TaxTMI 
TaxTMI 
2019 (1) TMI 1496
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....circular issued by the Commissioner read with Section 52 of the Act and Rule 58 of the Rules or in the alternative upon non-production of the TDF on interception of the goods whether a presumption that the goods are meant for sale within the State can mandatorily be drawn in view of Section 52 read with Rule 58 and the circular dated 3 September 2013 issued by the Commissioner." In M/s Prakash Transport Corporation, a vehicle carrying the goods was seized by the mobile squad of the commercial tax department of the State on 13.9.2013 on account of non-production of transit declaration form (for short 'TDF'). In response to show cause notice, the noticee produced a TDF downloaded from the official website of the department on 18.9.2013. The authorities refused to place reliance upon the same, as according to them, the TDF should have been carried by the driver alongwith him. Since he failed to carry the same, consequently, it was presumed under Section 52 of the U.P. Value Added Tax Act, 2008 (for short 'the Act') read with Rule 58 that the goods were meant for sale within the State. Resultantly, a seizure order exercising power under Section 48/50/51 read with Rul....
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....ed by U.P. VAT (Third Amendment) Act No.22 of 2009 w.e.f. 27.8.2009. Prior to its substitution, it read as under:- "52. Issue of authorisation for transit of goods 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 incharge of such vehicle shall obtain in the prescribed manner an authorisation for transit of goods from the officer incharge of the first check-post or barrier after his entry into the State and deliver it to the officer in-charge of the last check post or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person incharge of the vehicle : Provided that the goods carried by such vehicle are, after their entry into the State, transported outside the State by any other vehicle or conveyance, the onus of proving that the goods have actually moved out of the State shall be on the owner or person in-charge of the vehicle. Explanation--For the purpose of this se....
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....hall obtain in the prescribed manner a transit pass from the officer in charge of the first check-post or barrier after his entry into the State and deliver it to the officer in charge of the last check-post or barrier before his exist from the State, failing which it shall be presumed that the goods carried thereby have been sold within the State by the owner or person in charge of the vehicle." Repelling the contention that the provisions impugned were beyond legislative competence of the State Legislature or placed unreasonable restriction, the Supreme Court held :- "18. The levy of sales tax on goods which are held to have been sold inside the State cannot be considered as contravening Article 301 of the Constitution. The restrictions imposed are not also shown to be unreasonable. They do not unduly hamper trade. On the other hand they are imposed in the public interest. The contentions based on Article 301 and Article 19 (1)(g) of the Constitution are, therefore, without substance. 19. The foregoing discussion disposes of the contentions regarding legislative competence or unreasonable character of the provisions contained in Section 28-B of the Act and ru....
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....ourney commences. One of the disclosures to be made therein was the route that would be followed while taking the goods through the State. The circulars also provided for specified time limit within which the vehicle had to leave the State boundaries. The power of the Commissioner to prescribe a form in this regard was subjected to challenge in Prakash Parcel Service Limited Vs. State of U.P. and others, 2013 U.P.T.C. 912 and a Division Bench of this Court, while upholding the said power, observed as under:- "...On invocation of language of the Apex Court, the construction that would best achieve the purpose and object of the Statute should be adopted, we find that the form in dispute is to curb the tax evasion and not more than that. It does not cause any tax burden or financial burden on a dealer. The driver or incharge of the vehicle is required to get the down loaded the document in the shape of the form and after filling up the blanks by supplying requisite information which are with him but spread over, in a consolidated form, shall carry the document. In view of the Sodhi Transport Company Case (supra), it is crystal clear that the provision relating to necessary do....
