2011 (8) TMI 1180 - HC - VAT and Sales Tax

Summary

Issues involved: Seizure of consignment under section 48(7) of the U.P. Value Added Tax Act on grounds of undervaluation, rejection of representation, appeal before Trade Tax Tribunal, justification of seizure, relevance of market value in determining undervaluation.

Summary:

The judgment by the Allahabad High Court pertains to the seizure of a consignment under section 48(7) of the U.P. Value Added Tax Act, based on the allegation of undervaluation exceeding 50% of the true value of the goods. The representation against the seizure was rejected by the Joint Commissioner, leading to an appeal before the Trade Tax Tribunal under section 57 of the Trade Tax Act. The Tribunal allowed the appeal, emphasizing that the Department failed to establish the undervaluation as per relevant documents, rendering the seizure unjustified and ordering the release of goods without any security.

The Department challenged the Tribunal's order, arguing that the current price list from the market showed a significant discrepancy between the disclosed price and the actual market value. However, the Tribunal did not find this argument convincing, as it deemed the documents produced by the Department irrelevant and did not permit the introduction of new pricing information under section 47(1) of the Trade Tax Act.

In response, the opposing counsel highlighted that the Department must have concrete evidence to support the claim of undervaluation, rather than relying on presumptions and subsequent attempts to justify the seizure with unrelated market documents. It was emphasized that without proper material as per Section 47(1) of the Trade Tax Act, any seizure would be deemed illegal.

Upon hearing the arguments, the Court referred to section 48(1)(iii) of the Value Added Tax Act, which mandates that the calculation of undervaluation must be based on the market value in the local market area where the transaction occurred. In this case, as the transaction took place in Ghaziabad, the market value in Ghaziabad should have been considered to determine undervaluation. Since the Department failed to provide such evidence, the Court concluded that the seizure was illegal, supporting the Tribunal's decision. Consequently, the revision was dismissed.