K. Vinod Chandran, J.@mdashWhether the parcel/courier/transporting and clearing agencies [hereinafter referred to as "transporting agency"] functioning within the State are liable for registration under Section 15 of the Kerala Value Added Tax Act, 2003, is the question that arises in the aforesaid cases. The writ petitions are filed by a transporting agency challenging the notices issued based on Circular 33 of 2006, threatening penalty for non-registration and the subsequent issuance of registration.
2. The learned counsel for the petitioner would contend that a transporting agency does not come under the definition of "dealer" under sub-clause (xv) of Section 2 or the non-obstante clause under sub-section(2) of Section 15 and hence would not be obliged to obtain registration under Section 15 of the Act. The petitioner does not however, seek to resile from its commitment under Section 52, wherein inter alia, a transporting agency has to submit returns and information as prescribed under Rule 11 of all goods cleared forwarded or transported or shipped by it. It does not also seek to be exempted from the obligation to produce before the assessing authority concerned, its books of account or other documents, which the assessing authority may call for, for verification of the correctness of the returns submitted.
3. The learned Government Pleader, however, would contend that the transporting agency would come within the definition of "dealer". The learned Government Pleader would further place reliance on
4. Both the learned counsel would place reliance on
5. For convenience, the definition of "dealer" under Section 2(xv), is extracted hereunder:-
(xv) "dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, executing works contract, delivering any goods on hire-purchase or on any system of payment by installments; transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration not being an agriculturist and includes:-
(a) a casual trader;
(b) a commission agent, a broker or a del credere agent or an auctioneer or any other mercantile agent, by whatever name called, of such dealer;
(c) a non-resident dealer or an agent of a non- resident dealer or a local branch of a firm or company or association or body of person whether incorporated or not situated outside the State;
(d) a person who whether in the course of business or not, sells
(i) goods produced by him by manufacture or otherwise; or
(ii) trees which grow spontaneously and which are agreed to be severed before sale or under the contract of sale;
(e) a person who whether in the course of business or not:
(i) transfers any goods, including controlled goods whether in pursuance of a contract or not, for cash or for deferred payment or for other valuable consideration;
(ii) supplies, by way of or as part of any service or in any other manner whatsoever, goods, being food or any other articles for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration.
and so is Section 15.
Section 15: Registration of dealers:- (1) Every dealer whose total turnover in any year is not less than five lakh rupees shall, and any other dealer may, get himself registered under this Act.
(2) Notwithstanding anything contained in sub-section(1)
(i) every casual trader;
(ii)every dealer, registered under the Kerala General Sales Tax Act, 1963, (15 of 1963) immediately before the date of commencement of this Act whose total turnover under the said Act for the year preceding such date was not less t han the limit specified under sub-section (1);
(iii) every dealer registered under sub-section;
(3) of Section 7 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956);
(iv) every dealer who in the course of his business obtains or brings goods from outside the State or effect export of goods out of the territory of India;
(v) every dealer in bullion or specie or in jewellery of gold, silver or platinum group of metals;
(vi) every dealer residing outside the State, but carrying on business in the State;
(vii) every agent of a non-resident dealer;
(viii) every commission agent, broker, del credere agent, auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal;
(ix) any contractor and
(x) any State Government, Central Government, or Government of any Union Territory or any department thereof or any local authority/autonomous body, shall get himself registered under this Act, irrespective of the quantum of his total turnover.
(xi)any hallmarking unit.
(3) Notwithstanding anything contained in the foregoing sub-sections, an authorised retail or wholesale distributor dealing exclusively in rationed articles under the Kerala Rationing Order, 1966, shall not be liable to get himself registered under this Act.
(4) The burden of proving that a dealer is not liable to be registered under this Act shall lie on that dealer.
Section 52 reads as under:-
"Every clearing or forwarding house or agency transporting agency, shipping agency, shipping out agency, railway authorities, operators of leased railway wagons, air cargo authorities or steamer agency in the State shall submit to the assessing authority of the area such returns and information as may be prescribed of all goods cleared, forwarded, transported, or shipped by it. The assessing authority concerned shall have the power to call for and examine the books of account or other documents in the possession of such agency with a view to verify the correctness of the returns submitted and the agency shall be bound to furnish the books of account or other documents when so called for".
6. All the decisions relied on dealt with the constitutionality of the provisions, while in the instant case, there is no such challenge. The contention of the petitioner is that though it would be obliged to comply with Section 52, there being no statutory prescription, compelling the registration of a transporting agency, the circular issued by the Commissioner of Commercial Taxes, is beyond the scope of powers available to the Commissioner under Section 3 of the Act. The Statute having not specifically provided for registration of such transporting agencies and such agencies not having been included in the definition of "dealer", the Commissioner acted in excess of the powers conferred by the statute directing registration of such transporting agencies, is the argument.
