2014 (5) TMI 950 - HC - VAT and Sales Tax

Whether the revenue was justified in seizing the goods from the godown situate on the no men s land on the pretext that the goods have not actually gone out of the State of U.P. within the time of exit mentioned in the transit declaration Forms Seizure of goods Seizure in no men s land Legal fiction - Ground of overstay Seizure on the ground of overstay Brief Facts - The goods were accompanied by the requisite documents and the transit declaration Forms - The goods were seized on 2.3.2012 from the aforesaid godown on the ground that they have not been sent to the ultimate destination and have been retained in the State of U.P., giving rise to presumption u/s 52 of the Act that they are meant for sale in U.P. - Held that - Legislature is quite competent to create a legal fiction by providing assumption of certain facts which does not really exist - Such a legal fiction or assumption of fact may also be created by court as a basis for deciding an issue before it. Therefore, in the peculiar nature of transport business even if the goods have not technically crossed the border of the State of U.P. nonetheless if the goods have reached the godown of the opposite party situate in the area which has been declared to be no men s land near the U.P. Delhi border in District Ghaziabad by way of legal fiction, it would mean that they have actually reached the border otherwise the inter-state movement of goods would be impossible and the very purpose of establishing transhipment area would become redundant - Thus, if the goods reaches the godown situate in the said area within the time prescribed, the authorities cannot take any exception to it and seize the goods on the pretext that they have not actually passed out of U.P. - The goods which have reached the godown of the opposite party situate in the no men s land at the border within the time prescribed would be deemed to have reached the border for passing out from the State of U.P., and are not liable to be seized on the ground that they have over stayed within the State unless they are actually found to be so sold within the State or there is a finding that they are being removed from there for sale in U.P. - Tribunal has not erred in directing for the release of the seized goods - No merit in the revision and same is dismissed Decided against revenue.

Summary

Issues:
Seizure of goods under Section 52 of U.P. Value Added Tax Act - Whether goods retained in U.P. beyond exit period mentioned in transit declaration Forms are liable for seizure.

Analysis:
The case involves the seizure of 65 bags of "bari elaichi" by revenue authorities from a godown on the U.P-Delhi border under Section 52 of the U.P. Value Added Tax Act. The goods were brought from outside U.P. for further transportation to destinations outside U.P. The tribunal had earlier allowed the release of seized goods without any security, leading to the revenue filing a revision under Section 58 of the Act. The primary contention was that the goods were not sent out of U.P. within the time specified in transit declaration Forms, justifying the seizure.

The legal framework for seizure of goods in transit through U.P. is provided under Section 48, Rule 55, Section 50, and Section 52 of the Act. These provisions outline the grounds for seizure, including lack of accompanying documents, undervaluation, or false documents. Section 52 specifically addresses vehicles passing through U.P. carrying goods meant for destinations outside U.P., requiring prescribed documents failing which goods are presumed for sale within U.P.

The defense argued that the transhipment area on the U.P-Delhi border is a special zone where goods are processed for further transportation, and once in the godown, they are deemed to have exited U.P. The existence of the "no men's land" at the border, acknowledged in previous circulars, supports this argument. The court recognized the legal fiction created by such zones to facilitate transport operations, ensuring the practicality of interstate movement of goods.

The judgment concluded that goods reaching the godown in the designated area within the prescribed time should be deemed to have exited U.P., unless proven to be sold within the state. Since there was no evidence of intended sale within U.P., the seizure was deemed unjustified. The tribunal's decision to release the goods without security was upheld, dismissing the revenue's revision. The court emphasized the necessity of such free zones for efficient transport operations, ensuring the smooth movement of goods across state borders.