TaxTMI 
TaxTMI 
2019 (1) TMI 1496
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Rule 58 was passed. The learned Single Judge deciding the vali....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tution, 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 section, the hirer of the vehicle shall also be deemed to be the owner of the vehicle." The prefatory note men....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 rule 87 of the Rules. They are introduced, as stated earlier, to check evasion and to provide a machinery for levying tax from persons who dispose of goods inside the State ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ime 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 documents to be carried by a driver of the vehicle passing through the State of U.P. is a machinery provision. It does not charge on the subject. It is enacted to insure and keep a watch on a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pt 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 interest of the driver and the owner of the vehicle, the number of physical verifications en-route was limited to two. Certain other safeguards were also put in place but at the same time, the circular also stipulated that wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und 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. & others 2013 U.P.T.C. 912 it has been held that as the goods were moving along with necessary documents and the department has neither raised any question or doubt about the genuineness of the documents which were accompanying the goods at the time of interception, mer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 questions, we would like to make a brief reference to certain other provisions of the Act. Section 3 of the Act is the charging provision, which levies tax on every dealer on his taxable turnover of sale or purchase or both, as the case may be, of taxable goods. The relevant part of Section 3 is extr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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 under the Act arises only where sale or purchase of taxable goods is made within the State. Section 52 nor Rule 58 impose any tax on any subject or transaction. These are machinery provisions to prevent evasion of tax under the garb of inter-State trade. These are rules of evidence and gives rise to a presumption that in the absence of a driver carrying documents, as prescribed, it would be presumed that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntire 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 Act. The appellants contend that the words 'it shall be presumed that the goods carried thereby have been sold within the State' in section 28-B of the Act as meaning that it shall be conclusively held that the goods carried thereby have been sold within the State to buttress their argument that a tax is being levied on a transaction which is not a sale at all under Entry 54 of List II of the Seventh Schedule by intr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 being against evidence. The rules in this class of presumptions as in the former, have been adopted by common consent from motives of public policy and for the promotion of the general good; yet not as in the former class forbidding all further evidence, but only dispensing with it till some proof is given on the other side to rebut the presumption raised. 12. Having regard to the definition of the words 'may presume', it is open to a court where they are used in its discretion eith....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 show that the real fact is not as presumed the purpose of presumption is over. Then the evidence will determine the true nature of the fact to be established. The rules of presumption are deduced from enlightened human knowledge and experience and are drawn from the connection, relation and coincidence of facts, and circumstances. 16. In our opinion a statutory provision which creates a rebuttable presumption as regards the proof of a set of circumstances which would make a transaction liable to tax with the object of preventing evasi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 embodied under the above provisions is a rule of evidence. (c) The provision permits the authorities to draw a rebuttable presumption against the driver or person in charge of the vehicle that sale had taken place within the State in case he is found not carrying the TDF. (d) The burden to rebut the presumption is upon the driver or person in charge by leading positive evidence to prove that no sale had in fact taken place within the State and the consignment is meant for transportation outside the State. (e) Once such evidence is lead, the presumption embodied un....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 consignment was meant for sale within the State, and the authorities get invested with the power to seize goods in exercise of power under Section 50 (4) of the Act. In other words, according to him, the statutory presumption embodied in Section 52/Rule 58 is conclusive at the stage of seizure, though rebuttable in penalty proceedings. On the other hand, according to learned counsel for the revisionist, since the presumption is rebuttable, therefore, there is no power of seizure, though it may attract penalty. Alternatively, even if power of seizure would be exercised at the stage of detention of goods during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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 the vehicle and inspect the goods and all documents referred to in the preceding sections and compel the driver or person in charge of the vehicle to give his name and address and the names and addresses of the owners of the vehicles and of the consignor and consignee of the goods. Sub-section (4) confers power upon the officer making the search or inspection to seize the goods after giving him opportunity of hearing if he finds that a person is transporting or attempting to transport any goods to which the section applies without being covered by the proper and genuine documents referred to in the preceding sections. As alread....