TMI Blog2014 (9) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... hicle to carry with him a bill of sale or delivery note, goods vehicle record or trip sheet and other documents with all the particulars relating to the goods under transport. Confiscation of the goods would be necessitated if there is evasion of tax, if there is an attempt to evade the tax, and if the owner of the goods is not ascertainable. In case confiscation is not warranted, as per sub-rule (6), the officer who seized the goods shall return the goods to the owner or any person authorized by him if they had not been sold in public auction. If the goods are already sold in public auction, the proceeds of the sale less expenses incurred on the sale, if any, shall be refunded to the owner of the goods or any person authorized by him. The same procedure would be followed even where the order of confiscation is set aside or modified on appeal or revision. A reference may also be made to sub-rule (7) which provides for an opportunity to the owner of the goods to appear before the officer who ordered confiscation, satisfy him with relevant records regarding the bona fides of the goods in question and regarding the reasons for his non-appearance. If the concerned officer is satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities and he had given a wrong address. Examining these aspects with reference to the material and records collected and gathered by the Department, the learned Tribunal sought to justify the lacuna pointed out by the confiscating authorities in invalidating the confiscation proceedings. The finding that there was no proper notice or opportunity prior to seizure and confiscation are belied by the very fact that during the seizure, the manager or concerned person employed by BARL was present, notices were issued, consignor sent three representations and all were considered by the confiscating authorities. It is very curious that during the proceedings either before the CTO, Vijayawada or CTO, Kasibugga, consignees never appeared claiming the goods. The Tribunal in our considered opinion also lost sight of the provisions of sections 29A, 29B and rules 46, 47 and 48 and failed to see that admittedly the transporter did not produce all the duplicate copies of the transit passes when all the 45 lorries entered via the border check-post at Kasibugga passed through Vijayawada and allegedly moved out of Andhra Pradesh. Even the conduct of the consignor militates against her. Initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the stock was seized on May 21, 1993. On the same date, the CTO (Intelligence), Vijayawada inspected godowns of the BARL and seized 2,250 bags of cloves (each bag weighing 40 kgs). The documents revealed that goods were on transport from Dimapur to Delhi to M/s. Ram Niwas and Co., (hereafter, first consignee ). They were consigned by a person who is not a registered dealer. Hence, the CTO (Intelligence) proposed to confiscate the goods under section 28(6) of the Act. He issued a show-cause notice to BARL, the consignor and the first consignee. The General Power of Attorney (GPA) holder of the consignor filed objections on June 8, 1993. A contention was raised that section 28(6) of the Act has no application as the goods are in transit and passing through the State of Andhra Pradesh. Though notice was served on the first consignee, he did not file objections but sought fifteen days time for filing a representation. The CTO, Vijaya wada, conducted enquiry during which he recorded statements of the owners of the lorries who transported the cloves to the godowns. An officer of the Department went to Dimapur and conducted enquiry. It was found that the consignor was not available in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfiscated goods. The consignor would contend that in the absence of any order under section 33C of the Act, for withholding the refund of the amount of sale proceeds, the Department has no authority in law to retain the amount. We may mention that the grant of relief in this case would depend on the result in the tax revision cases. Submissions Special counsel for Commercial Taxes would submit that STAT was in error in holding that the confiscation of the goods is illegal on the ground that section 28(6) would not be attracted to the facts of the case. According to the counsel, the consignor is a dealer for the purpose of the Act and if the dealer is not able to account for the goods kept in a godown or business premises, the authorized officer is entitled to seize and confiscate the goods. Allegedly, the goods seized were in transit from Nagaland to Bombay and New Delhi but the consignor as well as transporter did not prove that the goods were actually intended to pass through Andhra Pradesh. The consignees never came and claimed the goods seized and enquiries have shown that the sale transactions between the consignor and consignees are spurious and doubtful. