JUDGMENT
I.A. Ansari, J.
1. By making this application under Article 226 of the Constitution of India, the petitioner has sought for issuance of appropriate writ(s) setting aside and quashing the instructions issued by the respondent No. 1, to the remaining respondents directing them to demand at sales tax check posts including one at Boxirhat, security, from vehicles carrying, amongst others, non-ferrous scraps in course of inter-State trade and commerce from the State of Assam to other States and commanding the respondents not to collect security in respect of such vehicles in each and every case.
2. In a nut shell, petitioner’s case runs as follows :-
The petitioner is a registered dealer not only under the Assam General Sales Tax Act, 1993 (hereinafter referred to as the “Act of 1993”), but also under the Central Sales Tax Act, 1956 (hereinafter referred to as the “Act of 1956”) and carries on the business of purchase, sale and supply of non-ferrous metal scraps in the State of Assam. In course of its business, the petitioner despatches non-ferrous metal scraps, purchased in the State of Assam, to its consignment agents appointed in other part of the country. The consignment agents, so appointed, sell the materials belonging to the petitioner on the account of the petitioner. The despatches, so made to the consignment agents, are on stock transfer basis, i.e., otherwise than by way of sale and the same is not taxable under the Act of 1956. The petitioner appointed one M/s Gaurav Metal Corporation in Delhi as its consignment agent and entered into a formal agreement with the said firm (annexure – I). While the goods are sent on stock transfer basis by the petitioner through local transporters, the vehicles carry with them all requisite challans, papers, etc., which are statutorily required for such purposes. In the past, there was no difficulty in carrying on its business by the petitioner, but since the year 1996, the vehicles carrying materials sent by the petitioner to its consignment agents are being stopped at Boxirhat check post and a security of Rs. 5,000 per truck is demanded, under the Act of 1956, for allowing the vehicles to cross the barriers of the check post. One of such consignments sent by challan, dated 3.6.1996 (annexure-II) was stopped at the said check post and vide receipt, dated 7.6.1996 (annexure-II) a sum of Rs. 5,000 was realized from the petitioner by way of security under the Act of 1956. The petitioner has been informed that the said action is being taken on the basis of instructions issued by the Commissioner of Taxes. The petitioner has also been informed that in future, a sum of Rs. 20,000 per vehicle carrying non-ferrous metal scraps will be realized as security under the Act of 1956, at the said check post. The petitioner has come to know the respondent No. 1, namely, Commissioner of Taxes has issued a circular/order, dated 4.2.1995 (annexure-III). As per the instructions so issued, the check post officers stand directed to realize security at the rates mentioned in the said circular/order. Thereafter, by another circular issued on 3.9.1995, the rates of security have been revised. The circulars/orders, under challenge, mention that the instructions aforementioned should be treated as most confidential and should not made known to anyone. The action of the Commissioner of Taxes in issuing the instructions, in question, to the check post officers to realize security at the rates fixed by the Commissioner of Taxes as well as the action of the check post officers in demanding security at the check posts under the Act of 1956 in respect of each vehicle carrying non-ferrous metal scraps sent to the consignment agents of the petitioner stand challenged in the present writ petition.
3. Though the respondents have contested the case, they have not filed any affidavit-in-opposition.
4. I have perused the materials on record including the impugned circulars/orders. I have heard Dr. A. K. Saraf, learned senior counsel for the petitioner, and Mr. B. J. Talukdar, learned Government Advocate appearing on behalf of the respondents.
5. According to Dr. Saraf, furnishing of security for the proper realization of tax is not compulsory under the Act of 1956 and the competent authority has to apply its mind to the facts and circumstances of the case of a particular assessee to derive satisfaction that for proper realization of tax under the Act of 1956, furnishing of security is necessary. This exercise of powers, points out Dr. Saraf, is quasi-judicial in nature and no authority superior to the assessing authority can direct the assessing authority to demand security. Such directions, contends Dr. Saraf, divests the assessing authority of the quasi-judicial powers, which the Act of 1956 vests in assessing authority. The impugned circulars/orders, therefore, submits Dr. Saraf, are wholly without jurisdiction and deserve to be set aside.
6. Referring extensively to various provisions of the Act of 1956 and the Act of 1993, Dr. Saraf has pointed out that under Section 7(2A) of the Act of 1956 security can be demanded only at the time of granting of the certificate of registration and not thereafter. It is has also been pointed out by Dr. Saraf that Section 7(3A) read with Section 7(3A) of the Act of 1956 show that even when additional security is to be demanded after granting of the certificate of registration, the same cannot be done without giving an opportunity of hearing to the person concerned. This shows that such demand of additional security can be made, contends Dr. Saraf, only in specific cases, which call for application of judicial mind and that such security cannot be demanded arbitrarily or in a routine manner. This apart, for making demand of such additional security under Section 7(3A), further contends Dr. Saraf, reasons for making such a demand have to be recorded in writing.
