2009 (2) TMI 809 - HC - VAT and Sales Tax

Levy of VAT - ancillary or incidental proceedings - Section 48(7) of U.P. VAT Act - detention order and seizure of goods

Summary

Issues:
1. Interpretation of ancillary or incidental proceedings under Section 48(7) of U.P. VAT Act.
2. Determination of the nature of goods in the context of irrigation sprinkler systems.
3. Assessment of the intention behind the sale of goods to government agencies and availing subsidies.
4. Justification of the order passed by the Commercial Tax Tribunal regarding seizure and security demand.

Issue 1 - Interpretation of ancillary or incidental proceedings under Section 48(7) of U.P. VAT Act:
The revision was filed against the order passed by the Commercial Tax Tribunal, challenging the seizure and detention of goods being transported by two trucks. The Tribunal had reduced the security amount demanded for release of goods. The appellant raised concerns regarding the authority's power to decide the tax liability in ancillary proceedings. The Court referred to previous judgments emphasizing that the Assessing Authority can determine the nature of transactions while framing assessment orders. The Court held that discrepancies in goods description do not necessarily justify detention orders.

Issue 2 - Determination of the nature of goods in the context of irrigation sprinkler systems:
The goods were seized due to discrepancies between the description in the delivery memo and the actual goods found. The appellant argued that the sprinkler systems were exempted items under agricultural implements. The Court noted that the delivery memo mentioned a "complete set" of sprinkler systems, but only pipes and joint items were found. The Court directed the Assessing Authority to examine the goods and determine their nature, emphasizing that the detention order was based on presumption and assumptions.

Issue 3 - Assessment of the intention behind the sale of goods to government agencies and availing subsidies:
The appellant contended that the pipes found were integral parts of sprinkler systems meant for government departments. The Court highlighted the importance of pipes in the system and noted the specific code assigned by the Bureau of Indian Standards. It directed the authorities to release the goods, emphasizing that the power of seizure should not be used to harass genuine dealers.

Issue 4 - Justification of the order passed by the Commercial Tax Tribunal regarding seizure and security demand:
The Court found that discrepancies in goods description did not indicate an intention to evade tax. It noted that the dealer was registered, accompanied by relevant documents, and there was no evidence of tax evasion. The Court emphasized the need for cautious exercise of seizure and detention powers to prevent tax evasion without harassing legitimate dealers. The revision was allowed, and the detention order and seizure orders were set aside, with directions to release the goods and provide a sample for assessment.