ORDER
A.K. Mathur, C.J.
1. The petitioners by this writ petition have challenged the validity of Sections 57, 58 and 59 of the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 (known as M. P. Commercial Tax Act) and have prayed that the same may be declared as ultra vires of the Constitution of India, as Entry 54 of List-II of Vllth Schedule of the Constitution, the State Legislature is not competent to legislate and cover the transporter/carrier subject to the provisions of the M. P. Vanijyik Kar Adhiniyam, 1994, (hereinafter referred to as the Act of 1994′) which repealed the M.P. General Sales Tax Act, 1958.
2. The petitioners are carrying on business of clearing and forwarding agents. They receive goods for being consigned to outside the area of their operation as also receive goods from place to place outside their principal place of business for delivery to consignees. In short, they are clearing and forwarding agents or Dalals transporting goods. They also provide warehouse facilities to the consignors so long as the goods are not delivered to them or despatched to places other than the place of their business. The Act of 1994 came into force with effect from 1-4-1995. It received the assent of the President on 7-1-1995 and the assent was published in the M. P. Gazette (Extraordinary) dated 7-2-1995. The validity of the three provisions, i.e. Sections 57, 58 and 59 of the Act, have been challenged by this petition.
3. As per the said three provisions, the petitioners are required to furnish information and such particulars, including the statement of accounts, and affairs verified in the manner specified by the Commissioner, as he may require in respect of transactions of any dealer with them provided the petitioner handle the documents of title to goods or transport goods. By virtue of Section 57(2) of the Act, a penalty is provided of a sum equal to three times the amount of tax payable in respect of the goods involved in the transaction referred to above. Section 58 of the Act, speaks of control on clearing and forwarding agents to prevent or check evasion of tax. Section 59 of the Act defines ‘clearing and forwarding agent’ as including a person engaged in collecting goods from any place inside the State, including Railway premises, and arrange for transport and/or delivery of such goods to the principal or any other person or carrier of goods and on behalf of the principal and in the process of collection, transport or delivery handles documents of title to such goods. For ready reference, Sections 57, 58 and 59 are reproduced as under :
“Section 57. Furnishing of information by banks and clearing and forwarding agents. – (1) Every bank including, any branch of a bank and every clearing or forwarding agent shall, if so required by the Commissioner, furnish such particulars including statement of accounts and affairs verified in the manner, specified by the Commissioner as he may require in respect of transaction of any dealer with such bank or with such clearing or forwarding agent which during the course of its business handles documents of title to goods or transports goods.
(2) If any clearing or forwarding agent contravenes the provisions of sub-section (1), the Commissioner may, after giving such agent a reasonable opportunity of being heard, direct him to pay, by way of penalty, a sum equal to three times the amount of tax payable in respect of the goods involved in the transactions referred to in sub-section (1) and which appear to have been evaded by the owner of such goods due to the failure of such agent to furnish information pertaining thereto required of him by the Commissioner under sub-section (1).”
“Section 58. Control on clearing and forwarding agents to prevent or check evasion of tax. – (1) The State Government may, if it is satisfied that it is necessary so to do with a view to prevent or check evasion of tax under this Act in place or places in the State, direct that:
“(i) Every clearing and forwarding agent who during the course of his business handles documents of title to goods or transports goods or despatches or takes delivery of goods and who has his place of business at such places as may be notified by the State Government, shall send an intimation about his business in the prescribed form to the prescribed authority and in the prescribed manner before the prescribed date; and
(ii) every such clearing and forwarding agent shall maintain a register in such form and containing such particulars of his business as may be prescribed which shall be open to inspection by the Commissioner.”
(2) If any clearing or forwarding agent on being directed to do so under sub-section (1) contravenes the provisions thereof, the Commissioner may, after giving such agent a reasonable opportunity of being heard, direct him to pay by way of penalty a sum not exceeding five hundred rupees.”
“Section 59. Clearing and forwarding agent defined. – For the purpose of Sections 57 and 58 clearing and forwarding agent includes a person engaged in collecting goods from any place inside the State including Railway premises and arranging for the transport and/or delivery of such goods to the principal or any other person or carrier of goods for and on behalf of the principal and in the process of collection, transport or delivery handles document of title to such goods.”
4. In short, by virtue of all the aforesaid three provisions of the Act, the carrier is being sought to be treated as a dealer and for evasion of any tax by the principal, the carrier is also sought to be penalised to the. extent of penalty in a sum equal to three times the amount of tax payable in respect of the goods involved in the transaction of evasion of tax. Therefore, the question is that whether the Legislature is competent to legislate on this issue or not because the transporter in nowhere connected with the sale and purchase of the goods. According to Entry 54 of List II of VIIth Schedule of the Constitution of India, the Legislature is competent to legislate on tax on sale and purchase of the goods other than newspapers. Entry 54 of List II of the VIIth Schedule of the Constitution of India, reads as under :
“Entry 54. Taxes on the sale or purchase of goods other than newspapers subject to the provisions of Entry 92A of List. I.”