7. Reliance placed on Tripura Goods Transport Association (supra), by both counsel, is apposite. In the aforesaid case, the amendment to the Tripura Sales Tax Act, 1976 and the rules brought in by the 11th amendment; obliged the transporting agencies in Tripura to obtain registration under the Act and to comply with various other formalities prescribed under the Act and Rules. The transporting agencies, so registered, were obliged to maintain accounts, according to the rules for carrying on the transportation business, including making declarations as prescribed. The challenge was based on the ground that the appellants were transporters and not dealers within the meaning of the definition under the Act.
8. The transporting agencies relied on a decision of the Hon''ble Supreme Court in
9. The decision in Santlal (supra) was held to be not applicable to the facts of Tripura Goods Transport Association (supra). The question was whether, the impugned provisions intended taxing of transporters resulting in impeding of the transport business, making it beyond the legislative competence and ultra vires Article 246 of the Constitution of India. It was held that when goods are sold and purchased inside or outside the State, the incidence of tax and the quantum of tax has to be ascertained for which it is necessary to identify the dealer, the taxable goods citus of sale and so on and so forth. If a transaction of sale or purchase, escapes the attention of the Taxing Authority, it results in loss to the state revenue and the mechanism provided and hence the provision was found to be one intended to overreach this possible escape. The maintaining of accounts by the transporter insisted upon under Section 36(a) was held to be only to aid the taxing authority to trace the dealer and fix the goods transported, so as to correlate the transport with the dealers, who have the liability to tax.
10. There was no intention discernible to treat the transporter as a dealer and consequently no obligation was cast on him to pay any tax, interest or penalty; which a dealer is required to pay. Only a false declaration and a finding of collusion could invite penalty. The need to make correct and complete declaration and filing of the same before the officer in charge of a check post or barrier, was also upheld on the very same reasoning. The fear of penalty being attracted, on a bona fide declaration being made; which turns out to be false, was also put to rest by the Hon''ble Supreme Court holding, that such penalty would not be attracted unless there is connivance between the transporter and the consignee. The challenge based on violation under 301 of the Constitution of India was hence negatived.
11. With respect to registration, the impugned provisions clearly included the provision to obtain a certificate of registration under Section 38B which is extracted hereunder:-
"38-B:- For carrying out the purposes of Section 38 every transporter, carrier or transporting agent operating its transport business relating to taxable goods in Tripura shall be required to obtain a Certificate of payment of such fees as may be prescribed."
The mandate of registration was upheld on the premise that this too merely aided the authorities in checking the evasion of tax and finding that registration makes it feasible for the authorities to trace out the defaulting dealers through the transporters. The aforesaid decision, was followed in the two latter decisions relied on by the learned Government Pleader.
12. Swastik Roadways (supra) was again a challenge against the prescription of maintenance of accounts, by clearing and forwarding agents and the penalty prescribed for failure to furnish the information on the transaction of dealers. The challenge was again based on Santlal''s case (supra), on the ground that the clearing and forwarding agents have no proximate connection with the sale or purchase of goods and the recovery of tax in the form of penalty, was hence, bad in law. The Court found that the power to levy a tax includes all incidental powers to prevent evasion of such tax. A brief illustration was struck insofar as the sale price, being net of the freight and such deduction claimed being liable to verification by the taxation authorities. Where there are excessive claims of deduction or fraud is detected, then, necessarily the particulars will have to be called for, from the clearing and forwarding agents, if the transport has been effected through them. The claim that the provisions were outside the scope of ancillary or incidental powers of legislature under Entry 54 of List II and the same having no nexus between such sale or purchase, was again negatived. The penalty sought to be levied was upheld on the basis of it being a deterrent measure and not in lieu of the tax evaded by the owner or dealer.
13. ABC (India) Ltd. (supra) was also a challenge against the provision requiring furnishing of information by clearing and forwarding agents, wherein almost similar obligations were cast on the transporters and powers were conferred on the Taxation Authority to call for the accounts, seize the same and to impose penalty, equal to three times the amount of tax sought to be evaded. Here too, it was found that there was no obligation on the transporters to pay any sales tax under the Act and the provisions were basically meant to check tax evasion. The requirement of maintenance of account, as also of obtaining registration by the transporters, was found to be for a similar purpose, as incorporated under the Tripura Sales Tax Act, 1976 and upheld in Tripura Goods Transport Association case (supra).
