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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.