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajaiah Sons v. Board of Revenue, Commercial Taxes [1978] 42 STC 145 (AP), Seetharamanjaneya Rice Mill v. State of A. P. [1989] 8 APSTJ 50, Shaik Basha v. State of Andhra Pradesh [1992] 14 APSTJ 121 (AP), State of Andhra Pradesh v. Andhra Pradesh Paper Mills Limited [1992] 14 APSTJ 272 (AP), State of Andhra Pradesh v. Sri Laxmi Srinivasa Groundnut Traders [1999] 29 APSTJ 235 (AP), Ramaswamy Kalingaryar v. Mathayan Padayachi AIR 1992 SC 115, Hamida v. Mohd. Khalil [2001] 5 SCC 30; AIR 2001 SC 2282 and Tallam Gangadharan v. U. Ismail Saheb [2009] 17 SCC 389. Contentious issues The brief background facts and submissions give rise to two broad issues for consideration. We would deal with these one after the other. Before doing so, we may repeat consignor's version and Department's version of chronology of events leading to passing of confiscation orders by two CTOs at Vijayawada and Kasibugga, respectively, to put in place the controversy in a little more detailed perspective. The consignor obtained cloves mahaldar in Kohima Division from Nagaland Forest Department for 1992-93 after paying an amount of ₹ 30,000. She then entered into a contract of sale with cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order detaining fifty five bags, the value of which is equal to tax due on the total value of the goods and three times of the amount of tax pending enquiry as security. The balance quantity of goods was released. In response to the notice, BARL submitted representation stating that the goods were not intended for sale in Andhra Pradesh but admitted that the transit passes were not available. He explained that as transit passes were not available at Ichchapuram, the check-post officials allowed the vehicles after being satisfied with the documents available with the lorry. As a follow up, discreet enquiries were made, when it was suspected that the first consignee had been indulging in clandestine trade by choosing BARL and storing the goods at Vijayawada. On May 21, 1993 in the presence of the Manager of BARL, the CTO (Intelligence) inspected two godowns at Vijayawada and found thousand (1,000) bags of cloves in one and 1,250 bags in another. As per the statement of the Manager, the buyer for all nine lorries was first consignee and that they were covered by transit passes issued by Purushothapuram check-post. He also stated that the goods were received in godown on differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit on the same lines. He denied allegation of tax evading clandestine sale in the State. He further stated that the BARL has to deliver the goods to the consignee on receipt of freight charges; the lorries were engaged up to Vijayawada where goods were unloaded in the godowns for the purpose of transshipment by engaging other lorries; it is BARL which is required to engage lorries and pay freight charges noted in the LR; and that freight charges were already paid from Nagaland to Vijayawada. The consignor also sent yet another representation on June 2, 1993 requesting for release of the goods under rule 48 of the Rules offering to pay the applicable tax, she expressed that first consignee is unlikely to pay the price of the goods in view of the seizure and that she would pay delivery charges after paying applicable taxes. The first consignee sent a telegram seeking fifteen (15) days time for filing detailed representation. The CTO recorded the statements of owners of five lorries, as well as that of a clerk of BARL. All the owners stated that they brought cloves from Dimapur and unloaded at the godowns of BARL. One of them (Kurma Nageswara Rao) who was owner of lorry No. AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und stocked at the godowns of Bikaneer Assam Road Lines, Vijayawada and Ichchapuram on the plea that they were waiting for transshipment; and the stocked cloves were not supported by proper documents. Both the original authorities also found that the goods kept in godowns at Ichchapuram and Vijayawada were not supported by proper documents and the consignees did not even appear and claim the goods. The authorities also considered various grounds urged on behalf of the consignee to which a reference is made supra and came to the conclusion that there are sufficient indications to lead to the conclusion that the goods were being brought from Nagaland on regular basis for being sold in Andhra Pradesh evading payment of tax under the Act. Before the appellate authority, it was argued that the goods in transit in the course of inter-State trade can be seized under section 29B only at the check-post for non-production of transit pass but when they were kept in the godown for onward transmission, they cannot be seized. This was repelled by the appellate authority, who observed that section 28(6) enables the seizure of the goods at the place of a dealer if they are not accounted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal were similar to those pleaded before the Appellate Deputy Commissioner. The Tribunal dealt with two main aspects. The first one was whether the goods originated from Dimapur and reached Ichchapuram and Vijayawada under valid documents, allegedly intended to be transported to the first consignee at Delhi and the second consignee at Bombay. The second aspect was whether the goods seized at two places by the respective competent authorities were actually and factually intended to be sold to the consignees or were intended for sale in Andhra Pradesh by evading tax under the Act. After considering various documents, namely, the documents issued by forest officials of Dimapur, consignment notes, LRs and other travel documents, the learned Tribunal recorded the finding as under: The above discussion based on undisputed facts clearly discloses that the entire stock confiscated by orders of the Commercial Tax Officer (Int), Vijayawada and Commercial Tax Officer, Kasibugga were accompanied by authenticated documents of permits issued by competent forest officials at Dimapur, consignment notes, LRs etc., including transit passes except for one lorry load issued by Purushothapura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the