2003 (9) TMI 746 - HC - VAT and Sales Tax

Seizure of goods - Revision u/s 11 of the U.P. Trade Tax Act, 1948 ( the Act ) - Validity of the presumption of sale within the state - Whether on physical verification any difference in goods were found as against the goods mentioned in form XXXIV or GR and on the basis of such difference it can be inferred that the goods do not relate to form XXXIV No. 4135/5309 dated November 23, 2002 - HELD THAT - Once the goods is booked with the transporter, the transporter becomes the custodian of the goods being a bailee as per the contract between the consignor and transporter and the transporter is required to deliver the goods to the consignee as per the contract. There may be cases where the consignor or consignee are name sake and the goods actually belong to the transporter which it wants to transport for its own purpose and therefore, Legislature was conscious with this situation. The Legislature has put the responsibility on the driver or the person-in-charge or hirer of the vehicle to obtain form XXXIV and to surrender at the exit check-post. In case, if the form XXXIV is not surrendered, it is the transporter against whom the presumption is drawn as contemplated under section 28-B of the Act and the transporter would be treated as dealer . It is made clear that transporter may be owner of the vehicle, which includes hirer and person-in-charge and driver represents, owner of vehicle. Therefore, while issuing form XXXIV the check-post officer must be more concerned about the genuineness of the transport-company and about the ownership of the vehicle, and the genuineness of the consignor and consignee are not much relevant because on the non-surrender of form XXXIV, presumption is being drawn for the sale of goods against the transporter, who is being treated as a dealer and subject to payment of penalty and tax. In my view, since on verification same number of packages and same description of goods were found on physical verification as mentioned in GR's and in form XXXIV, it cannot be said that the goods were not relating to form XXXIV No. 4135/5309 dated November 23, 2002. At the exit check-post, necessary verification should be made only with reference to the details of the goods mentioned in form XXXIV. The details, which are not mentioned in form XXXIV should not be considered at the exit check-post. If in form XXXIV, number of pieces are not mentioned and only number of packages are mentioned, the verification of number of packages should be made at the exit check-post and not the number of pieces. If the officer of exit check-post can verify the goods with reference to the goods mentioned in form XXXIV only, the officer of the Mobile Squad, who propose to check goods can also verify only with reference to the disclosed goods mentioned in form XXXIV and they cannot travel beyond that. In case if in respect of a particular goods or particular transaction, the officer feels that there may be possibility for opening of packages and change in number of pieces, in transit, it is always open to the officer concerned at entry check-post to take necessary care in this regard, and either put a seal or signature on the packages to overrule the possibility of it being opened, or to make the verification even of the contents of the packages and made the mention in form XXXIV itself to overrule the possibility of any presumption and to give liberty to any officer to exercise any kind of discretion. In my opinion, in the present case, the whole exercise was made on suspicions and presumption and without any basis. The detention of goods and subsequently its seizure was wholly arbitrary. However, while releasing the goods, they may take all precautions whatever they feel necessary to ensure that the goods may cross the State of U.P. and in case, if it is found that form XXXIV is not surrendered, presumption would be raised for its being sold and in that situation, they may catch hold the person responsible for the purpose of the assessment in accordance to the law. In the result, the revision is allowed. The order Tribunal dated May 28, 2003 is set aside and the authority concerned are directed to release the seized goods forthwith without any security. Petition allowed.

Summary

Issues Involved:
1. Legality of the seizure of goods.
2. Validity of the presumption of sale within the state.
3. Compliance with procedural requirements under Section 28-B and Rule 87 of the U.P. Trade Tax Act.
4. Verification discrepancies between declared and actual goods.
5. Responsibility and liability of the transporter under the Act.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of Goods:
The applicant, a transport company, was transporting goods from New Delhi to Akola and obtained a transit pass (Form XXXIV) at the Kotwan Check-Post. The goods were seized by the Assistant Commissioner (Mobile Squad) based on discrepancies found during an inspection. The Tribunal confirmed the seizure but reduced the security amount. The High Court noted that the vehicle was found loaded with goods before the expiry of the transit pass validity, and there was no evidence of goods being unloaded or the transit pass period being expired. The court held that the presumption of sale within the state could only be drawn if the transit pass was not surrendered within the stipulated time, making the seizure premature and arbitrary.

2. Validity of the Presumption of Sale within the State:
The court referred to Section 28-B, which mandates obtaining and surrendering a transit pass to avoid the presumption of sale within the state. The Supreme Court upheld the validity of Section 28-B, emphasizing that these are machinery provisions to prevent tax evasion and do not impose any charge by themselves. The presumption of sale arises only if the transit pass is not surrendered at the exit check-post. In this case, since the transit pass period had not expired, the presumption of sale was not applicable.

3. Compliance with Procedural Requirements under Section 28-B and Rule 87:
Section 28-B and Rule 87 outline the procedure for obtaining and surrendering a transit pass. The court highlighted that the transporter must surrender the transit pass at the exit check-post, and failure to do so would invoke the presumption of sale within the state. The court found that the applicant had complied with the procedural requirements, as the transit pass period had not yet expired at the time of inspection.

4. Verification Discrepancies between Declared and Actual Goods:
During the inspection, discrepancies were found between the declared goods in the GRs and the actual goods. The court noted that the number of packages and their descriptions matched, but there were differences in the number of pieces inside the packages. The court held that verification should be based on the number of packages as mentioned in the transit pass and not the number of pieces, as the transporter cannot be expected to verify the contents of each package at the time of booking. The court concluded that the goods were related to the transit pass, and the discrepancies did not justify the seizure.

5. Responsibility and Liability of the Transporter under the Act:
The court clarified that under Section 28-B, the responsibility to obtain and surrender the transit pass lies with the transporter, who is considered the custodian of the goods. The court emphasized that the genuineness of the consignor and consignee is not relevant for the purpose of Section 28-B, as the presumption of sale is drawn against the transporter if the transit pass is not surrendered. The court referred to the Supreme Court's observation that the transporter would be treated as a "dealer" for the purpose of tax liability if the transit pass is not surrendered.

Conclusion:
The High Court allowed the revision, setting aside the Tribunal's order and directing the release of the seized goods without any security. The court found that the seizure was arbitrary and based on unfounded suspicions, as the transit pass period had not expired and the verification discrepancies did not justify the seizure. The court reiterated the procedural requirements under Section 28-B and Rule 87, emphasizing the transporter's responsibility to surrender the transit pass and the irrelevance of the consignor's and consignee's genuineness for the purpose of presumption of sale.