7. Dr. Saraf submits that since instructions issued in the present case are routine in nature and the demand of security has been made in an arbitrary and routine manner without any application of judicious mind, the same one wholly and without jurisdiction. It is also submitted by Dr. Saraf that since the power to demand additional security is a quasi-judicial power, it cannot be demanded under the instructions of any superior authority, for, if it is so done, it would amount to non-application of mind by the authority demanding security, and such mechanical exercise of power is untenable in law.
8. Controverting the above submissions made on behalf of the petitioner, Mr. Talukdar has submitted that though security cannot be demanded in a routine manner, appropriate authority can, indeed, raise demand for security, if it is of the view that for the purpose of realization of the tax, such security is essential.
9. Before entering into the merit of the rival submissions made before me on behalf of the parties it is pertinent to note that whether Section 7(2A) of the Act of 1956, empowers the authority, which grants certificate of registration, to demand and realize security.
Section 7(2A) reads as under.
7(2A) where it appears necessary to the authority to whom an application is made under Sub-section (1) or Sub-section (2) so to do for the proper realization of the tax payable under this Act or for the proper custody and use of the forms referred to in Clause (a) of the first proviso to Sub-section (2) of Section 6 or Sub-section (1) of Section 6A or Clause (a) of Sub-section (4) of Section 8, he may, by an order in writing and for reasons to be recorded therein, impose as a condition for the issue of a certificate of registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order such security, as may be so specified, for all or any of the aforesaid purpose.
10. From a plain reading of Section 7(2A) of the Act of 1956, it is clear that these provisions are applicable only at the time of granting of certificates of registration. Since the petitioner is already a registered dealer under the Act of 1956, the provisions of Section 7(2A) are not applicable to the case of the petitioner. This position is not disputed by Mr. Talukdar.
11. Coming to Section 7(3A) of the Act of 1956, I notice that Section 7(3A) deals with the powers of the authorities to demand additional security after the grant of the certificate of registration. Section 7(3A) read as under –
7. (3A) Where it appears necessary to the authority granting a certificate of registration under section so to do for the proper realization of tax payable under this Act or for the proper custody and use of the forms referred to in Sub-section (2A) he may, at any time, while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted to furnish within such time as may be specified in the order and in the prescribed manner such security, or if the dealer has already furnished any security in pursuance of an order under this sub-section or Sub-section (2A), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.
12. Section 7(3B) of the Act of 1956, however, makes it clear that no dealer shall be required to furnish any security under Sub-section (2A) or additional security under Sub-section (3A) unless he has been given opportunity of being heard.
13. From a careful reading of Section 7(2A) and Section 7(3A) of the Act of 1956 it is clear that additional security can be demanded only when according to Section 7(3A), “it appears necessary”. In other words, additional security can be demanded only for good and sufficient reasons. It is, therefore, imperative on the part of the authority concerned to consider and to weigh the pros and cons in each case and revise demand for security or additional security only when the authority concerned is subjectively satisfied on objective consideration of the materials concerned that there are good and sufficient reasons for demanding such security and/or additional security.
14. Coupled with the above, opportunity of hearing has to be given to the dealer before additional security is demanded under Section 7(3A). It logically follows that security cannot be demanded under the Act of 1956 in a routine manner in respect of every vehicle going outside the State of Assam carrying scrap materials. It further logically follows that the power of demanding security has to be exercised in a judicious manner and not arbitrarily. Far from this, good and cogent reasons must be specified for making such a demand.
15. It is also of immense importance to note that the provisions of the Act of 1993, as regards security, cannot also be made applicable in respect of the inter-State transactions. This position becomes amply clear from a plain reading of Section 46(5) of the Act of 1993 inasmuch as Section 46(5) empowers the authority concerned to demand security if, on examination and inspection, it is found that the tax, if any, payable under the Act of 1993 in respect of sale and purchase of goods carried has not been paid or that the sale or purchase of the goods for the purpose of payment of the tax under the Act of 1993 has not been properly accounted for in the documents referred to in Sub-section (7) of Section 46 or where no complete or correct declaration has been given in respect of the goods carried.
