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TMI Blog2019 (1) TMI 1496X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Sales/Trade Tax Revision No. - 326 of 2017 - - - Dated:- 25-1-2019 - Pankaj Mithal, Manoj Kumar Gupta And Suneet Kumar For the Applicant : Markanday Singh,Abhishek Rai For the Opposite Party : C.S.C. ORDER (PER MANOJ KUMAR GUPTA, J.) This reference to Larger Bench is occasioned by order of one of us (Hon. Suneet Kumar, J) noticing divergence of opinion between judgements of two Co-ordinate Benches in M/s Prakash Transport Corporation Vs. CCT, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as a violation of the mandatory provisions of Section 52 read with Rule 58 and directed for seizure of the goods. However, in this case, the seizure order was given a seal of approval by this Court. Before we proceed to deal with the divergent views, it would be advantageous to take note of certain provisions of the Act and the amendments made therein from time to time. Section 52 of the Act and Rule 58, which were the edifice upon which the seizure orders rested, read thus:- 52. Provision for goods passing through the State - When a vehicle coming from any place outside the State and bound for any other place outside the State, and carrying goods referred to in sub-section (1) of Section 50, passes through the State, the driver or other person in charge of such vehicle shall carry such documents as may be prescribed failing which it shall be presumed that the goods carried thereby are meant for sale within the State by the owner or person in charge of the vehicle. Rule 58. The transit of goods by road through the State - The driver or person-in-charge of a vehicle carrying goods referred to in sub-section (1) of section 50, coming from a place outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State and bound for any other place outside the State and carrying goods mentioned in sub-section (1) of Section 50, to carry such documents as may be prescribed. The origin of check-posts and barriers is traceable to the U.P. Sales Tax Act, 1948. The provisions relating to establishment of barriers and check-posts, even under the previous legislation, had to undergo repeated amendments to deal with the problem of evasion arising out of transactions involving movement of goods into the State to any place outside the State. In Sodi Transport Co. and others Vs. State of U.P. and others, 1986 ATJ 289 , the validity of Section 28 and 28-B of the U.P. Sales Tax Act, 1948 as substituted by U.P. Act No.1 of 1973, which related to establishment of check-posts and barriers, was subjected to challenge before the Supreme Court on the ground of legislative competence, unreasonableness and a restriction upon free trade and commerce. These provisions were:- 28. Establishment of check-posts and barriers - The State Government, if it is of opinion that it is necessary so to do with a view to preventing evasion of tax or other dues payable under this Act in respect of the sale of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of check-posts and barriers to prevent and detect evasion of taxes in transactions taking place in the name of inter-State trade. Although the validity of similar provisions was upheld by the Supreme Court in Sodi Transport , but the State Government was conscious of the fact that it took long time to clear the consignments at the check-posts, resulting in long queues and wastage of time. There was also a persistent demand from the business community to solve the problem. To overcome the malady, the Government decided to abolish check-posts and barriers, but at the same time, it put in place a different mechanism to safeguard the interest of the revenue while taking care of the concerns of the business community. Now, by virtue of the substituted provisions of Section 52 read with Rule 58, driver or person in charge of a vehicle carrying goods from outside the State, having his destination to some other State, instead of the requirement of obtaining transit pass from the first check-post and then surrendering it at the exist check-post, is under obligation to carry the documents as are specified by general or special order issued by the Commissioner from time to time, failing whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one of the later judgments of this Court in M/s Seema Enterprises, Canal Avenue Vs. The Commissioner, Commercial Tax, U.P., Lucknow, 2013 52 NTN DX 237 the TDF prescribed by the Commissioner by Circular dated 12.12.2012 was found to be lacking in certain material aspects. Consequently, directions were issued by the Court to the Principal Secretary, Financial Institutions to consider making changes in the procedure, as under:- Now under Section 52 of the Act read with Rule 48 of the Rules and circular there is a provision for obtaining the Transit Declaration Form by downloading the details of the goods in the departmental website but no mechanism is provides for the surrender of the said transit declaration form. It is very ridiculous. The check posts have been abolished and now the officials sitting in the mobile squad checks the vehicles in route. Everything has been left open on the discretion and the whims of the commercial tax officers of the mobile squad. They have been allowed to act as uncrowned king to operate in any manner in which they may like. It is open to the Mobile Squad to check the vehicle or not and even allow the vehicle to go unnoticed with the unethic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a view, the Court also held that in the present era of globalization, checking of vehicles or goods during transport results in hindrance in trade and commerce though it may be necessary to check evasion. The Court also took into consideration the practical aspect that drivers/vehicle owners are mostly illiterate persons and are not amply equipped to download the TDF. The observations made in the judgement are as follows:- The Transit Declaration Form as provided by the above circular by the Commissioner has to accompany the goods in transit through the State of U.P. Any deviation or any default in carrying the said Transit Declaration Form would only