accounts in A.P., as she is not a dealer in A.P. If one could sum up the findings of the learned Tribunal which prompted it to allow the appeals of the consignor and transporter, they are as follows: (i) the goods were being transported from Dimapur to New Delhi and Bombay through Andhra Pradesh. They were supported by valid permits, passes and travel documents. BARL engaged the lorries only up to Vijayawada and it was to make arrangements for further transport of the goods from Vijayawada to New Delhi and Bombay; (ii) the officials of the Commercial Tax Department did not detain and seize the goods while they were in godowns or places of business of the consignor or dealer and offered for local sale. The goods were detained and seized while in transit on the ground that they were not accounted for in the books of accounts maintained by the consignor; and (iii) in view of the findings 1 and 2, the two ingredients of section 28(6) are not satisfied and thus the Department did not establish the allegation of clandestine sale of goods in Andhra Pradesh. Before we take up the substantial issues, we may point out that under section 22(1) of the Act, the revision would lie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith prevention of tax evasion have considerable bearing on the controversy raised before this court. Hence, it is necessary to briefly refer to them. Every person licenced or registered, and every dealer who is required to get registration under the Act shall keep and maintain true and correct account (section 24). Section 27 requires the owner or other person in charge of the goods vehicle to carry with him a bill of sale or delivery note, goods vehicle record or trip sheet and other documents with all the particulars relating to the goods under transport. These shall be submitted to the CTO having jurisdiction over the area in which the goods are delivered. Section 28 is an important machinery provision dealing with search, seizure and confiscation of goods. This is intended to prevent tax evasion and acts as deterrent. The analysis of section 28 would show that any officer not below the rank of an Assistant Commercial Tax Officer authorized by the State Government in this behalf, may require any dealer to produce before him the accounts, registers and other documents, and to furnish any information relating to his business. Sub-section (2) requires a dealer to keep open for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n; sub-section (6) says that, if any goods are found in possession of the dealer which are not so accounted for, they may be seized and confiscated if it is found, after holding an enquiry, as prescribed by rule 48, that 'there is an evasion or an attempt to evade the tax thereon'. As rightly pointed out in the two earlier Bench decisions of this court in K.S. Papanna v. Deputy Commercial Tax Officer, Guntakal [1967] 19 STC 506 (AP) and Kalangi Krishna Murty Co. v. Commercial Tax Officer, Guntur [1968] 22 STC 540 (AP), this provision is meant to operate as a deterrent, and as a penalty upon tax evaders, and is conceived in the interest of preventing the evasion of tax. The idea is to make the evasion of tax highly costly and a losing proposition. It is thus a power incidental and ancillary to the substantive power of taxation, conferred by entry 54. . . Sections 29, 29A and 29B are intended to check evasion of tax. When the goods ostensibly in transit through State of Andhra Pradesh to other destinations, are sold in Andhra Pradesh without being charged to the tax, these provisions empower the designated officers at the State borders or within a specified area or whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods so carried and in addition levy penalty not exceeding five times amount of tax payable on such goods (Ambica Lamp House v. Commercial Tax Officer [2005] 142 STC 551 (AP); [2005] 2 ALD 704; [2005] 3 ALT 190. As it existed during 1993-94, section 29 did not contain a provision for confiscation of the seized goods. By A. P. Act No. 30 of 2001, sub-section (6B) of section 29 was inserted empowering the check-post officer, to seize and confiscate any goods where such goods are carried in the goods vehicle without any documents or covered by fictitious documents . It may also be necessary to notice that the power to seize and confiscate the goods is one of several powers to check evasion of tax. It is intended to take all necessary steps for a proper assessment and collection of tax. It is a power to inspect any premises of dealer to seize or confiscate if the tax is not paid or the goods are not accounted for. Rule 48 of the Rules contains procedure contemplated by the proviso to sub-section (6). Rule 48(4) is important and reads as below: 48. (4) Any such officer, making such enquiry as he deems fit and after giving the owner of the goods, if he is ascertained, an opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them in a place or places. During the search, the carrier or bailee or person in-charge of the goods shall produce bill of sale or delivery note or other prescribed documents regarding the goods and give the name and address and of the carrier or the bailee and the consignee. Whether failure to do so would again attract section 28(6)? This is the issue, which we may have to deal with a little while later. Next, relevant provision, deals with transit pass to be obtained by the driver of the vehicle and the consequence of failure. Section 29B is relevant and reads as under: 29B. Transit of goods by road through the State and issue