2003 (9) TMI 746 - HC - VAT and Sales Tax

Court Orders Release of Seized Goods, Citing Arbitrary Seizure and Emphasizing Proper Compliance with Transport Rules.

Madhya Bharat Transport Carrier Versus Commissioner of Trade Tax, UP., Lucknow

Madhya Bharat Transport Carrier Versus Commissioner of Trade Tax, UP., Lucknow - [2006] 143 STC 493 (All) Issues Involved:1. Legality of the seizure of goods.2. Validity of the presumption of sale within the state.3. Compliance with procedural requirements under Section 28-B and Rule 87 of the U.P. Trade Tax Act.4. Verification discrepancies between declared and actual goods.5. Responsibility and liability of the transporter under the Act.Issue-wise Detailed Analysis:1. Legality of the Seizure of Goods:The applicant, a transport company, was transporting goods from New Delhi to Akola and obtained a transit pass (Form XXXIV) at the Kotwan Check-Post. The goods were seized by the Assistant Commissioner (Mobile Squad) based on discrepancies found during an inspection. The Tribunal confirmed the seizure but reduced the security amount. The High Court noted that the vehicle was found loaded with goods before the expiry of the transit pass validity, and there was no evidence of goods being unloaded or the transit pass period being expired. The court held that the presumption of sale within the state could only be drawn if the transit pass was not surrendered within the stipulated time, making the seizure premature and arbitrary.2. Validity of the Presumption of Sale within the State:The court referred to Section 28-B, which mandates obtaining and surrendering a transit pass to avoid the presumption of sale within the state. The Supreme Court upheld the validity of Section 28-B, emphasizing that these are machinery provisions to prevent tax evasion and do not impose any charge by themselves. The presumption of sale arises only if the transit pass is not surrendered at the exit check-post. In this case, since the transit pass period had not expired, the presumption of sale was not applicable.3. Compliance with Procedural Requirements under Section 28-B and Rule 87:Section 28-B and Rule 87 outline the procedure for obtaining and surrendering a transit pass. The court highlighted that the transporter must surrender the transit pass at the exit check-post, and failure to do so would invoke the presumption of sale within the state. The court found that the applicant had complied with the procedural requirements, as the transit pass period had not yet expired at the time of inspection.4. Verification Discrepancies between Declared and Actual Goods:During the inspection, discrepancies were found between the declared goods in the GRs and the actual goods. The court noted that the number of packages and their descriptions matched, but there were differences in the number of pieces inside the packages. The court held that verification should be based on the number of packages as mentioned in the transit pass and not the number of pieces, as the transporter cannot be expected to verify the contents of each package at the time of booking. The court concluded that the goods were related to the transit pass, and the discrepancies did not justify the seizure.5. Responsibility and Liability of the Transporter under the Act:The court clarified that under Section 28-B, the responsibility to obtain and surrender the transit pass lies with the transporter, who is considered the custodian of the goods. The court emphasized that the genuineness of the consignor and consignee is not relevant for the purpose of Section 28-B, as the presumption of sale is drawn against the transporter if the transit pass is not surrendered. The court referred to the Supreme Court's observation that the transporter would be treated as a 'dealer' for the purpose of tax liability if the transit pass is not surrendered.Conclusion:The High Court allowed the revision, setting aside the Tribunal's order and directing the release of the seized goods without any security. The court found that the seizure was arbitrary and based on unfounded suspicions, as the transit pass period had not expired and the verification discrepancies did not justify the seizure. The court reiterated the procedural requirements under Section 28-B and Rule 87, emphasizing the transporter's responsibility to surrender the transit pass and the irrelevance of the consignor's and consignee's genuineness for the purpose of presumption of sale.