2009 (6) TMI 973 - HC - VAT and Sales Tax

Seizure of goods - non-submission of documents - intent to evade tax or assessment - penalty - quantum of -

Issues Involved:
1. Validity of the seizure of goods due to incomplete Form 38.
2. Applicability of the circular issued by the Commissioner of Trade Tax.
3. Requirement of intent to evade tax for seizure and penalty under the VAT Act.
4. Interpretation of Section 50 of the VAT Act in light of previous judgments.

Detailed Analysis:

1. Validity of the Seizure of Goods Due to Incomplete Form 38:
The applicant, a registered dealer, was involved in the manufacture and sale of Industrial Filters/Filtration Systems and received purchase orders from UOP India (Pvt.) Limited for the supply of piping and valve skid, which included imported automatic valves provided by Gujarat Refinery. These goods were intercepted and seized by the Mobil Squad, Gautam Budh Nagar, because Form 38 was incomplete, specifically column No. 6, which required the mention of bill, cash memo, or challan numbers. The Tribunal upheld the seizure on the grounds that the incomplete form indicated an intention to evade tax, as the form could potentially be reused for importing the same quantity, weight, and value of goods.

2. Applicability of the Circular Issued by the Commissioner of Trade Tax:
The applicant argued that the circular dated 3.2.2009 issued by the Commissioner of Trade Tax should apply, which states that if columns 2 and 3 are filled, other unfilled columns may be completed, and the goods should not be seized. However, the court clarified that the circular did not apply to column No. 6, which was left unfilled in this case. The circular was intended for columns 2 and 3, and thus, the seizure was deemed appropriate.

3. Requirement of Intent to Evade Tax for Seizure and Penalty under the VAT Act:
The court examined Section 50 of the VAT Act and Rule 54 of the VAT Rules, which mandate that importers must carry duly filled declaration forms and other relevant documents. The court emphasized that the seizure of goods under Section 50(4) requires a finding of an attempt to evade tax. The court referenced the Division Bench decision in Jain Shudh Vanaspati Ltd. vs. State of U.P., which held that goods could not be seized merely for not being accompanied by declaration forms unless there was an attempt to evade tax. This principle was reaffirmed, indicating that the seizure must be based on evidence of intent to evade tax.

4. Interpretation of Section 50 of the VAT Act in Light of Previous Judgments:
The court analyzed the decisions of the Supreme Court in Guljag Industries vs. CTO and Assistant Commercial Tax Officer vs. Bajaj Electricals Limited, which dealt with similar issues under the Rajasthan Sales Tax Act. These cases established that carrying goods with incomplete declaration forms constituted a serious lapse, justifying the imposition of penalties. However, the court noted a distinction in the VAT Act, where the intent to evade tax is a prerequisite for seizure and penalty, unlike the Rajasthan Act, which imposes strict liability without requiring proof of intent.

Conclusion:
The court concluded that the seizure of goods was justified due to the incomplete Form 38, which indicated a potential intent to evade tax. The circular issued by the Commissioner did not apply to the unfilled column No. 6. The court upheld the Tribunal's decision and emphasized that the applicant could raise all relevant defenses during the penalty proceedings. The demand for security was also deemed appropriate, and the revision was dismissed.

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