Goods seizure upheld under U.P. VAT Act due to tax evasion; transporters accountable

The Commissioner Commercial Tax, U.P. Lucknow Versus S/S. Sri Supreme Freight Carriers Pvt. Ltd.

The Commissioner Commercial Tax, U.P. Lucknow Versus S/S. Sri Supreme Freight Carriers Pvt. Ltd. - TMI Issues Involved:
1. Validity of seizure of goods and demand of cash security under Section 48 of the U.P. VAT Act, 2008.
2. Status of Delhi - U.P. Border area of District Ghaziabad as "no-man's land."
3. Role and awareness of transporters regarding consignors and consignees.
4. Applicability of Section 52 or Section 48 of the U.P. VAT Act, 2008 in cases of fraudulent transportation of goods.

Issue-wise Detailed Analysis:

1. Validity of Seizure and Cash Security Demand:
The court found that the goods originated from Ghaziabad and were transported under forged invoices with fictitious TIN numbers and non-existent consignees. The Mobile Squad Authority identified that the goods were intended for unloading in Deoria, U.P., based on mobile numbers mentioned in the invoices. The respondent failed to provide specific replies to these findings. The court held that the seizure of goods and demand for cash security under Section 48 of the U.P. VAT Act, 2008 was valid, as the transportation was fraudulent and intended to evade tax. The tribunal's order setting aside the seizure was deemed erroneous.

2. Status of Delhi - U.P. Border Area:
The court rejected the respondents' claim that the Delhi - U.P. Border area of District Ghaziabad is "no-man's land." It clarified that this area is part of District Ghaziabad (U.P.) and not exempt from the jurisdiction of U.P. VAT authorities. The court referenced Article 1(2) of the Constitution of India and noted that the circular dated 31.01.1987, which was relied upon by the respondents, was cancelled and had no relevance.

3. Role and Awareness of Transporters:
The court dismissed the respondents' argument that transporters are ignorant about consignors and consignees. Citing the Supreme Court's observations in A.B.C. (India) Ltd. v. State of Assam, the court noted that transporters are directly involved in transactions and cannot claim ignorance. The court emphasized that transporters should not act as facilitators for tax evasion by concealing the real identity of consignors and consignees.

4. Applicability of Section 52 or Section 48:
The court held that fraudulent transportation of goods with the intent to evade tax falls under Section 48, not Section 52, of the U.P. VAT Act, 2008. It referenced the Supreme Court's judgments on the consequences of fraud and the principle that fraudulent transactions cannot be protected under the guise of legitimate tax planning. The court concluded that the respondents' actions constituted fraud, misrepresentation, and suppression of facts, and thus, the seizure under Section 48 was justified.

Conclusion:
The revision was allowed, and the tribunal's order was set aside. The court directed that the penalty proceedings be concluded by the competent authority without being influenced by the observations made in this judgment.