STATE OF RAJASTHAN AND ANR. versus M/S. D.P. METALS

Citation: [2001] SUPP. 3 S.C.R. 572 · Decided: 04-10-2001 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
STATE OF RAJASTHAN AND ANR. 
v. 
MIS. D.P. METALS 
OCTOBER 4, 2001 
B 
[B.N. KIRPAL, N. SANTOSH HEGDE AND B.N. AGRAWAL, JJ.] 
c 
D 
E 
F 
G 
Sales Tax: 
Rajasthan Sales Tax Act, 1994-Section 78(2) & (5)-/nspection of 
documents at check-post-Non-production of declaration Form ST 18k 
Levy of penalty-Validity and legislative competence of State on levy of 
penalty-Held, the levy is valid as State has legislative competence to check 
evasion of sales tax-Constitution of India, 1950-Entry ~4 in List II o.f Seventh 
Schedule-Rajasthan Sales Tax Act, 1954 (since repealed)-Sections 22-A & 
22-B. 
Levy o.f Penalty at 30% after issuing show-cause notice-Discretion of 
Revenue not to levy or levy lesser penalty-Existence o.f mens rea-Held, on 
.facts, necessary documents not produced even after affording opportunity to 
produce them-Hence, mens rea existed-No discretion given by Legislature to 
Revenue not to levy or levy lesser penalty. 
A truck carrying goods of respondent-dealer was stopped at a check-
post by Sales Tax authorities and on finding that the person incharge of the 
goods was not carrying declaration Form ST 18A as required under Section 
78(2) of the Rajasthan Sales Tax Act, 1994, the department seized the 
goods. A show~cause notice was issued by Revenue to the· respondent• 
dealer. After hearing, Revenue levied penalty at 30% of the value of the 
goods under Section 78(5) of the Act. Similar action was taken by Revenue 
against other respondent-dealers. The respondents filed applications before 
Taxation Tribunal challenging the provisions of Section 78(5) of the Act 
and claiming consequential relief of the quashing of penalty orders. Pursuant 
to abolition of the Taxation Tribunal, the applications were transferred to 
High Court as Writ Petitions. High Court allowed the Writ Petitions of the 
respondents holding Section 78(5) of the Act as unconstitutional and ultra 
vires. 
H 
In appeal to this Court, the appellant-State contended that the power 
572 
.. 
STATE v. D.P. METALS 
573 
to levy penalty under Section 78(5) of the Act is meant to check evasion of 
A 
sales tax and is incidental to the power of levy of sales tax which is within · 
the legislative competence of the State under Entry 54 of List II of the 
Constitution; and that similar provisions existed in the Sales Tax Actc; of 
other States also. 
The respondent-dealers contended that Section 78(5) of the Act is 
ultra vires being beyond the legislative competence of the State; that the 
penalty imposed under the section has no nexus with the evasion of sales 
tax; and that in the absence of mens rea, a mere technical breach, which is 
unintentional and bona fide, should not by itself invite penalty under the 
Section. 
Allowing the appeals, the Court 
HELD : 1.1. It is settled law that provisions to check evasion of sales 
tax are within the legislative competence of the States under Entry 54 in 
List II of the Seventh Schedule of the Constitution. The provisions to make 
the imposition of tax efficacious or to prevent evasion of tax are within the 
legislative competence. The persons referred to in Section 78(2) of the 
Rajasthan Sales Tax Act, 1994 are persons concerned with the movement 
of goods, which are sold or likely to be sold. With there being no valid 
challenge to Sectim. 78(2) of the Act, a provision contained in Section 
78(5), which provides for levy of penalty in case of non-compliance 
of Section 78(2), can only be regarded as consequential and valid. H there 
was legislative competence to enact Section 78(2), then the same power 
contained in Entry 54 in List II could enable the State Legislature to 
provide for consequence of non-compliance by incorporating sub-section 
(5) therein. Section 78(5) and Section 78(8) of the Act are part of an 
integral scheme and deal with two separate classes of people referred to in 
Section 78(2). [597-G-H; 598-A-B] 
Sodhi Transport Co. & Ors. v. State of U.P. & Ors., [1986] 2 SCC 486; 
Delite Carriers (Regd.) v. State of Haryana & Ors., (1990) 77 STC 170 and 
Tripura Goods Transport Association & Am: v. Commissioner o.f Taxes & Ors., 
[1999] 2 sec 253, relied on. 
The Check Post Officer & Ors. v. K.P. Abdulla & Bros., [1970] 3 SCC 
B 
c 
D 
E 
F 
G 
355 and State of Haryana & Ors. v. Sant Lal & Am:, [1993] 4 SCC 380, 
H 
A 
B 
574 
SUPREME COURT REPORTS 
[2001] SUPP. 3 S.C.R. 
distinguished. 
2._1. Under Section 78(5) of the Act, levy of penalty is only on the 
person incharge of the go

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