16. It is also imperative to note that under Section 7(2A) and/or Section 7(3A), security and/or additional security, as the case may be, can be demanded only by the authority, which is competent to grant certificate of registration. According to Section 9(2) of the Act of 1956, the authorities empowered to assesss, re-assess, collect and enforce payment of tax under the Central Sales Tax Law of the appropriate State shall, on behalf of the Government of India, assess, re-assess, collect and enforce payment of tax including interest, penalty, etc. under the Act of 1956. It is worth mentioning, in this regard, that Section 11 of the Act of 1993 makes it clear that the assessing officer is the competent authority to grant certificate of registration under the Act. The assessing officer has been defined by Section 2(3) of the Act of 1993 as under :
2.3 “Assessing Officer” means any person appointed to assist the Commissioner under Sub-section (1) of Section 3 to whom all or any of the powers of the Commissioner for levy and collection of tax conferred by or under this Act or rule framed thereunder has been delegated by the Commissioner under Sub-section (3) of that section.
17. Section 3(1) of the Act of 1993 provides that the State Government may, by notification, appoint a person to be the Commissioner of Taxes together with such other persons to assist him as it thinks fit and may specify the area or areas over which they shall exercise the jurisdiction.
18. Rule 2(d) of the Act of 1993, defines the assessing officer to mean the Senior Superintendent of Taxes or the Superintendent of Taxes. The State Government, vide notification No. CTS-3/92/14, dated 2nd July, 1993, delegated the powers of the Commissioner of Taxes to the Senior Superintendent of Taxes and the Superintendent of Taxes in exercise of the powers under Section 3(3) of the Act of 1993. Thus, the authority competent to grant certificate of registration under the Act of 1956 is the Senior Superintendent of Taxes or the Superintendent of Taxes. It follows, as a corollary, that is the Senior Superintendent of Taxes or the Superintendent of Taxes, who can demand additional security and they are further empowered to raise such demands only when they are so satisfied after affording opportunity of hearing to the dealer concerned. It, therefore, further follows that the Commissioner of Taxes cannot direct the Senior Superintendent of Taxes or Superintendent of Taxes to demand additional security in respect of inter-State trade or commerce.
19. Demand of tax and/or security is a quasi-judicial act and has to be exercised in a quasi-judicial manner in strict compliance of the provisions of the relevant statute. Tax and/or security cannot be demanded and/or collected by an authority without complying with the provisions of the relevant statute. No authority, superior to an assessing authority, can interfere with the quasi-judicial functions of an assessing authority by issuing administrative directions. The Apex Court has in Orient Paper Mills Ltd. v. Union of India, (1969) SC 48, made the position of law in this regard clear in the following words :
“If the power exercised by the Collector was a quasi judicial power as we hold it to be that power cannot be controlled by the directions issued by the Board. No authority however, high placed can control the decision of a judicial or a quasi judicial authority. That is the essence of our judicial system. There is no provision in the Act empowering the Board to issue directions to the assessing authorities or the appellate authorities in the matter of deciding disputes between the persons who are called upon to pay duty and the department. It is true that the assessing authorities as well as the appellate authorities are Judge in their own cause ; yet when they are called upon to decide disputes arising under Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others”.
20. In the present case, there is no dispute before me that the goods of the petitioner are sent to the consignment agents otherwise than by way of sale. Hence, such a transportation of goods is not taxable under the Act of 1956. In view of the fact that security can be demanded only for proper realization of the tax payable under the Act of 1956 and in view also of the fact that no tax is payable by the petitioner on stock transfer, the act of demanding of security by the respondents on such stock transfer at the check posts aforementioned on the strength of the impugned circulars/orders is per se illegal, without jurisdiction and not tenable in law.
21. What, thus, crystallizes from the above discussion is that the Commissioner of Taxes has no power whatsoever to issue instructions/ directions to his subordinates asking to demand security indiscriminately and mechanically nor can the Commissioner of Taxes fix the rates of such security in the manner as has been done in the present case. The illegality of the action of the Commissioner of Taxes is also apparent from the fact that the impugned administrative instructions/directions issued to the quasi-judicial authorities interfering with the powers specifically conferred on them by the Statute have been directed to be kept confidential and the same have been directed to be not made known to anybody. Such action of the Commissioner of Taxes is highly illegal, without jurisdiction and is liable to be set aside and quashed.
22. In the result and for the reasons discussed above, the impugned circulars/orders issued by the Commissioner of Taxes are set aside and quashed and the respondents, authorities concerned are hereby restrained and prohibited from demanding and/or collecting, on the strength of the impugned circulars/orders and/or in the manner as have been done in the present case, security at check posts set up under the Acts of 1956 and/or 1993
23. With the above observations and directions, the writ petition shall stand disposed of. However, there shall be no order as to costs.