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....n sold inside the State except in cases where the driver is caught unloading the goods inside the State. In my opinion, this mechanism has left the scope of large scale tax evasion and the scope of corrupt practices. In view of the above, I direct the Principal Secretary, Financial Institutions to look into the matter and review the mechanism provided under the Act and take steps to provide such mechanism to check evasion and corrupt practices and may think to revive the earlier provision as was available under the U.P. Trade Tax Act." In compliance of the above directions, the Commissioner, Commercial Taxes, Uttar Pradesh issued a Circular dated 3rd September, 2013. The said circular also provided for downloading of a form called TDF-1 from the official website before entry of goods into the State. As in the past, in the said TDF form also the details of the vehicle, the transport company, the weight of the consignments, the route to be taken during movement of goods through the State were required to be disclosed. The TDF-1 would remain valid for four days only from the date of entry of the vehicle, as disclosed in the TDF form. In order to safeguard the inte....
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....t practical experience is otherwise and it is common knowledge that such exercise causes hindrance not only in trade and commerce and delay in transit of goods but also in the smooth flow of traffic. This apart one cannot loose sight of the ground reality that in a country like India where most of the people are not literate, one cannot expect a driver or the cleaner of the vehicle to be competent enough to download a Transit Declaration Form, fill it correctly and produce it before the authority on demand. Generally, the driver or the cleaner of the vehicle are not possessed of internet facility. There is no guarantee that at every place of entry in U.P. from outside there is sufficient provision where a person can go and download the Transit Declaration Form. Even if Cyber Cafe is available one is never sure of its proper functioning enabling downloading of Transit Declaration Form round the clock. In such circumstances, the provision for downloading a Transit Declaration From and to produce it on demand as stipulated by the circular of the Commissioner dated 30.7.09 and 3.9.13 is totally impractical. In Prakash Parcel Service Ltd. Vs. State of U.P. & o....
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....iately before the goods actually enter into the State of Uttar Pradesh. In the facts of the case the interception of the goods had taken place on 20th April, 2013 while the transit form produced had itself been generated only on 22nd April, 2013, which is clearly two days after the entry of the goods in the State of Uttar Pradesh. The generation of such transit pass in the opinion of the Court will not in any way dilute the mandatory requirements of the Value Added Tax Act as already noticed above. Therefore, in the facts of the case, this Court is satisfied that there is no illegality in the orders of seizure of the goods and the demand of security for release of the same." The basic issue which falls for consideration is whether in the absence of TDF form being produced by the driver/owner, the authorities are justified in drawing a conclusion that sale had taken place within the State and there was an effort to evade the tax liability inviting seizure and penalty provisions. The above issue assumes importance as the authorities have been interpreting Section 52 and Rule 58 as conferring an unbridled power to seize goods and impose penalty. Before we answer these q....
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....ly of any goods under sub-clause (i) to sub-clause (vi) above shall be deemed to be sale of those goods by the person making the delivery, transfer or supply and a purchase of those goods by the person to whom such delivery, transfer or supply is made. Section 7 prohibits levy of tax on certain sales or purchases. Clause (a) of Section 7, which is of relevance, is extracted below:- 7. Tax not to be levied on certain sales and purchases- No tax under this Act shall be levied and paid on the turnover of,- (a) sale or purchase where such sale or purchase takes place- (i) in the course of inter-State trade or commerce; or (ii) outside the State; or (iii) in the course of the export out of or in the course of the import into, the territory of India;" Thus, under Section 3, the charging provision, the liability to pay tax arises on sale or purchase of taxable goods within the State. Section 7 prohibits levy of tax on sales and purchases made in the course of inter- State trade or commerce or beyond the geographical boundaries of the State. A combined reading of the above provisions would make it amply clear that the liability to pay tax ....
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....have been sold inside the State and in doing so, it may where the presumption contained under the Act and the Rules had not been successfully rebutted, be justified in imposing tax and penalty by treating the sale to have taken place within the State. The law on the subject laid down in the said judgement applies on all fours to the statutory provisions under consideration. It is fruitful to reproduce in detail the entire discussion on the point from the said judgement:- "10. We shall now deal with the question relating to the presumption contained in section 28-B of the Act. It is seen that if the transit pass is not handed over to the officer in-charge of the check-post or barrier before his exit from the State it shall be presumed that the goods carried thereby have been sold inside the State by the person in charge of the said goods. It is contended that the said rule virtually makes a person who has not actually sold the goods liable to pay sales tax and it is further argued that a transporter being just a transporter cannot be treated as a dealer within the meaning of that expression as it was defined in the Act at the time when section 28-B was introduced into the A....
