2019 (1) TMI 1496 - HC - VAT and Sales Tax

Seizure of Vehicle - Non-production of transit declaration form (TDF) - Section 52 of the U.P. Value Added Tax Act, 2008 - circular dated 3 September 2013 - Incidence and levy of tax - Rebuttal of presumption. Which of the two cases i.e. M/s Prakash Transport Corporation vs. CCT 2013 (12) TMI 921 - ALLAHABAD HIGH COURT , or M/s S.B. International Gularbhoj vs. The Commissioner, Commercial Tax Lucknow 2013 (10) TMI 916 - ALLAHABAD HIGH COURT , lays down the correct proposition of law? Whether the Transit Declaration Form (TDF) is mandatory requirement in view to the circular issued by the Commissioner read with Section 52 of the Act and Rule 58 of the Rules or in the alternative upon non-production of the TDF on interception of the goods whether a presumption that the goods are meant for sale within the State can mandatorily be drawn in view of Section 52 read with Rule 58 and the circular dated 3 September 2013 issued by the Commissioner? Held that - The officer inspecting the goods in transit is invested with the power to seize goods, if he finds that the documents in respect of the consignment is false, bogus, incorrect, incomplete or invalid. These powers are wide enough to empower the officer making search of goods in transit to seize the goods where TDF is not being carried by the driver or the owner of the vehicle. It would be a case where incomplete or invalid documents are carried during transit - Section 48 deals with power of an authorised officer to seize goods found in a dealer's place of business, vehicle, vessel or any other building or place or in other contingencies stipulated thereunder. Sub-section (5) of Section 50 makes applicable mutatis mutandis the provisions of subsections 3, 7, 8, 9 and 10 of Section 48 to goods seized under Section 50. Once the scheme of the Act reveals that the seizure is not automatic but a result of quasi judicial process where decision is taken consistent with the principles of natural justice after recording satisfaction regarding infraction of the provisions of the Act or an attempt to evade payment of tax, it follows as a necessary corollary that the presumption contained under Section 52 and Rule 58 would also be rebuttable at such stage, otherwise providing hearing would be an empty formality and eyewash. Scope of enquiry which has to be made at the stage of issuance of show cause notice before seizure is directed - Held that - The irresistible conclusion is that under the scheme of the Act, the carrying of TDF is both for the benefit of the driver or person in charge of the vehicle as well as revenue as it prima facie establishes that the consignment is meant for transportation outside the State. It is mandatory in the sense that once it is duly carried during transit, the authorities would then not be in a position to draw presumption under Section 52/Rule 58. But, even if such case, it is not conclusive evidence of the fact that such goods are meant for transportation outside the State. If it is found as a matter of fact that the goods had not been so carried out of the State, the authorities would still have power to levy tax and impose penalty Rule 6 (7) . On the other hand, if the driver or the person in charge of the vehicle is intercepted without carrying TDF, a presumption would be raised that the goods carried thereby are meant for sale within the State inviting seizure and penalty. The Commissioner is authorised to waive the requirement of making deposit or direct deposit of such lesser amount or may require furnishing security in such form other than cash or indemnity bond, as he may deem fit. The driver or person in charge of such a vehicle would get another opportunity to rebut the presumption contained under Section 52 and Rule 58 during course of penalty proceedings. Here he would get a more elaborate hearing and opportunity to lead evidence followed by final order imposing penalty or dropping the proceedings. Based on ultimate outcome of the penalty proceedings, amount, if any, deposited as per provisions of sub-section (7) or sale proceeds under sub-section (9) would be adjusted and the excess amount refunded to him. The observations made in M/s Prakash Transport Corporation that good cannot be seized for non-production of TDF was confined to the facts of that case, but cannot be approved as laying down any general principle of law - Again, the observations made in M/s S.B. International were based more on concession of the parties than laying down any law of general application. Thus, none of the above judgments lay down any general proposition of law to be treated as a precedent and therefore, no question of conflict arises between the two judgments. The provision relating to carrying of TDF is a machinery provision. The production of TDF during transit is mandatory in the sense that it thereby denudes the authorities of their power to draw presumption under Section 52/Rule 58. Absence of the same does not mandatorily lead to the conclusion that goods are meant for sale within the State. It only gives rise to a rebuttable presumption - The presumption is rebuttable subject to limitations discussed above during course of seizure proceedings and without any limitation whatsoever at the stage of penalty proceedings. The reference is answered accordingly.

Summary

Issues Involved:

1. Determination of the correct proposition of law between two conflicting judgments.
2. Whether the Transit Declaration Form (TDF) is a mandatory requirement according to the circular issued by the Commissioner read with Section 52 of the Act and Rule 58 of the Rules.
3. Whether the non-production of TDF on interception of goods leads to a mandatory presumption that the goods are meant for sale within the State.

Issue-wise Detailed Analysis:

1. Determination of the Correct Proposition of Law:

The court was tasked with resolving the divergence of opinion between two judgments: M/s Prakash Transport Corporation vs. CCT and M/s S.B. International Gularbhoj vs. The Commissioner, Commercial Tax Lucknow. The former held that authorities had no power to seize goods for non-production of TDF, while the latter upheld the seizure of goods for the same reason.

2. Mandatory Requirement of TDF:

Section 52 and Rule 58 mandate that the driver or person in charge of a vehicle carrying goods through the State must carry prescribed documents, failing which it is presumed that the goods are meant for sale within the State. The court noted that the TDF requirement is a machinery provision meant to prevent tax evasion and facilitate trade by abolishing check-posts and barriers. The provision is not penal but prescriptive, aiming to ensure that goods are tracked and accounted for during transit.

3. Presumption of Sale within the State:

The court emphasized that the presumption arising from the non-production of TDF is rebuttable. It is a rule of evidence, not a conclusive proof of sale within the State. The burden to rebut this presumption lies with the driver or person in charge, who must provide positive evidence that the goods are destined for outside the State. The court clarified that the authorities must conduct a quasi-judicial process to determine whether the presumption has been successfully rebutted before imposing any tax or penalty.

Detailed Legal Analysis:

The court examined the legislative history and intent behind Section 52 and Rule 58, noting that these provisions were designed to replace the cumbersome check-post system with a more streamlined process that still protected revenue interests. The court referred to the Supreme Court's judgment in Sodi Transport Co. vs. State of U.P., which upheld similar provisions under the U.P. Sales Tax Act, emphasizing that such presumptions are rebuttable and serve as rules of evidence.

The court also analyzed the practical implications of the TDF requirement, acknowledging that drivers and transporters might face difficulties in downloading and carrying the TDF. It stressed that while the TDF is mandatory to avoid the presumption of sale within the State, its absence alone does not justify the seizure of goods without considering the driver's explanation and evidence.

The court concluded that the observations in M/s Prakash Transport Corporation were specific to the facts of that case and did not establish a general principle of law. Similarly, the judgment in M/s S.B. International was based on concessions by the parties rather than a thorough legal analysis. Therefore, neither judgment could be considered a binding precedent.

Conclusion:

The court held that the TDF requirement is mandatory to avoid the presumption of sale within the State, but the presumption is rebuttable. The authorities must consider the driver's explanation and evidence before seizing goods or imposing penalties. The reference was answered accordingly, and the case was remitted to the regular Bench for further proceedings in line with the court's findings.