attract the presumption which has been provided in Section 52 of the VAT Act and Rule 58 of the Rules. The default in carrying the Transit Declaration Form is not a ground specifically provided for the seizure of goods under the VAT Act. It is not the case of the department that any other document specified under Section 50 of the VAT Act or the Rule 54 of the Rules or as a matter of fact by any other provision of the VAT Act/Rules was not accompanying the goods or was false, incorrect, incomplete or invalid. Therefore, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recognized as an authentic document, as possession and production of Transit Declaration Form for carrying goods through the State of U.P. is not a ground for seizure, the seizure is without jurisdiction. The absence of Transit Declaration Form only gives rise to a rebuttable presumption and may attract penal consequences but the goods cannot be seized for non-production of it. The answer to the question, therefore, is that the goods cannot be seized for absence of Transit Declaration Form. In S.B. International , the Court on the other hand held that there was no dispute that the provisions of the Act requiring TDF to accompany the driver/vehicle owner is mandatory, consequently, TDF generated two days after the goods were intercepted would be of no consequence and accordingly, the seizure of the goods was held to be valid. The relevant extract from the said judgment is as under:- This Court after examining the provisions of the Value Added Tax Act made a pointed query from the learned counsel for the assessee as to whether under the provisions of the Value Added Tax Act it is mandatory that the goods which are brought within the State of Uttar Pradesh for being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration. Section 2 (ac) defines 'sale' to mean any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) by one person to another, for cash or for deferred payment or for any other valuable consideration and includes,- (i) a transfer, otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) the delivery of goods on hire purchase or any other system of payment by installments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by an association or body of persons (whether incorporated or not) to a member thereof for cash, deferred payment or other valuable consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing that driver or other person in charge of the vehicle coming from outside the State shall obtain transit pass from the first check-post and surrender the same at the time of exit from the State, 'failing which it shall be presumed' that the goods carried thereby have been sold within the State. Before the Supreme Court, having regard to the said provision, the argument advanced was that thereby, even a transporter, who is not a dealer, had been brought within the ambit of the Act by creating a legal fiction. In other words, the contention was that the impugned provision attaches liability to pay sales tax even where no sale had actually taken place within the State. In the above context, the significance of the phrase 'shall presume' was dealt with in great detail by the Supreme Court and it was held that it only raises a rebuttable presumption. It was held to be a rule concerning evidence. It only specifies the person on whom the burden of proof lies. It by itself does not impose any charge on the subject. When a party upon whom the burden lies to rebut the presumption, has produced evidence to show that the real fact is not as presumed, the purpose of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presume'.-- Whenever it is provided by this Act that the Court may presume a fact, it may either regard such fact as proved, unless and until it is disproved; or may call for proof of it; 'Shall presume'.-- Whenever it is directed by this Act that Court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved: 'Conclusive proof'. When one fact is declared by this Act to be conclusive proof of another, the Court shall, on proof of the one fact, regard the other as proved, and shall not allow evidence to be given for the purpose of disproving it. 11. In the Indian Evidence Act, 1872 there are three cases where conclusive presumption may be drawn. They are sections 41, 112 and section 113. These are cases where law regards any amount of other evidence will not alter the conclusion to be reached when the basic facts are admitted or proved. In Woodroffe Amir Ali's Law of Evidence (Vol. I), 14th Edition at page 299 it is stated thus : Conclusive presumptions of law are : 'rules determining the quantity of evidence requisite for the support of any particular averment, which is not permitted to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are used and we should expect that the U.P. Legislature also has used them in the same sense in which Indian courts have understood them over a long period and not as laying down a rule of conclusive proof. In fact these presumptions are not peculiar to the Indian Evidence Act. They are generally used wherever facts are to be ascertained by a judicial process. 13. The history of the rules regarding presumptions is succinctly given in W.S. Holdsworth's 'A History of English Law' (Vol.IX) at page 140 thus : From time to time the ordinary process of reasoning have suggested various inferences, which have been treated by the courts in different ways. Sometimes they are treated as more or less probable inferences of fact; and it is possible, though by no means certain, that in the remote past most presumptions originated as mere presumptions of fact. Just as in the case of judicial notice, the courts, as a matter of common sense, assume the existence of matters of common knowledge without further proof; so they easily drew an obvious in reference from facts proved or admitted, and thus created a presumption, as common sense dictated. And just as the truisms whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We are of the view that the words contained in Section 28-B of the Act only require the authorities concerned to raise a rebuttable presumption, that the goods must have been sold in the State if the transit