2012 (10) TMI 1159 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legislative competence to impose tax on transactions.
2. Detention and seizure of goods.
3. Maintainability of the writ petition.
4. Grounds for detention and seizure under Section 48(2) of the Act.
5. Findings by the assessing authority.

Summary:

1. Legislative Competence to Impose Tax on Transactions:
The petitioner argued that transactions involving the purchase and dispatch of mentha oil on behalf of Ex-UP Principal are exempted u/s 7 of the U.P. Value Added Tax Act, 2008. The petitioner cited Supreme Court judgments, including 'Commissioner of Sales Tax v. M/s Bakhtawar Lal Kailash Chandra Arhti' and a Division Bench judgment in 'Reliance Industries Limited v. State of U.P.', to support the claim that the State Government lacks legislative competence to impose tax on such transactions.

2. Detention and Seizure of Goods:
The Assistant Commissioner, Commercial Tax, detained the goods on 21-7-2010, suspecting that the goods being transported were different from those mentioned in the documents. A show cause notice was issued, alleging discrepancies such as similar menthol content in samples, uniform handwriting in 6R forms, and impracticality of purchasing from 38 persons in one day. The petitioner contended that these grounds were factually incorrect and did not justify detention or seizure.

3. Maintainability of the Writ Petition:
The State questioned the maintainability of the writ petition. However, a Division Bench admitted the petition, stating that the State acted without jurisdiction and arbitrarily, thus allowing the Court to proceed on merits.

4. Grounds for Detention and Seizure under Section 48(2) of the Act:
The Court examined whether the conditions u/s 48(2) of the Act, which permit seizure when goods are not properly accounted for in business records, were met. The Court found no discrepancy in the documents and noted that the goods were accompanied by all necessary documents, including transfer challan, statutory forms, and Mandi gate pass. The Court concluded that the grounds for seizure were based on unfounded facts and incorrect reading of entries.

5. Findings by the Assessing Authority:
During the pendency of the writ petition, the assessing authority, in its final assessment order dated 29-6-2012, found that the goods were the same as those dispatched from Barabanki for Jammu. This contradicted the initial suspicion by the authorities who seized the goods. The Court emphasized that the authorities acted arbitrarily and without proper consideration of the petitioner's objections and documents.

Conclusion:
The writ petition was allowed, and the Court quashed the detention memo, show cause notice, and seizure order. The Court imposed exemplary costs of Rs. 50,000 on the authorities responsible for the seizure, to be deposited within one month, with half the amount to be given to the petitioner and the other half to the Mediation Centre of the Court. The State Government was given the option to recover the cost from the pensionary benefits of the responsible officers.