1985 (7) TMI 343 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Seizure of goods and demand for security.
2. Alleged breach of Section 28-A of the U.P. Sales Tax Act.
3. Jurisdiction and discretion of the court in granting interim orders under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Seizure of Goods and Demand for Security:
The petitioners, Agra Bartan Bhandar Pvt. Ltd. and its Director, challenged the seizure of goods from their shop on August 17, 1984, and the demand for 40% of the goods' value as security before their release. The seizure order (Annexure 1) stated that a survey revealed goods in excess of stock mentioned in the books, which could not be explained as purchased within Uttar Pradesh. The Sales Tax Officer believed the entries of sale and purchase in the account books were doubtful, indicating an intention to evade tax. The goods were to be released only upon furnishing security for 40% of their value. The petitioners made several representations (Annexures 2, 3, 4, 5, 6, 9, 11) to the Sales Tax Commissioner and other officials, requesting the unconditional release of the goods. The court noted that the petitioners had indeed approached the authorities under the Act, contrary to the standing counsel's argument.

2. Alleged Breach of Section 28-A of the U.P. Sales Tax Act:
The court examined Section 15-A(1) of the U.P. Sales Tax Act, which outlines penalties for various breaches, including maintaining false accounts (clause (d)), importing goods in contravention of Section 28-A (clause (o)), and failing to obtain a transit pass (clause (q)). The court found that the seizure memo did not allege a breach of Section 28-A, which is necessary to demand security to the extent of 40% of the goods' value. The court concluded that the demand for such security was without jurisdiction, as the facts did not support a breach of Section 28-A.

3. Jurisdiction and Discretion of the Court in Granting Interim Orders under Article 226 of the Constitution:
The standing counsel argued that the court should not grant an interim order without the respondents filing their return and that the petitioners should exhaust alternative remedies. The court held that under Article 226, it has the discretion to protect a petitioner by an interim order in appropriate cases, guided by relevant judicial considerations. The court cited several precedents, including Titaghur Paper Mills Co. Ltd. v. State of Orissa and Union of India v. Oswal Woollen Mills Ltd., to emphasize that the balance of convenience and likelihood of irreparable injury must be considered. The court found that the continued detention of the goods would result in irreparable loss to the petitioners, and the balance of convenience was in their favor. The court also addressed the standing counsel's reliance on Assistant Collector of Central Excise v. Dunlop India Limited, reiterating that a prima facie case alone is not sufficient for an interim order; the balance of convenience must also be considered.

Conclusion:
The court allowed the petition, finding that the demand for 40% security was without jurisdiction and that the balance of convenience favored the petitioners. The court exercised its discretion under Article 226 to grant an interim order for the release of the goods.