2010 (10) TMI 966 - HC - VAT and Sales Tax

Whether it was an inter-State sale or intra-State sale obviously cannot be decided by the mobile squad and it is for the assessing authority to record a finding on the aforesaid issue during the course of assessment? Held that - In the present case it cannot be said that either of the two conditions given in the aforesaid section 48(2) of the Act did exist. We are therefore prima facie satisfied that neither the goods could have been detained by the mobile squad nor the seizure order have been passed on such not existent facts and incorrect reading of entries in 6R and 9R and merely on conjectures and surmises that purchases could not have been done in one day. The writ petition is therefore admitted.

Issues Involved:
1. Legislative competence to impose tax on transactions.
2. Detention and seizure of goods.
3. Maintainability of the writ petition under Article 226 of the Constitution.
4. Compliance with Section 48 of the U.P. Value Added Tax Act, 2008.
5. Discrepancies in documentation and the validity of the seizure order.

Issue-wise Detailed Analysis:

1. Legislative Competence to Impose Tax on Transactions:
The petitioner argued that the transactions involving the purchase and dispatch of mentha oil on behalf of the ex-U.P. principal were exempt under Section 7 of the U.P. Value Added Tax Act, 2008. The petitioner cited the Supreme Court decision in Commissioner of Sales Tax v. Bakhtawar Lal Kailash Chand Arhti, which held that the State Government lacked legislative competence to impose tax on such transactions.

2. Detention and Seizure of Goods:
The Assistant Commissioner, Commercial Tax, Mobile Squad, Bareilly, detained the goods on July 21, 2010, on the directions of the Additional Commissioner, Commercial Tax, Grade-I, Lucknow Zone. The detention was based on the suspicion that the goods being transported were different from those mentioned in the accompanying documents. A supplementary detention memo was issued on July 22, 2010, citing inconsistencies such as uniform menthol content in samples, identical handwriting in documents, and the improbability of purchasing from 38 persons in one day. Despite the petitioner's written request for release, the goods were seized on August 23, 2010.

3. Maintainability of the Writ Petition under Article 226 of the Constitution:
The petitioner contended that the seizure was without jurisdiction and authority, and no appeal lies against the seizure order under the Act. Therefore, the writ petition under Article 226 was maintainable. The court agreed, citing the Division Bench decision in Gopal Traders v. State of U.P., which held that the High Court is justified in entertaining a petition if the order is without jurisdiction and adversely affects the petitioner's rights.

4. Compliance with Section 48 of the U.P. Value Added Tax Act, 2008:
The court examined whether the conditions for seizure under Section 48(2) were met. This section allows seizure if goods are not properly accounted for in the dealer's accounts or if there is doubt about the goods' bona fide nature. The court found that the entries in the transfer invoice and form 9R showed no significant discrepancies. The goods were accompanied by all necessary documents, including the transfer challan, statutory form, mandi gate pass, and agreement with the ex-U.P. principal. Therefore, the seizure was not justified under Section 48(2).

5. Discrepancies in Documentation and the Validity of the Seizure Order:
The court noted that the alleged discrepancies in the documents were not substantial enough to justify the seizure. The identical menthol content in samples and similar handwriting in documents were not sufficient grounds. The court also referenced previous interim orders and judgments, such as the case of Shaw Scott Distilleries Private Ltd. v. Sales Tax Officer, which held that seizure is only justified if goods cannot be traced to a bona fide dealer or if they are not properly accounted for. The court concluded that neither condition was met in this case.

Conclusion:
The court admitted the writ petition and ordered the immediate release of the goods, finding that the detention and seizure were based on incorrect facts and misreading of documents. The court emphasized that the mobile squad could not decide whether the transaction was an inter-State or intra-State sale, which is the assessing authority's responsibility during the assessment proceedings. The court's decision underscored the importance of adhering to legal provisions and ensuring that actions taken by authorities are within their jurisdiction and based on accurate facts.

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