2016 (10) TMI 784 - HC - VAT and Sales Tax

Courier service provider - logistics Agreement - inspection of premises - presence of various goods which had not entered the State of U.P on the strength of certain Forms 38/39 - seizure of goods - power of seizure - Held that - The power to seize goods is not dependent upon the bonafides or characteristics of a past transaction or perceived course of business. It has to be necessarily exercised in the backdrop of whether the goods which are being seized fall within the mischief of Section 48 or not. Whether the sales were liable to be treated as inter-State sales? - Held that - What appears to have weighed with the Tribunal is the fact that the payment for the goods was made within the State. What the Tribunal clearly lost sight of and unjustifiably chose to ignore was its own record wherein it was admitted that the goods in question had come from outside the State of U.P. The Tribunal in its entire order nowhere places reliance or refers to any material which may have cast a shadow of doubt on the said recital which stood recorded in the course of the initial seizure proceedings. Further, the view taken by the Tribunal to the effect that the sale would stand completed only upon the payment for the goods and that the payment of price would be determinative of the issue would also, in the opinion of this Court, appear to be an issue which may not be free from debate. This Court however refrains from commenting further on this aspect. The caveat which stands entered above is primarily on account of the fact that in the opinion of this Court there was no occasion for the Tribunal to have ruled upon this aspect of the matter at all, the proceedings themselves being confined to the validity of seizure. This Court therefore without commenting any further on this aspect refrains from returning or entering any finding which may prejudice the rights and contentions of either of the parties - seizure quashed - revision allowed - decided in favor of revisionist.

Summary

Issues involved:
1. Whether the revisionist is liable to be treated as a "dealer" under the provisions of the 2008 Act.
2. Whether the transactions in question can be treated as inter-State sales.
3. Whether the revisionist is engaged in "business" within the State of U.P as per the 2008 Act.
4. Validity of the seizure of goods by the Department.
5. Correctness of the findings returned by the Tribunal.

Analysis:
1. The revisionist contested its liability as a "dealer" under the 2008 Act, arguing that its services as a courier company do not constitute engaging in the sale or purchase of goods. The Tribunal, however, held that the revisionist qualifies as a "dealer" under the Act. The revisionist's counsel cited specific clauses in the Act to support their contention, emphasizing that the revisionist was not appointed as an agent for the collection or payment of sale price. The Tribunal's decision was based on the interpretation of the Agreement and the nature of the revisionist's operations within the State.

2. The Tribunal determined that the transactions in question, involving the receipt of payment within the State of U.P., were not inter-State sales. The revisionist argued that the goods had entered the State from outside, resembling a V.P.P Parcel transaction. Citing a judgment from the Punjab & Haryana High Court, the revisionist contended that the Tribunal's findings were not in line with legal precedents. The Court refrained from further discussion on this issue, as the focus was on the validity of the seizure rather than the nature of the transactions.

3. The Tribunal concluded that the revisionist was engaged in "business" within the State of U.P. as defined by the 2008 Act. The revisionist challenged this finding, highlighting discrepancies in the Tribunal's reasoning and the lack of specific findings related to the seized goods. The Court noted that the Tribunal's decision was influenced by doubts regarding the revisionist's business practices, which were based on prior transactions unrelated to the seized goods. The Court emphasized that the power to seize goods should be exercised based on whether the seized goods fall under the provisions of Section 48 of the Act.

4. The validity of the seizure of goods by the Department was a crucial issue. The Tribunal's decision to seize goods was based on various discrepancies in the revisionist's business transactions. However, the Court found that the Tribunal failed to establish a direct link between the seized goods and the alleged irregularities in prior transactions. The Court emphasized that the power to seize goods should be exercised based on specific grounds outlined in Section 48 of the Act, which was not adequately addressed by the Tribunal.

5. The Court scrutinized the correctness of the findings made by the Tribunal regarding the character of the transactions and their classification as inter-State sales. The Tribunal's focus on the completion of sales upon payment within the State was challenged by the revisionist, citing the origin of the goods from outside the State. The Court observed that the Tribunal's decision lacked consideration of crucial aspects, such as the origin of the goods and the validity of the seizure itself. Ultimately, the Court set aside the Tribunal's order and quashed the seizure of goods by the Department.

Overall, the Court's decision centered on procedural errors in the Tribunal's findings, emphasizing the importance of adhering to legal provisions when seizing goods and determining the nature of transactions under the 2008 Act.