2002 (8) TMI 816 - HC - VAT and Sales Tax

Summary

Issues: Seizure of goods for alleged tax evasion based on diversion of consignment, justification of security amount demanded, legality of seizure order, interpretation of documents and intentions of importer.

The judgment by the Allahabad High Court addressed the trade tax revision against the seizure of goods under the U.P. Trade Tax Act, 1948. The revision involved the import of 42 drums of latex (rubber) for shoe manufacturing, valued at Rs. 2,49,690, which were detained based on suspicion of tax evasion. The seizure was made on the belief that the goods were being imported by an Allahabad dealer to evade tax, as indicated by a letter directing delivery to Allahabad instead of Kanpur. The Tribunal partially upheld the seizure but reduced the security amount demanded. The Court referred to precedents like Shri Ram Automobiles v. State of U.P. and Indian Steels, Jhansi v. Commissioner of Sales Tax to analyze the legality of the seizure based on the importer's intentions and document interpretation.

The Court emphasized that the mere diversion of goods from Kanpur to Allahabad should not be automatically construed as an intention to evade tax. It cited Commissioner of Sales Tax v. S.R. Paper Cores as a precedent where the Tribunal's findings were upheld, emphasizing that the presence of proper documents like "form 31" and bills negated any intention to evade tax, even if there were discrepancies in the consignment details. The Court scrutinized the documents and records in the present case and concluded that the seizure was unjustified. It noted that the applicant was a registered dealer importing goods with proper documentation, hence the demand for double the tax amount as security was deemed unwarranted.

Ultimately, the Court found the seizure order legally unsustainable and directed the immediate release of the goods without any security. The trade tax revision was allowed, but the judgment clarified that it should not impact any future proceedings by tax authorities. The Court ordered the issuance of a certified copy of the order to the applicant's counsel. The petition was allowed, setting aside the seizure and security demand.