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PETITIONER: M/s.  NAND LAL RAJ KISHAN

       Vs.

RESPONDENT: COMMISSIONER OF SALES TAX, DELHI AND ANOTHER

DATE OF JUDGMENT: 14/03/1961

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. AIYYAR, T.L. VENKATARAMA DAS, S.K. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1962 AIR  562            1961 SCR  Supl. (3) 707  CITATOR INFO :  D          1966 SC1686  (9)  RF         1981 SC 991  (10)  RF         1987 SC1059  (18)

ACT: Sales  Tax Act--Security demanded for payment of  tax--Vali- dity  of--Bengal Finance (Sales Tax) (Delhi Amendment)  Act, 1956 (Act 17 of 1956), s. 8A.

HEADNOTE: The  validity  of  s. 8A of the Bengal  Finance  (Sales  Tax (Delhi  Amendment)  Act, 956, enabling the  Commissioner  of Sales Tax to demand security from dealers for payment of tax was  challenged by the petitioners on the grounds  that  (i) the section gave undefined, unlimited and unrestricted power to the commissioner, (ii) no limit was fixed for the  amount of  security, and (iii) the section did not provide for  any enquiry  before the demand of security, nor did  it  provide for an opportunity of being heard being given to the  person against whom the order was proposed to be passed. Held, that s. 8A did not give any unlimited or  unrestricted power  to the Commissioner of Sales Tax.  The power  of  the Commissioner of Sales Tax was subject to the condition  that it (1)[1958] 9 S.T.C. 194. 284 must  appear lo him to be necessary to demand  security  for the proper realisation of the tax.  The power to levy a  tax includes  the  power  to impose  reasonable  safeguards  for collecting it and demanding security for the proper  payment of   tax  is  neither  in  arbitrary  nor  an   unreasonable restriction. Durga  prasad  Khaita v. Commercial Tax  Officer,  [1957]  8 S.T.C. 105, approved. Dwarka  Prasad Laxmi Narain v. The State of  Uttar  Pradesh, [1954] S.C.R. 803, distinguished. Virendra  v.  The  State of Punjab, [1958]  S.C.R.  308  and Kishan Chand Arora v. The Commissioner of police,  Calcutta, [1961] 3 S.C.R. 135, referred to.

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The  power  of  the Commissioner as regards  the  amount  of security was not unlimited because the order of the  Commis- sioner  was  subject to revision and scrutiny by  the  Chief Commissioner. In  the instant case an opportunity having been give to  the petitioners for submitting their defence and an  explanation having been actually submitted by the petitioners there  was no violation of the principles of natural justice.  A second opportunity for oral hearing was not obligatory.

JUDGMENT: ORIGINAL JURISDICTION: Petition No. 77 of 1958. Petition  Under  Art. 32 of the Constitution  of  India  for enforcement of Fandamental Rights. Bhavani Lal and P. C. Agarwala, for the petitioners. C.K.  Daphtary, Solicitor-General of India, B.  Ganapathy Iyer and T. M. Sen, for the respondents. 1961.  March 14.  The Judgment of the Court was delivered by S.K. DAS, J.-This is a writ petition under Art. 32 of the Constitution.   The  petitioners,  Messrs.   Nand  Lal   Raj Kishan,  carry on a business of commission agents  at  Delhi and are liable to pay sales tax in respect of their business under the provisions of the Bengal Finance (Sales Tax)  Act, 1941,  as  in force in Delhi.  They filed returns  for  four quarters of 195455 and claimed exemption in respect of sales of certain goods to the registered dealers under the  provi- sions of s. 5(2)(a)(ii) of the said Act.  By his order dated April  11,  1956,  the  Sales  Tax  Officer  disallowed  the exemption  claimed by the petitioners mainly on  the  ground that the alleged sales were made to "those 285 registered  dealers whose activities had gone  underground." The Sales.  Tax Officer issued a demand notice for a sum  of Rs. 1,11,890-11-0 on account of sales tax.  The  petitioners then  carried  an appeal to the  Assistant  Commissioner  of Sales Tax, Delhi.  The Assistant Commissioner set aside  the order  of the Sales Tax Officer and remanded the case for  a fresh  decision in the light of certain judgments  given  by the Chief Commissioner, Delhi, in a number of similar cases. In  the meantime the Bengal Finance (Sales Tax)  Act,  1941, was  amended  by  the  Bengal  Finance  (Sales  Tax)  (Delhi Amendment)  Act,  1956,  being Act No.  17  of  1956.   This amending  Act  which came into force on  October  27,  1956, inserted a new section, which is  s.    8A of the Act.  This section reads as follows:               "S.  8A.   Security  from  certain  class   of               dealers.The Commissioner, if it appears to him               to  be  necessary  so to  do  for  the  proper               realisation of the tax levied under this  Act,               may  impose  for  reasons to  be  recorded  in               writing  as  a  condition of the  issue  of  a               registration certificate to a dealer or of the               continuance, in effect, of such a  certificate               issued  to any dealer, a requirement that  the               dealer  shall give security up to  ail  amount               and in the manner approved by the Commissioner               for the payment of the tax for which he may be               or become liable under this Act." On  May  17,  1957,  the  petitioners  asked  for  a   fresh registration  certificate on the ground that their  original certificate  had been lost in transit.  They  further  asked for  the  addition  of  some more  items  of  goods  in  the registration  certificate,  such as  cigarettes,  bidis  and