pass is not handed over to the officer at the check-post or the barrier near the place of exist from the State. The transporter concerned is not shut out from showing by producing reliable evidence that the goods have not been actually sold inside the State. It is still open to him to establish that the goods had been disposed of in a different way. He may establish that the goods have been delivered to some other person under a transaction which is not a sale, they have been consumed inside the State or have been redespatched outside the State without effecting a sale within the State etc. It is only where the presumption is not successfully rebutted the authorities concerned are required to rely upon the rule of presumption in Section 28-B of the Act. It is, therefore, not correct to say that a transaction which is proved to be not a sale is being subjected to sales tax. The authority concerned before levying sales tax arrives at the conclusion by a judicial process that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r various wrongs committed under the Act. Item No.15 of Section 54 stipulates that Where the driver or person in charge of the vehicle, as the case may be, (i) fails to carry documents referred to in Section 52 and also fails to prove that goods carried in his vehicle are meant for delivery to dealers or person outside the State, he is liable to a penalty specified therein, in addition to the tax, if any, payable by him. The liability to pay penalty arises not merely for failure to carry documents referred to in Section 52 but when the driver or person in charge of the vehicle also fails to prove that goods carried in his vehicle are meant for delivery to dealers or persons outside the State. It is beyond any pale of doubt that failure to carry documents including TDF ipso facto does not attract penalty but only when the person charged of the wrong doing is unable to lead evidence to rebut the presumption. The above conclusion also stands re-enforced from Rule 6 (7), which reads thus:- (7) In a case in which the driver or person-in charge of a vehicle carrying goods referred to in subsection (1) of section 50, with the documents referred to in Section 52 (Rule 58) to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancillary provisions. Section 49 of the Act provided for establishment of checkposts to prevent evasion of taxes. The said provision was deleted by U.P. VAT (Third Amendment) Act, 2009 w.e.f. 27.8.2009. However, the heading of the Chapter was not amended and it continues to remain the same. Section 50 of the Act, also falling under Chapter VII, was drastically amended w.e.f. 27.8.2009 thereby providing that any person importing goods into the State by road could do it after obtaining a declaration in prescribed form. The declaration could be obtained from the assessing authority having jurisdiction over the area, where his principal place of business is situated or, in case there is no such place, where he ordinarily resides. The provision also facilitates, in the alternative, downloading of the declaration form from the official website of the department. Sub-section (3) and (4) of Section 50 which are relevant for our purposes, are extracted below:- (3) The driver or other person in-charge of any vehicle carrying any goods referred to in the preceding sub-sections shall stop the vehicle when so required by an officer authorized under sub-section (1) of Section 45 or sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the authorities with the power to invoke Section 50 of the Act, drawing an inference that the goods are meant for sale within the State. The driver or person in charge of the vehicle would naturally not be carrying the form prescribed under Section 50, applicable where the goods imported from outside are meant for sale within the State. In respect of such a consignment, the provisions of sub-section (4) of Section 50 would then empowers the officer making the search or inspection to seize the goods for not carrying proper and genuine documents. Rule 55 also relates to inspection of goods in transit and provides as under:- Rule 55. Inspection of goods in transit.- (1) At any place inside the State when so required by an officer empowered under rule 5 to exercise powers under section 45 or section 48, the owner, driver or any other person-in-charge of the vehicle or vessel, as the case may be, shall stop the vehicle or vessel and keep it stationary as long as may be required by such officer. He shall also allow such officer to examine the contents of the vehicle or vessel and to inspect all documents and records relating to the goods carried, which may be in his possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, vessel or any other building or place, but are not accounted for by the dealer in his accounts, registers or other documents maintained in the ordinary course of his business; (iii) which are found in any place of business, vehicle, vessel or any other building or place, and such goods are accompanied by any tax invoice or sale invoice or any other document pertaining to value of goods, as the case may be, containing value of goods under valued to the extent more than fifty percent of the value of goods prevalent at the relevant time in local market area where the said transaction had taken place, with intention to evade payment of tax. Provided that a list of all the goods seized under this sub-section shall be prepared by such officer and be signed by the officer and not less than two witnesses. (2) Where any officer referred to in sub-section (1) has reason to believe that the goods found in any vehicle, vessel, building or place are not traced to any bonafide dealer or the documents issued by a bonafide dealer with respect to the accompanying goods contains wrong particulars or that it is doubtful if such goods are properly accounted for by any dealer in his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner, may, for sufficient reasons to be recorded in writing, direct that the goods be released without any deposit or on depositing such lesser amount, or furnishing security in such form other than cash or indemnity bond, as he may deem fit: Provided