of transit pass. Where a vehicle, carrying goods, coming from any place outside the State and bound for any other place outside the State, pass through the State, the driver or other person in-charge of such vehicle shall 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 checkpost or barrier before his exit from the State, failing which it shall be presumed that the goods carried thereby have been sold within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of goods at the premises of the dealer or at any other place of the dealer carrying the goods, whereas the latter is concerned with inspection of goods at checkpost while in transit. Indisputably after April 1, 2001 by reason of section 29A(2) when the goods in transit are kept in godown, shop, office or vessel by the carrier or bailee, and they are not covered by the documents or covered by fictitious documents even those goods can be confiscated. Of course, under section 29(3)(b)(ii), at the check-post, if the goods are not properly accounted for for the purpose of payment of tax, the check-post officer can demand the tax payable as well as furnish security for an amount exceeding five times the tax payable. As per section 29(6) if the tax demanded is not paid or the security is not furnished, the goods can be detained and can be sold. It is also indisputable that with effect from April 1, 2001 by reason of insertion of sub-section (6B) of section 29, check-post officer is empowered to seize and confiscate the goods where such goods are carried without any documents or covered by fictitious documents. Similarly, by reason of insertion of section 29A(2) by the said amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation cannot be ordered as section 28(6) has no application. According to the Tribunal, section 28(6) will be attracted only if the goods found in any office, establishment, etc., of the dealer were not found accounted for by the dealer in his accounts and other documents maintained in the course of business and that the Revenue failed to establish that as an agent of the consignor, the transporter was doing business in Andhra Pradesh. This conclusion in our considered view, suffers from misdirection in law. The learned Tribunal ignored the relevant provisions dealing with burden of proof; failed to appreciate the true scope of section 28(6) and drew inferences from the facts which are not warranted. Misdirection is improper understanding of facts and law. It is certainly a ground to fault a decision impugned before the revisional court. If the court or Tribunal addresses a wrong question and not the right question, whether the jurisdiction is exercised lawfully or not, such approach would amount to misdirection in law. It is certainly a grave error of law which warrants interference by the reviewing courts, or the appellate court (Depot Manager, Andhra Pradesh State Road Transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther transshipment, section 29B has to be satisfied. This section provides that any vehicle carrying the goods coming from any place outside the State shall obtain transit pass from the check-post officer and deliver it to the check-post officer at the exit/last check-post while passing through the State of Andhra Pradesh. The proviso to section 29B casts burden of proving that the goods have actually moved out of the State shall be on the owner or person in charge of the vehicle. If the burden is not discharged by producing proper documents, it shall be presumed that the goods carried are sold in the State by the owner or the person in-charge of the vehicle and accordingly tax is assessed and penalty levied in accordance with the provisions of the Act. Thus, as per section 29B, if the owner or the person in charge of the goods, fails to discharge the burden of proving that the goods have actually moved out of the State, the law presumes that the goods carried are sold in the State of Andhra Pradesh. In such an event, there cannot be any bar for seizing and confiscating the goods under section 28(6). A submission is made by the counsel for the consignor and BARL that section 28( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) an agent for handling goods or documents of title relating to goods; or (iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment and every local branch of a firm or company situated outside the State, shall be deemed to be a dealer for the purpose of this Act. Whether a person be it a consignor or agent of consignor or consignee, who is not registered under the Act, as a dealer can also be subjected to the extreme action of confiscation of goods on which tax was not paid or an attempt was made to evade payment of tax in the State of Andhra Pradesh? The answer must necessarily depend on construing section 2(e) which defines dealer . As is usually done, the Legislature defined the term dealer as means and also including other aspects . The main definition part defines dealer as to mean any person who carries on the business of buying, selling, supplying or distributing goods or delivering goods or executes a works contract. The Explanation I specifically deals with agent of a non-resident dealer , on behalf of the dealer residing outside the State, who buys, sells, supplies and distributes goods in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of buying, selling and supplying the same commodity. Mere buying for personal consumption, i.e., without a profit-motive, will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The Legislature has not made sale of the very article