5. The transporters are, at best, carriers of the goods and they are nowhere connected with the sale and purchase of the goods. Therefore, the State Legislature is not competent to bring this class of persons under the umbrella of Sales Tax or Commercial Tax Act. Section 2(d) of the Act defines ‘commerce’, which reads as under :-
“Section 2(d). ‘Commerce’ means sale or purchase of goods within the meaning of Clause 29-A of Article 366 of the Constitution of India and the expression ‘Commercial’ shall be construed accordingly.”
Clause 29-A of Article 366 defines “Commerce” under the Constitution of India, which reads as under :-
“Cl. 29-A ‘Tax on the sale or purchase of goods’ includes. –
(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;
(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(c) a tax on the delivery of goods on hire purchase or any system of payment by instalments;
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article 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 such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.”
Clause 29-A was inserted by the Constitution (Forty-sixth Amendment) Act, 1982. Clause 29-A defines tax on sales or purchase of the goods with the extended meaning, cannot include the carriers, who transport the goods from one place to another so as to come in the widely worded definition of tax on sale and purchase of goods.
6. ‘Dealer’ has also been defined in Section 2(h) of the Act, which reads as under :
“Section 2(h) ‘Dealer’ means any person who carries on the business of buying, selling, supplying or distributing goods directly or otherwise, whether for cash, or for deferred payment or for commission, remuneration or other valuable consideration and includes –
(i) a local authority, a company, an undivided Hindu family or any society (including a co-operative society), club, firm or association which carries on such business;
(ii) a society (including a co-operative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to its members;
(iii) a commission agent, a broker, a del credere agent, an 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 the principal;
(iv) any person who transfers the right to use any goods for any purpose (whether or not for a specified period) in the course of business to any other person.”
The definition of ‘dealer’ as defined in the Commercial Tax Act by no stretch of imagination can include transporter/carrier. Though the word ‘dealer’ has been given an extended meaning but there is a common thread in all those categories is that the person should have something to do with the sale, purchase or distribution of the goods on behalf of the principal. The carrier of the goods is only a bailee and his job is to transport the goods from one place to another end for which, his services are being remunerated. That kind of person cannot by any stretch of imagination come within the definition of ‘dealer’ so as to be covered by the provisions of the Act. The paramount consideration in the Act is taxing the sale and purchase of the goods and those who directly or indirectly deal with the sale and purchase of goods, have to account for payment of tax. By this consideration, the transporter/carrier has nothing to do with the sale and purchase of the goods on behalf of the principal. He is only a carrier of those goods from one place to another. He has no licence to sell or purchase goods in whatever capacity. His job is to deliver the goods as desired by the principal from one place to another. The responsibility and liability of the carrier is governed by the Carriers Act, 1865. ‘Common Carrier’ has been defined in Section 2 of the Carriers Act, 1865, which reads as under :-
“Section 2. ‘Common Carrier’ denotes a person other than the Government, engaged in the business of transporting for hire property from place to place, by land or inland navigation for all persons indiscriminately.” “A person” includes any association or body of persons whether incorporated or not.” Therefore this carrier is a category apart and he cannot be treated to be a dealer in the definition as defined in the Act, as quoted above.
7. Rules have been framed under the said Act known as ‘M. P. Vanijyik Kar Niyam, 1975’. As per Rule 75 of the Rules, it has been incumbent on the clearing and forwarding agent to send an intimation in Form 60 about his business to the appropriate Commercial Tax Officer within three months from the date of commencement of his business and he has also been obliged to keep and maintain the register in Form 61. As pointed out above, since the clearing and forwarding agents are not covered either by definition of ‘dealer’ and the transporters i.e. clearing and forwarding agents are nowhere connected with the sale and purchase of goods; therefore they cannot be brought under the provision of the Act and be penalised for omission or commission of their principal. Therefore, this rule also cannot force them to regulate their business under the Act. In this connection, our attention was invited to a decision of Hon. Supreme Court in State of Haryana v. Santlal and Anr., 1993 (91) STC 321 and in that case, the competence of the State Legislature under the Haryana General Sales Tax Act, 1973, and Rules made thereunder was challenged. The clearing and forwarding agents or dalals or other persons transporting goods were brought under the control of the Haryana Sales Tax Act and Rules and thereby the validity of those provisions were challenged and in that context, their Lordships held that under Entry 54 of the Second List of the VIIth Schedule, Haryana General Sales Tax Act and Rules were framed, does not cover this area and thereby, their Lordships have struck down the provisions. In that context, their Lordships observed :
“As is clear from a reading of sub-section (1) of the said Section 38, it is not every clearing or forwarding agent or ‘dealer’ or person transporting goods who comes into possession of the particulars and information required to be furnished under the said Act and Rules for the sub-section itself casts that obligation only upon such clearing or forwarding agents, ‘dalals’ or persons transporting goods who during the course of their business handle, ‘documents of title to goods for or on behalf of any dealers’. It is, therefore, at best, only such clearing or forwarding agents or ‘dalals’ or other persons transporting goods who handle documents of title to goods for or on behalf of dealers who can be said to have a connection with the transaction of sale thereof. It is only such clearing or forwarding agents, ‘dalals’ or other persons transporting goods who can be required to obtain from the assessing authority under the said Act a licence for carrying on their business and be made liable to cancellation of such licence and penalty for breach of their obligations under the said Act. However, inasmuch as the said Act does not define what precisely it means by the expression ‘documents of title to goods’. It is unclear which class of forwarding or clearing agents or dalals or persons transporting goods it intends to bring within the ambit thereof. To clearing and forwarding agents, ‘dalals’ and other persons transporting goods who do not handle documents of title to goods for or on behalf of any dealer, the provisions of the said Act can have no application at all. In respect of such persons the State Legislature has no power of legislation under the legislative entry concerned. Qua them the legislation is not in respect of any matter ancillary or subsidiary to the legislative entry which entitles the State Legislature to impose a tax on the sale of goods.