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....d universal. They have been adopted by common consent, from motives of public policy, for the sake of greater certainty, and the promotion of peace and quiet in the community; and therefore, it is that all corroborating evidence is dispensed with, and all opposing evidence is forbidden (Taylor, Ev., s.71 : Best, Ev., p. 317, s.304'). * * * Rebuttable presumptions of law are, as well as the former, the result of the general experience of a connection between certain facts or things, the one being usually found to be the companion or the effect of the other. The connection, however, in this class is not so intimate or so uniform as to be conclusively presumed to exist in every case; yet, it is so general that the law itself, without the aid of a jury, infers the one fact from the proved existence of the other in the absence of all opposing evidence. In this mode, the law defines the nature and the amount of the evidence which is sufficient to establish a prima facie case, and to throw the burden of proof upon the other party; and if no opposing evidence is offered, the jury are bound to find in favour of the presumption. A contrary verdict might be set aside as ....
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....wn to the law. But it was inevitable that as the law developed, some of these presumptions should be so frequently drawn that they took upon themselves the character of rules of laws and we shall see that, owing to the exigencies of primitive methods of trial, the Legislature and the courts were active in creating them. Some of them were made or became only prima facie rules - rules, that is, which were rebuttable by further evidence. Others were made or became irrebuttable, and therefore, in effect, rules of law. Others hovered uncertainly on the border line of rebuttable and irrebuttable presumptions. 14. A presumption is not in itself evidence but only makes a prima facie case for party in whose favour it exists. It is a rule concerning evidence. It indicates the person on whom the burden of proof lies. When presumption is conclusive, it obviates the production of any other evidence to dislodge the conclusion to be drawn on proof of certain facts. But when it is rebuttable it only points out the party on whom lies the duty of going forward with evidence on the fact presumed, and when that party has produced evidence fairly and reasonably tending to sho....
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....ch she had brought inside the State, then he would be a dealer even according to the definition of the word 'dealer' as it stood from the very commencement of the Act subject to the other conditions prescribed in this behalf being fulfilled. A person who sells goods inside the State of Uttar Pradesh and fulfills the other conditions prescribed in that behalf is a dealer even as per amendments made in 1959, 1961, 1964, 1973 and 1978 to the said definition. There is, therefore, no substance in the contention that a transporter was being made liable for the first time after 1979 with retrospective effect to pay sales tax on a transaction which is not a sale. Tax becomes payable by him only after a finding is recorded that he has sold the goods inside the State though with the help of the presumption which is a rebuttable one." The above pronouncement by the Apex Court, in our opinion, clinches the issue and does not leave room for any further discussion. The following conclusions are, therefore, deductible as regards Section 52 and Rule 58:- (a) These are machinery provisions and do not ipso facto subject any transaction to tax. (b) The presumption embodie....
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....bove provision would show that driver or person in charge of a vehicle even if carrying documents referred in Section 52 (Rule 58), is found not to carry such goods outside the State, he would be subjected to assessment and penal proceedings. Thus, the material event for imposition of tax or penalty is not failure to carry the documents referred in Section 52 (Rule 58) but failure to prove that goods were meant for delivery to dealer or person outside the State. There is not much dispute between the parties that the presumption contained under Section 52 and Rule 58 is rebuttable and it is open to the person against whom the rule of presumption is applied to lead evidence and prove that the sale had not taken place nor is intended to take place within the State. The more contentious issue between the parties is whether the authorities could seize goods for the mere fact that the driver was not carrying TDF during transit of goods through the State. According to Sri B.K. Pandey, learned standing counsel appearing on behalf of the State, as soon as a vehicle is intercepted without the driver carrying the prescribed documents including TDF, a presumption arises that the consignm....
