(5) and Section 78(8) are part of an integral scheme and they deal with two separate classes of people referred to in Section 78(2). These provisions are meant curb the practice of tax evasion and the validity thereof was upheld by the Supreme Court. Thus, according to the learned Advocate General nothing survives in this petition and the same is liable to be dismissed.

Learned counsel for the petitioner argued the petitioner is not a dealer within the definition of the word ''dealer'' contained in Section 2(14) of the Act and, therefore, he could not be made liable under the impugned provisions. The word ''dealer'' has been defined in the Act as under:

"dealer'' means any person, who carries on business in any capacity, of buying, selling, supplying of distributing goods directly or otherwise, or making purchases or sales as defined in Clause (38) for himself or other, whether for cash of deferred payment, or for commission, remuneration or other valuable consideration.

Explanation-I.

Every person who conducts any business activity of buying, selling, supplying or distributing goods, as an agent for the purpose of this Act.

Explanation-II.

The Central or any State Government or any of their department of offices which, whether or not in the course of business, buy, sell, supply or distribute goods directly or otherwise, whether for cash or deferred payment, or for commission, remuneration or other valuable consideration shall be deemed to be a dealer for the purpose of this Act.

According to the learned Advocate General, in view of the explanations contained in the section and in view of the statement of the petitioner recorded by the authorities, copy whereof has been placed on record, the petitioner falls within the definition of the word ''dealer'' and the contention of the learned counsel for the petitioner to the contrary is not tenable. In this connection, the relevant portion of the statement of the petitioner recorded by the Department is reproduced as under:-

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From the above statement of the petitioner read with definition of the word ''dealer'' alongwith the explanation, it is clear that it is not possible to exclude the petitioner from the definition of ''dealer''. For this reason Section 77 of the Act would clearly cover the petitioner and the petitioner is amenable to the provisions contained in the said section. The provision of Section 77 being in the nature of penalty and being within the legislative competence of the State, cannot be found fault with particularly on the ground of being violative of Article 14 and 19 of the Constitution of India. These are salient provisions for checking evasion of tax. Complete machinery for enforcing the provisions is contained within the section itself.

Thus, we find no merit in the contention that Section 77(8) of the Act is ultravires the Constitution. As matter of fact, in view of the decision of the Supreme Court in State of Rajasthan and Anr. v. D.P. Metals (supra), nothing survives so far as challenge to the constitutional validity of the said provision is concerned.

The Writ Petition is accordingly dismissed. No order as to costs.