2013 (8) TMI 643 - HC - VAT and Sales Tax

Detention of Goods - UP VAT - transport of the goods from Delhi to Orissa - Transit Declaration Form - Held that - Goods had not been taken outside the State of U.P - The declaration form under the Orissa VAT Act, which was necessary for the import of the goods was not produced - The discrepancy in the bill number and date of issue of certain bills from the bill book had been alleged - The goods have been detained illegally, arbitrarily and without any basis and merely on surmises and conjectures and whims of the authorities concerned despite the settled principle of law - Each and every transaction had to be examined independently on its own merit and past conduct is wholly irrelevant - the driver of the vehicle possessed the documents relating to the goods and the Transit Declaration Form and the same were produced before the Commercial Tax Officer at the time of checking. Neither such Transit Declaration Form was found non-genuine or improper nor were any details relating to the goods furnished in the Transit Declaration Form found incorrect - No such finding had been recorded by any authority in this regard. No case had been made out that Section 52 of the Act or Rule 58 or circular of the Commissioner had been violated - No case had been made out that the goods were not traceable to bonafide dealer and were not recorded in the books of accounts, document or register - The inference that the goods may likely to be unloaded inside the State of U.P. And may not be taken to other State, while the goods were in transit and vehicle was on declared route was merely based on presumption, suspicion and doubts, which was not sustainable in law. 28-B. Transit of goods by road through the State and issue of authorization for transit of goods - When a vehicle coming from any place outside the State and bound for any other place outside the State, and carrying goods referred to in sub-section (1) of Section 28-A, passes through the state, the driver or other person-in-charge of such vehicle shall obtain in the prescribed manner an authorization for transit of goods from the officer-in-charge of the first check-post or barrier after his entry into the State and deliver it to the officer-in-charge of the last check-post or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person-in-charge of the vehicle. The Principal Secretary, Financial Institutions was directed to look into the matter and review the mechanism provided under the Act and take steps to provide such mechanism to check evasion and corrupt practices - The Commercial Tax Officer was directed to release the goods forthwith without any security and also pay the exemplary cost imposed.

Issues Involved:
1. Legitimacy of the seizure of goods in transit.
2. Validity of the presumption of sale within the state based on past conduct.
3. Requirement and sufficiency of Transit Declaration Form and other documents.
4. Legality of the imposition of security for the release of goods.
5. Relevance of the driver's statement and past transactions.
6. Examination of the procedural compliance under Section 52 of the VAT Act and Rule 58 of the VAT Rules.
7. Assessment of the Tribunal's decision and the imposition of exemplary costs.

Issue-wise Detailed Analysis:

1. Legitimacy of the Seizure of Goods in Transit:
The court found that the seizure of goods by the Commercial Tax Officer was illegitimate. The driver had all necessary documents, including the Transit Declaration Form, which were produced at the time of checking. The court emphasized that the presumption of sale within the state cannot be made merely based on past conduct or suspicion without concrete evidence.

2. Validity of the Presumption of Sale within the State Based on Past Conduct:
The court ruled that each transaction should be examined on its own merits, and past conduct is irrelevant. The authorities' presumption that the goods might be sold within the state was deemed baseless and without any reasonable foundation. The court criticized the authorities for acting on mere presumption, surmises, and conjectures.

3. Requirement and Sufficiency of Transit Declaration Form and Other Documents:
The driver possessed and presented all requisite documents, including the Transit Declaration Form. The court noted that the documents were neither found to be non-genuine nor improper, and no discrepancies were identified. Therefore, the seizure based on the assumption that the goods might not cross the state was unjustified.

4. Legality of the Imposition of Security for the Release of Goods:
The Tribunal's decision to reduce the security from 40% to 20% of the value of goods was scrutinized. The court found no legal basis for demanding security when the goods were accompanied by proper documentation and there was no evidence of intent to sell within the state.

5. Relevance of the Driver's Statement and Past Transactions:
The court dismissed the reliance on the driver's statement and past transactions as unjustified. The driver's statement that he could not have traveled from Orissa to Delhi within nine days was irrelevant to the current transaction. The court highlighted that the authorities failed to provide any substantial evidence to support their claims.

6. Examination of the Procedural Compliance under Section 52 of the VAT Act and Rule 58 of the VAT Rules:
The court referred to Section 52 of the VAT Act and Rule 58 of the VAT Rules, which mandate the carrying of specific documents during transit. The driver complied with these requirements. The court criticized the lack of a mechanism for surrendering the Transit Declaration Form at the state border, which could prevent arbitrary seizures.

7. Assessment of the Tribunal's Decision and the Imposition of Exemplary Costs:
The court set aside the Tribunal's order confirming the seizure and imposed an exemplary cost of Rs. 1 lakh on the authorities for acting in an arbitrary and illegal manner. The court directed the Commissioner of Commercial Tax to take appropriate action against the officials involved and to release the goods without any security.

Conclusion:
The court allowed the revision, set aside the seizure order, and directed the release of goods without any security. The authorities were ordered to pay exemplary costs and to review the mechanism under the Act to prevent tax evasion and corrupt practices. The court emphasized the need for a robust mechanism to ensure compliance and prevent arbitrary actions by tax officials.

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