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....allow him to search the vehicle and inspect the goods and all documents referred to in the preceding sub-sections and shall, if so required, give his name and address and the names and addresses of the owner of the vehicle and of the consignor and the consignee of the goods. (4) Where the officer making the search or inspection under this section finds any person transporting or attempting or abetting to transport any goods to which this section applies without being covered by the proper and genuine documents referred to in the preceding sub-sections and if, for reason to be recorded, he is satisfied after giving such person an opportunity of being heard that such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, he may order seizure of such goods. (5) The provisions of sub-sections (3), (7), (8), (9) and (10) of section 48 shall mutatis mutandis apply to goods detained under sub-section (4), as they apply to goods seized under that section." Sub-section (3) of Section 50 invests the authority with the power to stop the vehicle, keep it stationary for so long as may be necessary, search ....
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....are not covered by one or more of the documents referred to in sub-rule (1) of rule 54; or (b) any such documents in respect of any consignment is false, bogus, incorrect, incomplete or invalid, the officer shall issue a notice to the driver or personincharge of the vehicle or vessel why the goods should not be seized. (3) The officer, if he is satisfied as to the reason or reasons for the omission or defect, as the case may be, may vacate the notice after recording his finding therefor. (4) If the officer is not satisfied with the explanation furnished by the owner, driver or the person-in-charge of the vehicle, he shall order the seizure of the goods and furnish a receipt to the person aforesaid in respect of the goods seized. (5) The commissioner may from time to time issue instructions with regard to the procedure to be followed regarding search and seizure of goods imported into the State from out of State." Once again, the officer inspecting the goods in transit is invested with the power to seize goods, if he finds that the documents in respect of the consignment is false, bogus, incorrect, incomplete or invalid. These powers a....
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....ions of this section shall mutatis mutandis apply in relation to such seizure. (3) An officer seizing the goods under sub-section (1) shall take all the measures necessary for their safe custody and forward the list, referred to in the proviso to sub-section (1), along with other documents relating to the seizure to the assessing authority concerned. (4) The said assessing authority shall serve on the dealer or, as the case may be, the person in-charge of the goods at the time of seizure (hereinafter in this section referred to as the person in-charge) a notice in writing requiring him to show cause, why a penalty should not be imposed. (5) If such authority, after taking into consideration the explanation, if any, of the dealer or, as the case may be, the person in charge and after giving him an opportunity of being heard, is satisfied that the said goods were omitted from being shown in the accounts, registers and other documents referred to in sub-section (1) or not traced to any bonafide dealer or not properly accounted for by any dealer or the documents issued by a bonafide dealer with respect to the accompanying goods contained wrong particulars or ....
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.... assessed or penalty imposed, as the case may be, is not deposited in accordance with the provisions of this Act, the officer seizing the goods or the assessing authority, as the case may be, may, without prejudice to any other action that may be taken in accordance with other provisions of this Act, cause the goods to be sold by public auction in the prescribed manner. The sale proceeds of such goods shall be adjusted towards the expenses of tax assessed or penalty imposed. The balance, if any, shall be refunded to the dealer or, as the case may be, the person in-charge in accordance with the provisions of sub-section (8). (10) If the amount deposited under sub-section (7) is more than the amount of penalty imposed under sub-section (5), the excess amount so deposited shall be refunded to the dealer or, as the case may be, the person in-charge by the authority with whom it was so deposited, in accordance with the provisions of section 40." Section 45 is the power to order production of accounts, documents and power of entry, inspection, search and seizure conferred upon the officer empowered by the State Government in this behalf. Such an officer is invested with the p....
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....ately imposed in accordance with sub-section (8). Again sub-section (10) which requires excess amount, after deducting penalty to be refunded to the dealer or person in charge, evinces a clear intention that the seizure of goods is an interim measure to secure the interest of the revenue in case ultimately penalty is imposed. Before the goods are seized, as provided under sub-section (4) of Section 50, the person concerned has to be given an opportunity of hearing. A similar hearing is also stipulated under Rule 55 (2) (b). The order of seizure could only be passed if the concerned officer is satisfied after giving opportunity of hearing that goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under the Act. Likewise, under Rule 55 (2) the officer concerned is empowered to inspect the documents and records relating to goods carried and if on such examination, the officer finds or has reason to believe that any such documents in respect of any consignment is false, bogus, incorrect, incomplete or invalid, the officer shall issue notice to the driver or person in charge of vehicle or vessel why the goods should not be seized.....