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 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. Section 48 reads thus:- "48. Power to seize goods. (1) An officer authorised u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 the goods are undervalued to the extent of more than fifty percent of the value of goods prevalent at the relevant time in the local market area where the said transaction had taken place, with intention to evade payment of tax, it shall pass an order imposing a penalty not exceeding forty per cent of the value of such goods, as he deems fit. (6) A copy of the order imposing penalty under sub-section (5) shall be served on the dealer or, as the case may be, the person in-charge. (7) The officer seizing the goods shall serve on the dealer or, as the case may be, the person in-charge an order in writing mentioning the fact of such seizure and indicating the amount, not exceeding such amount as would be sufficient to cover the penalty likely to be im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 power to require any dealer to produce before him any book, document or account relating to his business and may inspect, examine and copy the same and make such enquiries from the dealer as may be necessary. Section 46 which is of significance deals with power of search, inspection and seizure in case of a person other than a dealer. It empowers the officer authorised under sub-section (1) of Section 45 to exercise the above powers in respect of a person carrying on an activity ancillary or incidental or in connection with business of a dealer and it includes transporter or any other carrier or forwarding agent of goods or a person who holds in custody any goods belonging to a dealer. These provisions are wide enough to empower the authorised officer under Section 45 to search and seize the goods being carrie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. Sub-section (3) specifically provides that if the officer is satisfied as to the reason or reasons for omission or defect, as the case may be, he may discharge the notice after recording his findings therefor. Only if the officer is not satisfied with the explanation furnished by the driver or person in charge of the vehicle, by virtue of sub-rule (4) of Rule 55, he can direct seizure of goods. At this stage, it is apposite to note the penalty provision, i.e. Section 54, which again embodies the principles of natural justice by conferring right in favour of the person concerned to a reasonable opportunity of hearing before penalty is imposed in addition to tax, if any. The penalty could only be imposed if the driver or person in charge of the vehicle, though found not carrying the documents referred in Section 52,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....han 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 prejudicial to the interest of the person concerned but would also pose problem for the revenue to secure the seized goods. Therefore, it is implicit that at the stage of consideration of the explanation before passing order of seizure, a prima facie enquiry as regards ultimate success of the penalty proceedings has to be undertaken. Although no time is prescribed under the Act or the Rules as regards the time frame within which explanation is to be furnished and final order has to be passed dropping the proceedings or seizing the goods, but in view of the very object of the provision and the scheme of the Act, the time for replying to show cause notice should be a short period, say 48 hours to a week. If the noticee during this period produces cogent, reliable and unimpeachable evidence to prove that there was no attempt to evade assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 response to show cause notice also produced a TDF downloaded from the official website, though five days after the vehicle was detained. In the aforesaid background facts, the learned Single Judge held that the seizure was bad. While so holding, the Court also observed that non-production of transit declaration form is not a ground for seizure though it may attract penal consequences. A close reading of the above judgment reveals that the observation that nonproduction of TDF is not a ground for seizure, was made in the fact situation obtaining in that case. The Court was convinced that the presumption stood adequately rebutted as the authenticity of other documents were not in doubt. In this regard, it also placed reliance on the Division Bench judgement in Prakash Parcel Services Ltd. (supra) where the Division Bench after upholding the provision relating....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 modified by this Court while passing an interim order by providing that if the petitioner gives the bank guarantee for remaining 15 per cent of the amount also, the goods shall be released in its favour. In absence of any finding by any of the authorities below, that there was an intention to evade the payment of tax, the irresistible conclusion is that the seizure order is bad. On merits, we are in agreement with the submission of the learned counsel for the petitioner, therefore, the seizure order cannot be allowed to stand and is hereby set aside. Resultantly, the bank guarantee furnished by the petitioner, if any, stands discharged and the cash amount, if any, deposited by the petitioner as security is liable to be refunded forthwith preferably within a period of one month. The point is decided accordingly." If we confine the observations made in the judgement in Prakash Transpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 favour. The Commissioner is authorised to waive the requirement of making deposit or direct deposit of such lesser amount or may require furnishing security in such form other than cash or indemnity bond, as he may deem fit. The driver or person in charge of such a vehicle would get another opportunity to rebut the presumption contained under Section 52 and Rule 58 during course of penalty proceedings. Here he would get a more elaborate hearing and opportunity to lead evidence followed by final order imposing penalty or dropping the proceedings. Based on ultimate outcome of the penalty proceedings, amount, if any, deposited as per provisions of sub-section (7) or sale proceeds under sub-section (9) would be adjusted and the excess amount refunded to him. We accordingly answer question no. (i) by holding that the observations made in M/s Prakash Transport Corporation that good canno....