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glass  of all kinds.  Thereupon the Sales Tax  Officer  made certain  enquiries and found that the petitioners  had  been frequently  shifting their places of business and the  sales alleged to have been made by them to some registered dealers were not genuine, because those persons could not be  traced at the addresses given.  On a report being submitted to  the Commissioner of Sales Tax, Delhi, the Commissioner asked the Sales Tax Officer to issue a notice to the petitioners.  On 286 July 13,1957, such a notice was issued to the petitioners to show  cause  why  they  should not be  asked  to  furnish  a security of Rs. 10,000 in accordance with the provisions  of s.  8A.  The petitioners then appeared before the Sales  Tax Officer and made a statement  that they were not prepared to deposit  any amount as security.  They also filed a  written explanation objecting to the demand of security.  The matter was then referred to the Commissioner of Sales Tax who  con- sidered the explanation of the petitioners and the report of the  Sales  Tax  Officer.  The  Commissioner  expressed  his finding in the following words:               "In  view  of the reputation that  the  dealer               enjoys in the market, namely, that he being  a               commission  agent  has  been  engaged  in  the               business of selling goods to other  commission               agents,   all   sales   being   effected    to               unscrupulous   registered  dealers,   frequent                             changes  in  the  name and  place  of  busines s               without   giving   specific   details,    late               submission   of  information   regarding   the               changes:  in the name and place  of  business,               non-submission of returns for the year 1956-57               within the prescribed time, it appears  neces-               sary  to demand security under section  8A  of               the Bengal Finance (Sales Tax) Act, 1941 as in               force in Delhi." Accordingly,  on  November  27,  1957,  he  made  an   order directing the petitioners to furnish security either in cash or  by  two  personal sureties for a Bum  of  Rs.  5,000  by December  15,  1957.   Against the aforesaid  order  of  the Commissioner  the petitioners went in revision to the  Chief Commissioner of Delhi.  The Chief Commissioner heard Counsel for  the petitioners and by his order dated April 15,  1958, dismissed the application in revision.  The petitioners then filed  a  writ petition in the Punjab High Court  which  was summarily dismissed. On  the present writ petition the petitioners have  impugned the order of the Commissioner dated November 27, 1957 on the ground  that  s.  8A of the Act under which  the  order  was passed  is constitutionally invalid.  They  have  challenged the  validity  of  s. 8A on three grounds:  firstly,  it  is contended that s. 8A 287 gives an undefined, unlimited and unrestricted power to  the Commissioner of Sales Tax; secondly, it is contended that no limit  is fixed with regard to the amount of security  which may  be  demanded  under the section;  and  thirdly,  it  is contended   that   the  section  imposes   an   unreasonable restriction  on  the right of the petitioners  to  carry  on their  business  inasmuch  as it does not  provide  for  any enquiry before the demand for security is made, nor does  it provide for an opportunity being given to the person against whom  the  order  is proposed to be passed  of  being  heard before such order is passed. We  do  not  think that these grounds  have  any  substance.