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....n 52 and Rule 58 would also be rebuttable at such stage, otherwise providing hearing would be an empty formality and eyewash. This leads to another question as regards the scope of enquiry which has to be made at the stage of issuance of show cause notice before seizure is directed. As noted above, the seizure of goods is not confiscatory in nature. The title in the goods seized did not vest in the State Government. The object, as stated above, is to secure the interest of the revenue so that if ultimately penalty is imposed, the amount could be set off against the security amount which the person concerned may furnish for getting the seized goods released in his favour. The Commissioner is invested with the power to release the goods even without any deposit or on deposit of such lesser amount or furnishing security in such form other than cash or indemnity bond, as he may deem fit. The above provisions unequivocally evinces the legislative intent that as far as possible the seized goods should be returned to the driver or person in charge as soon as the amount is deposited or the security is furnished. The seized goods should not be kept for a long period as it may not only be....
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....on the presumption embodied under Section 52/Rule 58 would be justified in directing seizure of goods. In Naresh Kumar Vs. Commissioner, Commercial Tax, 2013 UPTC 843, one of us (Hon. Pankaj Mithal, J.) held that documents prepared or manufactured after receipt of notice of seizure would not be taken into consideration. It has been held that:- "The mandate to consider the documents produced in response to the show cause notice is only with regard to existing genuine and bona fide documents which for one reason or the other could not be produced when the goods were detained but this mandate would not apply to documents which were not in existence at the relevant time and were procured or manufactured subsequently." In Prakash Transport Corporation (supra), the Court while deciding the validity of the seizure order noted that the seizure order itself records that except for the fact that TDF form was not produced when the vehicle was intercepted, no other discrepancy was found in the other documents accompanying the goods. The consignor and consignee were found to be genuine dealers. There was no unloading of goods within the State of U.P. The driver of the vehicle in ....
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....rything was found in order. Reliance has been placed on certain decisions namely M/s. Crystal India Limited Vs. Commissioner of Commercial Tax 2012 Tax Law Diary-130, M/s. Balaji Timbers and Paints Vs. Commissioner of Commercial Tax, 2010 NTN (43) 521, and certain other unreported judgments to show that presumption of sale stands rebutted. The learned standing counsel, on the other hand, could not point out any thing to the contrary. Even in the case of Sodhi Transport (supra) as also in the circular issued by the Commissioner it has been laid down that a rebuttable presumption in absence of necessary documents to be drawn against a person. The Apex Court in the case of Sodhi Transport (supra) has examined this issue in depth and laid down that the presumption is rebuttable presumption. This Court in the case of the above relied upon decisions has gone to the extent that if the transit form is furnished subsequently, after the interception of the vehicle, the seizure order becomes bad. The Appellate Authority fixed 15 per cent cash security and bank guarantee to be given for 25 per cent of the value of the goods as a condition for releasing the goods. This order was modifi....
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....t for sale within the State inviting seizure and penalty. Such a person in response to show cause notice issued to him in course of seizure proceedings, can rebut the presumption contained under Section 52 and Rule 58 by leading cogent and reliable evidence of unimpeachable character to prove that the consignment was not being transported in an attempt to evade assessment or payment of tax due or likely to be due but is destined for sale outside the State. In case he leads evidence to the said effect, the purpose of presumption is over and the authority has to take an informed decision based on judicial process and can direct seizure of such goods only if it satisfied that the goods were being transported in an attempt to evade assessment or payment of tax due or likely to be under the Act or that the reason for omission or defect to carry the required documents was not satisfactory. In such cases, the authority is invested with the power to direct seizure of goods requiring the person concerned to deposit an amount not exceeding such amount as would be sufficient to cover the penalty likely to be imposed and upon deposit whereof in cash, the seized goods would be released in his f....