2016 (2) TMI 281 - HC - VAT and Sales Tax

Challenge to the recovery notice - order of attachment - sale of goods without billing came to light during raid at godowns - Held that - When the investigation is yet not completed and assessment to be made at a later point of time, it would not be appropriate on our part to make any conclusive observations with respect to the rival contentions. In view of the prima facie materials at the command of the department, it is not possible to direct lifting of the seals on the godown without further conditions. At the same time, the estimate of the department on possible duty and penalty liability is also based on 150% penalty which is maximum imposable under the statute and not necessarily always imposed at such maximum rate. In that view of the matter, on some further conditions, the seals on the godowns can be lifted. - Upon the two undertakings being filed and postdated further cheques being issued by the petitioner, seizure of the stock would be lifted. The department shall remove the seals on the godowns.

Summary

Issues:
Challenge to notice under Section 34(8A) of the VAT Act, declaration of consequential steps as illegal, challenge to order of attachment under Section 45 of the VAT Act.

Analysis:
The petitioner, a partnership firm dealing in electronic goods, challenged a notice dated 07.11.2015 under Section 34(8A) of the VAT Act and an order of attachment dated 09.11.2015 under Section 45 of the VAT Act. During a raid by State Tax Authorities, discrepancies in stock and sales without billing were discovered. The department assessed principal tax and penalty on unaccounted goods. The partners denied receiving certain goods and agreed to issue postdated cheques for the principal duty. The competent authority sealed the godowns despite the cheques. The petitioner argued that duty liability is pending assessment and requested the removal of seals to prevent financial loss due to stock deterioration.

The respondent, opposing the petition, claimed reliable evidence of sales without tax payment, including unaccounted stock and statements from transporters and purchasers admitting to purchases without bills. The court acknowledged the ongoing investigation and refrained from making conclusive observations. Considering the prima facie evidence, the court declined immediate removal of seals but proposed conditions for lifting them. The court noted the petitioner's issued cheques, directing the removal of seizure and seals upon fulfillment of specified conditions, including filing undertakings, depositing additional sums, and maintaining minimum stock levels in the godowns.

Upon compliance with the outlined conditions, including filing undertakings and issuing postdated cheques, the court ordered the removal of stock seizure and godown seals. The petition was disposed of with these directions, allowing direct service.