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Section 8A does not give unlimited or unrestricted power. to the  Commissioner of Sales Tax.  It states inter  alia  that the  Commissioner may impose for reasons to be  recorded  in writing  as  a  condition  of  the  issue  of   registration Certificate  to  a dealer, or of the continuance of  such  a certificate,  a  requirement  that  the  dealer  shall  give security  up to an amount and in the manner approved by  the Commissioner for the payment of the tax for which he may  be or   become  liable  under  the  Act:  this  power  of   the Commissioner  is, however, subject to the condition that  it must "appear to him to be necessary so to do for the  proper realisation  of  the tax levied under the  Act".   In  other words, the Commissioner may exercise his power of  demanding security  only when he considers it necessary to do  so  for the proper realisation of the tax levied under the Act.   By no stretch of argument can it be suggested that the power is an unlimited or an unrestricted power.  Learned Counsel  for the  petitioners  has referred us to the  decision  of  this Court in Messrs.  Duarka Prasad Laxmi Narain v. The State of Uttar Pradesh (1).  That was a case in which under cl.  4(3) of the Uttar Pradesh Coal Control Order, 1953, the licensing authority  was, given absolute power to grant or  refuse  to grant,  renew or refuse to renew suspend, revoke, cancel  or modify  any licence under the Order.  It was pointed out  by this  Court that there was nothing to regulate or guide  the discretion (1)[1954] S.C.R. 803. 288 of the licensing officer and the provision impugned  therein committed  to the unrestrained will of a  single  individual the  power to grant, withhold or cancel licences in any  way he chose.  That is not the position here.  Section 8A itself gives   the  necessary  guidance  when  it  says  that   the Commissioner  may  exercise  his  power  only  when  it   is necessary  to  do so for the proper realisation of  the  tax levied under the Act.  In a later decision of this Court  in Virendra v. The State of Punjab (1) it was pointed out  that in   Dwarka  Prasad’s  case  (1)  the   impugned   provision prescribed no principles and gave no guidance in the  matter of  the  exercise  of the power, but in  a  case  where  the exercise of the power is conditioned by the statute  itself, the  ratio  in Dwarka Prasad case (2) does not  apply.   The same  view  was  reiterated in Kishan  Chand  Arora  v.  The Commissioner of Police, Calcutta (3). Section  7(4a)(i)  of the Bengal Finance  (Sales  Tax)  Act, 1941,  gives  the  power  to  the  Commissioner  to   demand reasonable  security for the proper payment of  tax  payable under  the Act.  This section came in for  consideration  of the   Calcutta  High  Court  in  Durga  Prasad  Khaitan   v. Commercial Tax Officer (4) and it was held that the  section did  not  confer  unfettered  or  arbitrary  power  to   the Commissioner.  We approve of the view expressed therein that the  power  to  levy  a tax includes  the  power  to  impose reasonable  safeguards  in  collecting  it,  and   demanding security for the proper payment of the tax payable under the Act is neither an arbitrary nor an unreasonable restriction. As  to the contention that there,is no limit to  the  amount which  can be demanded as security, it is only necessary  to point  out that the amount that can be demanded as  security must  have relation to the payment of the tax for which  the person concerned may be or become liable under the Act.  The amount  must  depend  on the nature  of  the  business,  its turnover and the amount of tax payable thereon by the person concerned.  Furthermore, the order of the Commissioner under s. 8A is subject to revision by the Chief

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(1)  [1958] S.C.R. 308, 321 (3)  [1961] 3 S.C.R. 135. (2)[1954] S.C.R. 803. (4)[1937] 8 S.T.C. 105. 289 Commissioner  and if an arbitrary or unreasonable amount  is demanded,  the order of the Commissioner will be subject  to scrutiny  by the Chief Commissioner.  We do not  think  that even  in the matter of the amount of security, the power  of the Commissioner is unlimited or unrestricted. As to the last contention that the section does not  provide for any enquiry or any opportunity being given to the person against  whom  the order is proposed to be passed  of  being heard,  this point was taken before the  Chief  Commissioner and  the  Chief Commissioner rightly pointed  out  that  the principles of natural justice would apply and the person  to whose  prejudice  the order is to be made must be  given  an opportunity  to say whatever he has to say in  his  defence. In  the  present case such an opportunity was given  to  the petitioners.  A notice was issued to the petitioners by  the Sales  Tax  Officer.  The petitioners  appeared  before  the Sales Tax Officer, submitted a written explanation and  also made oral submissions.  The Commissioner had before him  the report  of the Sales Tax Officer, the explanation  submitted by  the petitioners in reply to the notice issued, and  also the statements made by them. It  has been contended on behalf of the petitioners that  no oral   hearing   was  given  to  the  petitioners   by   the Commissioner  of  Sales  Tax and  learned  Counsel  for  the petitioners  has  made  a grievance that the  order  of  the Commissioner was passed without hearing the petitioners.  It may be pointed out here that when the petitioners were heard by the Chief Commissioner in support of their application in revision,  they  made  no grievance on the  score  that  the Commissioner  of  Sales  Tax had not  given  them  a  second opportunity of a fresh oral hearing.  We do not think that a second  opportunity like the one suggested on behalf of  the petitioners   was  either  necessary  or  obligatory.    The petitioners  had an opportunity of saying what they  had  to say  against  the  demand of security.   They  raised  their objections which were considered by the Commissioner who, in spite  of those objections, came to the conclusion  that  it was necessary to ask the petitioners 37 290 to  furnish security for the proper realisation of  the  tax levied  or leviable under the Act.  We agree with the  Chief Commissioner  that there was no violation of the  principles of natural justice in the present case. For  the reasons given above we hold that there is no  merit in the petition which is accordingly dismissed with costs.                                     Petition dismissed.