14. The essence of the findings of the aforesaid decisions therefore is that a State, making an enactment under Entry 54 of List II of Seventh Schedule would be competent to provide for registration of transporters of goods, intended for sale within or without the State and providing for measures to check evasion of tax, by requiring such registered transporters to file returns and to make declaration as prescribed for effective implementation of the enactments. The said power though not specifically enumerated, were held to be incidental and ancillary powers, conferred on the legislature to further the purpose of taxation enactments and to ensure due payment of tax and check evasion thereon. There can be no quarrel that if such provisions are available under a statute, the same have to be upheld on the principles of legislative competence as declared by the aforesaid binding precedents. The reliance placed by the learned Government Pleader, to that extent is only proper. But, however, as was noticed earlier, it is not the constitutionality of such provision that arise in the instant case. It is the lack of a provision obliging the transporters, to take registration, that has been urged herein.
15. Section 38B of the Tripura Sales Tax Act as extracted herein above, would indicate that the said legislation, specifically provided for registration by the transporting agency. The Kerala Value Added Tax Act, 2003, however, does not mandate such registration. It definitely mandates, by Section 52, the maintenance of proper accounts, the filing of returns and production of the accounts on demand, made by the Assessing Officer. While provision for obtaining registration under the taxation enactment was held to be ancillary or incidental power of the State legislature, under Entry 54 of List II, the same cannot be arrogated by the Commissioner, which, in effect, is what has been done by issuance of Circular No. 33/2006/CT. Admittedly there is no provision in the KVAT Act, obliging transporting agencies, to take registration thereunder. Hence, though there is no specific prayer to strike down the circular, this Court finds, on the above reasoning, that, the circular is beyond the powers conferred on the Commissioner under Section 3 of the KVAT Act, 2003 and the same is hence, liable to be set aside.
16. The further contention of the State, is with respect to the dealer being enjoined upon, to obtain registration, even as per the definition of ''dealer''. The definition of dealer as has been extracted above, under sub section (xv) of Section 2 does, in the body of the definition, take in only persons engaged in the business of buying, selling, supplying or distributing goods; for cash or for deferred payment or for commission or remuneration or for other valuable consideration. A transporting agency does not indulge in such activity and merely charges the freight for the transport of goods on the basis of the quantity, weight or the space the goods occupy, correlated with the distance traversed. A transporting agency does not also come within any of the enumerated categories in the inclusive definition provided under sub-section (xv) of Section 2 or the non-obstante clause under sub-section(2) of Section 15.
17. The learned Government Pleader would attempt to rope in the transporting agency, as being covered under sub-section (vii) of sub-section(2) of Section 15; being "every agent of a non resident dealer or under sub section (viii) again inter alia "being an agent, who supplies or distributes goods on behalf of any dealer. Sub-section (viii) obviously is qualified by the same being applicable only to a non-resident dealer. The agency being qualified by that being of a non-resident dealer; the transporting agency not engaged in any sale or purchase cannot fall to be registered by virtue of the said sub-section.
18. Further, the agency, contemplated under sub-section (2), does not at all take in a transporting agency since, what is intended is an agency which has a nexus with the sale and purchase of goods as such. The essential distinction would be that a transporting agency cannot be deemed to be an agency supplying and distributing goods, which words used in sub-clause (viii) definitely, takes the colour of the previous words, "business of buying and selling", employing the rule of ejusdem generis. The delivery of goods, in pursuance of a sale, to a purchaser though has a proximate connection with the sale, does not clothe the transporting agency with the necessary concomitants of an agency, as understood in law.
19. In this context, the decision of the learned Single Judge in Excel Assay & Hallmarking Centre (supra) too assumes significance. The hallmarking being a service as provided under the Finance Act, 1994 and despite the service rendered by such unit, does not involve any sale or delivery of goods, following the Tripura Goods Transport Association case (supra), the provision was upheld, but however the inclusion of a provision mandating registration by such an agency.
20. As was noticed, there is absolutely no bar on the legislature, to provide for registration of transporting agencies, who have an intimate and proximate connection, to the sales and purchase of goods, and also provide for filing of returns, and inspection of accounts of such transporting agencies. However, as the Act, stands now, it only mandates the latter and does not provide for registration. The statute having not provided for the same, the Commissioner as was noticed, is not entitled to bring in such transporting agencies invoking the administrative powers conferred under Section 3 of the KVAT Act. The above discussion lead this Court to the irrefutable conclusion that the petitioner is not liable to be registered.
W.P(C).No.28690/2011 is infructuous, insofar as the notice challenged therein having culminated in the petitioner being registered, the same is so dismissed. W.P(C).No.31635/2011, challenging the registration made, is allowed. Exts.P6 and P7 would stand set aside. Parties to suffer their respective costs.
