2016 (12) TMI 1150 - HC - VAT and Sales Tax

Release of confiscated goods - discrepancies found in stock of dry chilly - order of release of the goods without security by Tribunal - is Tribunal justified in doing so? Held that - The discrepancy was explained by the respondent assessee but the explanation was found to be unsatisfactory by the Mobile Squad Authority. The stand of the assessee that no discrepancies whatsoever was found in his books of accounts, is the matter to be examined at the time of penalty proceedings, if any, or at the time of assessment proceedings. However, it can not be said that there was absolutely no material before the Mobile Squad Authority to seize the goods and to demand security - therefore, ends of justice should be better served if the goods are directed to be released on deposit of the security in the form of other than cash or bank guarantee for an amount equivalent to the amount of tax as may be involved with respect to the seized goods. Goods to be released on payment of security - appeal disposed off - decided partly in favor of respondent-assessee.

Summary

Issues:
1. Seizure of goods and demand for cash security by the authorities.
2. Rejection of application under proviso to Section 48(7) of the U.P. VAT Act, 2008.
3. Appeal before the Member Commercial Tax Tribunal and the impugned order.

Analysis:
1. The case involved a survey conducted by the Special Investigation Branch of the applicant's department at a Cold Storage facility. A show cause notice was issued to the respondent regarding unaccounted stock of dry chilly, leading to the seizure of goods and a demand for cash security equivalent to 15% of the estimated value of the goods. The respondent filed an application under proviso to Section 48(7) of the U.P. VAT Act, which was rejected by the Joint Commissioner.

2. The respondent appealed the rejection order by filing Second Appeal No.647 of 2016 before the Member Commercial Tax Tribunal, which was allowed in the impugned order. The Tribunal directed for the release of goods without security, leading to a dispute between the parties. The applicant argued that despite evidence of unaccounted stock, the Tribunal erred in directing the release without security.

3. The High Court analyzed the seizure order, the Joint Commissioner's order, and the Tribunal's decision. It noted discrepancies in the stock of dry chilly stored by the respondent, which were explained but found unsatisfactory by the authorities. The Court acknowledged that while the respondent claimed no discrepancies in their books of accounts, further examination could be done during penalty or assessment proceedings. The Court decided that justice would be served by releasing the goods upon the respondent furnishing security equivalent to the tax amount involved, within two weeks.

In conclusion, the High Court disposed of the revision, directing the release of goods upon the furnishing of specified security, emphasizing that assessment and penalty proceedings should proceed independently of the observations in the order.