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2017 (1) TMI 1060 - HC - VAT and Sales TaxClandestine removal - TIN numbers mentioned in each invoices were found to be fictitious. Consignors were found non-existent - invoices were found to be fake and bogus - In the paper sheet (manifest) of the respondent, the transportation of goods is shown from U.P.B. to Chhapra or Siwan. Respondent could not prove from who they received goods and to whom they shall deliver. 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. Under the circumstances, 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. 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 - Once a transportation of goods under the cover of Section 52 of the Act is shown to be fraudulent, sham, bogus, circuitous or a device designed to evade tax under the Act, the statutory authorities under the Act and the court can always examine the substance of the transaction because the legislature never intends to guard fraud. No authority or court may recognise such transportation or transaction on the basis of the provisions of Section 52 of the Act. Law is manifestation of principles of justice, equity and good conscience. Hence section 52 of the Act cannot be interpreted and understood in a manner so as to encourage tax evaders and to discourage those who abide by law. Revision application 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 knowledge of transporters regarding consignors and consignees. 4. Applicability of Section 52 versus Section 48 of the U.P. VAT Act, 2008 in cases of fraudulent transportation. Detailed Analysis: Issue 1: Validity of Seizure and Cash Security Demand The court examined whether the seizure of goods and the demand for cash security under Section 48 of the U.P. VAT Act, 2008, were valid. It was found that the TIN numbers in the invoices were fictitious, consignors were non-existent, and the addresses of consignees were incomplete. The invoices were deemed fake and bogus, with CST/VAT shown deceitfully. The goods originated from Ghaziabad, U.P., and were transported fraudulently to appear as if they were moving from outside U.P. to another state. The court concluded that the seizure and demand for cash security were justified as the entire transaction was fraudulent, aimed at evading tax. Issue 2: Status of Delhi-U.P. Border Area The respondents claimed that the Delhi-U.P. Border area of District Ghaziabad was "no-man's land." The court rejected this claim, stating that District Ghaziabad is within U.P. territory as per the Constitution of India. The circular of 31.01.1987, which the respondents relied upon, was found irrelevant and non-existent. The court held that the Delhi-U.P. Border area is not "no-man's land" but part of District Ghaziabad, U.P. Issue 3: Role and Knowledge of Transporters The court addressed whether transporters are strangers to the transactions of sale and purchase and are ignorant about the consignors and consignees. It cited the Supreme Court's observation that transporters are integral to the sale or purchase of goods and often involved in fictitious transactions to evade tax. The court held that the respondents' claim of ignorance was unacceptable, emphasizing that transporters are part of the transaction and should disclose the real consignors and consignees. The court stated that transporters should not act as torchbearers for dishonest persons. Issue 4: Applicability of Section 52 vs. Section 48 The court examined whether fraudulent transportation of goods falls under Section 52 or Section 48 of the U.P. VAT Act, 2008. It referred to the Supreme Court's stance on tax avoidance and fraud, emphasizing that fraudulent activities cannot be protected under legal provisions. The court concluded that when transportation is fraudulent, it falls under Section 48, not Section 52. The protection of Section 52 cannot be extended to perpetuate fraud or tax evasion. The court held that the transaction in question was sham and intended to evade tax, thus justifying the seizure under Section 48. Conclusion: The court allowed the revision, set aside the Tribunal's order, and ruled in favor of the applicants. It directed that penalty proceedings be concluded by the competent authority without being influenced by the observations made in this judgment. The court emphasized the importance of preventing tax evasion and fraudulent transactions, underscoring that legal provisions should not be misused to protect dishonest activities.
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