bought by a person a condition for treating him as a dealer: the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The commodity may itself be converted into another salable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such salable commodity. In Travancore Rubber and Tea Co. [1967] 20 STC 520 (SC), reiterating the view in Abdul Bakshi [1964] 15 STC 644 (SC) that, a person to be dealer must be engaged in the business of buying, selling or supplying of goods , the Supreme also held that, . . . To infer from a course of transactions that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined under section 2(m) of the Act, any person who carries on the business of buying and selling of goods shall be dealer as defined in section 2(e) for the purpose of section 28(6) of the Act. The charging section, i.e., section 5 of the Act mandates that, . . . every dealer shall pay a tax under this Act for each year on every rupee of his turnover of sales or purchases of goods in each year irrespective of the quantum of his turnover at the rate of tax and at the points of levy specified in the Schedules . The words registered dealer are very conspicuous by its absence in section 5 as well as section 28(6) of the Act and we cannot read section 28(6) as empowering the officer of the Department to seize the goods not accounted for only by the registered dealer. The word dealer used in section 28(6) cannot be given such a narrow meaning, especially when the said provision is intended to act as a deterrent measure to prevent evasion of tax by any person whether registered dealer or dealer who carries on business of buying and selling of goods in the State of Andhra Pradesh. Before the original/appellate authority as well as the Tribunal, the consignor admitted that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of this section, be deemed to be the owner of the vehicle. The driver or any person in-charge of the vehicle carrying goods coming from any place outside the State shall have to obtain a transit pass from the check-post officer. The driver or the person in-charge of the vehicle shall have to carry the transit pass while passing through the State and shall have to deliver it to the check-post officer at the exit check-post, i.e., the last check-post of barrier before exit from the State of Andhra Pradesh. If transit pass is not obtained or the transit pass is not delivered at the exit check-post, the legal consequence is that it shall be presumed that the goods carried by the vehicle have been sold within the State by the owner or the person in-charge of the vehicle. In such a deemed sale, the goods are exigible to tax and penalty can always be levied in accordance with the provisions of the Act. In every case of non-delivery of transit pass, at exit check-post or while passing through the State of Andhra Pradesh, the burden of proving that the goods actually moved out of the State shall be on the owner or person in-charge of the vehicle. In such a situation, it is rather ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawing inferences and applying the presumption of sale in the State from the following undisputed facts. The consignor is not registered under the Nagaland sales tax the consignor was not available at the address given in the travel documents; the transport vehicles took a circuitous route avoiding nearest route to the place of consignees; the first consignee was indulging in doubtful activities without carrying any business from the registered premises at Delhi; the second consignee was not even registered with the Maharashtra sales tax authorities and he had given a wrong address. Examining these aspects with reference to the material and records collected and gathered by the Department, the learned Tribunal sought to justify the lacuna pointed out by the confiscating authorities in invalidating the confiscation proceedings. Relying on Seetharamanjaneya Rice Mill [1989] 8 APSTJ 50, Shaik Basha [1992] 14 APSTJ 121 (AP) and Andhra Pradesh Paper Mills [1992] 14 APSTJ 272 (AP) as well as the two decisions of the Supreme Court, dealing with the scope of section 100 of the Code of Civil Procedure, 1908, the counsel for the consignor and transporter vehemently urged that these revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the consignees is doubtful and when no written contract of sale is produced with regard to the payment, delivery, etc., and based on the statement made by the consignor and the transporter, the presumption under section 29B does not get dislodged. The finding that there was no proper notice or opportunity prior to seizure and confiscation are belied by the very fact that during the seizure, the manager or concerned person employed by BARL was present, notices were issued, consignor sent three representations and all were considered by the confiscating authorities. It is very curious that during the proceedings either before the CTO, Vijayawada or CTO, Kasibugga, consignees never appeared claiming the goods. The Tribunal in our considered opinion also lost sight of the provisions of sections 29A, 29B and rules 46, 47 and 48 and failed to see that admittedly the transporter did not produce all the duplicate copies of the transit passes when all the 45 lorries entered via the border check-post at Kasibugga passed through Vijayawada and allegedly moved out of Andhra Pradesh. According to the consignor, she agreed to sell huge quantities of cloves to the consignees at New Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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