further that in case of a person, who is not a registered dealer and against whom penalty order referred to in sub-section (7) has been passed, filing of return by such person and assessment of tax on him may not be necessary. (8) The penalty or such part thereof as remains after adjustment of any amount deposited under sub-section (7) shall be deposited in the prescribed manner within thirty days of the date of service of the copy of the order imposing the penalty. In default, the assessing authority shall cause the goods to be sold in such manner as may be prescribed and apply the sale proceeds thereof towards the penalty imposed, and subject to the provisions of section 40, refund the balance, if any, to the dealer or, as the case may be, to the person in-charge. (9) Where the officer seizing the goods, before forwarding the list and other documents referred to in sub-section (3), or the assessing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r confiscatory in nature but to secure the interest of the revenue in case ultimately penalty is levied on such person. The same is clear from sub-section (7) of Section 48 which restricts the power of the officer seizing the goods to demand an amount not exceeding such amount as would be sufficient to cover the penalty likely to be imposed and on deposit whereof in cash, the goods so seized are to be released in favour of the person concerned. The aforesaid conclusion is fortified by the proviso to sub-section (7) of Section 48 which empowers the Commissioner to release goods without insisting for any deposit for sufficient reasons to be recorded in writing or to demand such lesser amount or other security other than cash or indemnity bond as he may deem fit. Once again, sub-section (8), though it permits goods to be sold in default to deposit the security demanded as a result of seizure of goods, the excess amount from the sale proceeds after deducting the penalty amount which is ultimately imposed, has to be refunded to the dealer or person in charge. Likewise, where the seized goods are subject to natural and speedy decay, the authorities while being invested with the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer or other person, as the case may be, has committed the wrong described in column (2) of the table below, it may, after such inquiry, if any, as it may deem necessary and after giving dealer or person reasonable opportunity of being heard, direct that such dealer or person shall, in addition to the tax, if any, payable by him, pay by way of penalty, a sum as provided in column (3) against the same serial no. of the said table: 15. Where the driver or person in charge of the vehicle, as the case may be,- (i) fails to carry documents referred to in Section 52 and also fails to prove that the goods carried in his vehicle are meant for delivery to dealers or persons outside the State; or (ii) .............................. (iii) ................................... (iv) .............................. Tax payable on the value of goods or 40% of the value of goods which ever is higher 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 rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation may discharge the notice. The noticee at this stage cannot insist for being provided with opportunity to lead oral evidence or place reliance on documents, the authenticity whereof has to be established by leading further evidence or by lengthy process of reasoning. This would be possible only at the stage of enquiry in pursuance to show cause notice issued during penalty proceedings. Thus, by way of illustration, there could be a case where driver or person in charge of the vehicle despite having downloaded TDF from the official website before entering the State may, for valid reason or omission, not have carried the same alongwith him but produces the same forthwith in response to show cause notice during seizure proceedings alongwith other supporting documents to prove that consignment is meant for transportation to a place outside the State. In such a case, the seizing authority if satisfied, will have no other option but to discharge the notice. On the other hand, if the noticee produces evidences which could not be accepted on its face value or seeks time to produce oral evidence of the consignor and the consignee or other witnesses to prove that the consignme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stood rebutted as the goods were booked from Vallabhgarh Faridabad, Haryana to BHEL, Haridwar, State of Uttranchal, a Government of India Enterprise. The goods were found to be of a nature as were not meant for consumption, use or sale by the public at large. The Court held that the seizure of the goods would, therefore, be unsustainable. The relevant extract from the above judgement is as follows:- 13. On the merits of the case, the learned counsel for the petitioner submitted that except the down loaded form prescribed by the Commissioner the goods were moving along with all necessary documents. The department has neither raised nor doubted the genuineness of other documents which were being carried by the driver of the vehicle at the time of interception of the goods. The goods were booked at Ballabhgarh, Faridabad (State of Haryana) to BHEL, a Government of India Enterprizes. The details of the consignor and consignee were not found to be incorrect. The goods were not meant for consumption, use or sale by the public at large. The submission is that there was no intention to evade the payment of tax in the State of U.P.. A perusal of the impugned order would show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same time, the said observation cannot be accepted as a general proposition of law, in view of what has been held above. In so far as the judgement of this Court in case of S.B. International (supra) is concerned, it was based more on concession of the parties that carrying of TDF is mandatory without examining the legal provisions and thus, does not appear to lay down any law of general application. Having regard to the above discussion, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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