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2017 (1) TMI 578 - HC - VAT and Sales TaxEvasion of tax - goods transported under the cover of TDF - consignors and consignees are non-existent - seizure - Whether under the facts and circumstances of the case, seizure of goods and demand of cash security for its release under Section 48 of the U.P. VAT Act, 2008 is valid? - Held that - the goods in question originated for transportation from Ghaziabad, were being carried by the respondent in a fraudulent manner under the cover of bogus invoices with fictitious TIN numbers printed thereon. Respondents downloaded TDF-1 by submitting false information, suppressing material information, identity and particulars of real owners of the goods, so as to give it colour of transportation of the goods from outside the State of Uttar Pradesh to outside the State of Uttar Pradesh under Section 52 of the Act, with intent to evade tax under the Act - seizure of the goods under Section 48 of the Act and demand of cash security by the Mobil Squad Authority for release of the goods, does not suffer from any illegality. Whether Delhi - U.P. Border area of District Ghaziabad is no-man s land ? - Held that - the circular dated 31.01.1987 is non-existent. That apart, it has no relevance in view of the facts found and the constitutional provisions mentioned above. Delhi - U.P. Border area of District Ghaziabad is not no man s land rather it is part of District Ghaziabad (U.P.). Whether transporters are strangers to the transaction of sale and purchase and totally ignorant about the consignors and consignees? - Held that - it cannot be said that transporters are strangers to the transaction of purchases and sales and totally ignorant about the consignors and consignees. In cases like the present case where transactions have been fictitiously carried on in false names and addresses, bogus invoices with fictitious TIN numbers printed therein and TDF-1 is downloaded on the basis of false particulars and forged papers by a transporter then he makes himself party to the episode of fictitious transaction with sole purpose of evasion of tax by undisclosed non-bonafide dealers. By seizure of goods in such cases transporter is not affected if he is really a transporter - Therefore, instead of being torch bearer of dishonest persons, he should allow the real consignors or consignees to come forward and assign reasons for concealing their real identity. The action of the departmental authorities in such cases to unearth evasion of tax is one of their fundamental duties under the Act. Whether fraudulent transportation of goods and colourable devices used to give impression of transportation of goods from outside the State of U.P. to outside the State of U.P. shall fall under Section 52 or would be a case falling under Section 48 of the U.P. VAT Act, 2008? - Held that - No doubt, when a person transports goods from outside the State of U.P. to outside the State of U.P. in terms of Section 52 of the Act and Rule 58 of the Rules, the authorities under the Act have no power to seize the goods and demand security for release thereof but where, as in the present case, the transaction is sham, not genuine and make-believe and originated from a place within the State of U.P. or intended to be sold within the State of U.P. with intent to evade tax then it would be a case falling under Section 48 of the Act. Provisions of Sections 48 & 52 of the Act, have to be considered in a manner so as to hold that it serves to seek a reasonable result. Protection of Section 52 of the Act cannot be extended for evasion of tax under the Act, to perpetuate fraud or to do something indirectly which cannot be done directly. Revision allowed - decided in favor of applicants.
Issues Involved:
1. Validity of seizure of goods and demand of cash security under Section 48 of the U.P. VAT Act, 2008. 2. Status of Delhi - U.P. Border area of District Ghaziabad as "no-man's land." 3. Role and awareness of transporters regarding consignors and consignees. 4. Applicability of Section 52 or Section 48 of the U.P. VAT Act, 2008 in cases of fraudulent transportation of goods. Issue-wise Detailed Analysis: 1. Validity of Seizure and Cash Security Demand: The court found that the goods originated from Ghaziabad and were transported under forged invoices with fictitious TIN numbers and non-existent consignees. The Mobile Squad Authority identified that the goods were intended for unloading in Deoria, U.P., based on mobile numbers mentioned in the invoices. The respondent failed to provide specific replies to these findings. The court held that the seizure of goods and demand for cash security under Section 48 of the U.P. VAT Act, 2008 was valid, as the transportation was fraudulent and intended to evade tax. The tribunal's order setting aside the seizure was deemed erroneous. 2. Status of Delhi - U.P. Border Area: The court rejected the respondents' claim that the Delhi - U.P. Border area of District Ghaziabad is "no-man's land." It clarified that this area is part of District Ghaziabad (U.P.) and not exempt from the jurisdiction of U.P. VAT authorities. The court referenced Article 1(2) of the Constitution of India and noted that the circular dated 31.01.1987, which was relied upon by the respondents, was cancelled and had no relevance. 3. Role and Awareness of Transporters: The court dismissed the respondents' argument that transporters are ignorant about consignors and consignees. Citing the Supreme Court's observations in A.B.C. (India) Ltd. v. State of Assam, the court noted that transporters are directly involved in transactions and cannot claim ignorance. The court emphasized that transporters should not act as facilitators for tax evasion by concealing the real identity of consignors and consignees. 4. Applicability of Section 52 or Section 48: The court held that fraudulent transportation of goods with the intent to evade tax falls under Section 48, not Section 52, of the U.P. VAT Act, 2008. It referenced the Supreme Court's judgments on the consequences of fraud and the principle that fraudulent transactions cannot be protected under the guise of legitimate tax planning. The court concluded that the respondents' actions constituted fraud, misrepresentation, and suppression of facts, and thus, the seizure under Section 48 was justified. Conclusion: The revision was allowed, and the tribunal's order was set aside. The court directed that the penalty proceedings be concluded by the competent authority without being influenced by the observations made in this judgment.
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