The same point can be stated differently. A clearing or forwarding agent or ‘dalal’ or person transporting goods does not necessarily handle the booking or receipt of goods which have been sold; they could very well be handling goods which a consignor may consign to himself from one town or village to another in the State. The said Act does not take account of this and requires all forwarding and clearing agents, ‘dalals’ and persons transporting goods to be licensed under the said Act. To this extent the said Section 38 goes beyond the ancillary and subsidiary powers of the State Legislature in enacting a law imposing sales tax.
It is difficult to hold that a clearing or forwarding agent, ‘dalal’ or person transporting goods can be made liable to a penalty equivalent to 20 per cent of the value of the goods in respect of which no particulars and information have been furnished. Given the obligation to furnish particulars and information, a penalty for evasion of tax, in addition to the tax evaded, can reasonably and fairly be imposed which bears a proportion to the quantum of tax that has escaped assessment but it cannot reasonably and fairly bear a proportion to the value of the goods the sale of which has occasioned the liability to tax. A penalty as high as that sought to be imposed could well put a smaller clearing or forwarding agent or ‘dalal’ or person transporting goods out of business.”
In this connection, their Lordships have also made a reference to the decision of Hon. Supreme Court in Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income Tax., AIR 1973 SC 376 in which the Bengal Finance (Sales Tax) Act, was declared ultra vires the powers of the State Legislature on the ground that it purported to levy a tax on an auctioneer, a person who was neither a seller nor a purchaser. Therefore, ultimately, their Lordships concluded in the following terms :
“There can be no doubt that the State Legislature would be entitled to impose sales tax upon a person who carries on the business of selling goods and who has in the customary course of business authority to sell goods belonging to the principal. A clearing or forwarding agent, ‘dalal’ or person transporting goods does not carry on the business of selling goods and does not have, in the customary course of his business, authority to sell goods belonging to the dealer whose goods he books or receives. As we have already stated, there has to be a reasonable and proximate connection between the transaction of sale and the clearing or forwarding agent, ‘dalal’ or persons transporting goods before the State Legislature can, in exercise of the power to levy sales tax, enact legislation concerning him. We are not satisfied that there is such close and direct connection between the transaction of sale of goods by a dealer and the clearing or forwarding agent or ‘dalal’ who books or receives such goods or a person who transports such goods within the meaning of the said Section 38.”
Therefore, applying the same reasoning as has been laid down by the Hon. Supreme Court, there is no escape from the conclusion that Sections 57, 58 and 59 of the Act which bring the transporter under the Act, are certainly beyond the competence of the State Legislature in exercise of power of Entry 54 of List II of VIIth Schedule of the Constitution of India and the Rules made thereunder.
8. The plea of the State was that somewhat similar provisions also existed under the earlier Act, i.e. M. P. General Sales Tax Act, and it is also pointed out that it is also a machinery provision for regulating the evasion of tax. So far as the regulating provisions are concerned, it may be possible for the State to take such regulating measures, but to make a person liable who cannot legitimately be brought under the provisions of the Act, and to maintain the register under the Act and to penalise for evasion of tax for which he is not remotely connected, cannot be countenanced. There is no proximate connection of the carrier/transporter with the sale and purchase of the goods or evasion of tax. It is a principal who is primarily responsible for evasion of tax if there is any, for which a carrier cannot be held responsible. Hence, there is no merit in the contention of the State and same is overruled.
9. In the result, we declare the provisions of Sections 57, 58 and 59 of the Act and Rule 75 of the Rules as ultra vires of the Entry 54 of List II of VIIth Schedule of the Constitution of India. Consequently, the notices issued by the respondents dated 19-5-1995 (annexures P/1 and P/2) are also quashed. No order as to costs.