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2017 (1) TMI 578 - ALLAHABAD HIGH COURT

2017 (1) TMI 578 - ALLAHABAD HIGH COURT - TMI - Evasion of tax - goods transported under the cover of TDF - consignors and consignees are non-existent - seizure - Whether under the facts and circumstances of the case, seizure of goods and demand of cash security for its release under Section 48 of the U.P. VAT Act, 2008 is valid? - Held that: - the goods in question originated for transportation from Ghaziabad, were being carried by the respondent in a fraudulent manner under the cover of bogus .....

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ad Authority for release of the goods, does not suffer from any illegality. - Whether Delhi - U.P. Border area of District Ghaziabad is "no-man's land"? - Held that: - the circular dated 31.01.1987 is non-existent. That apart, it has no relevance in view of the facts found and the constitutional provisions mentioned above. Delhi - U.P. Border area of District Ghaziabad is not "no man's land" rather it is part of District Ghaziabad (U.P.). - Whether transporters are strangers to the trans .....

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by a transporter then he makes himself party to the episode of fictitious transaction with sole purpose of evasion of tax by undisclosed non-bonafide dealers. By seizure of goods in such cases transporter is not affected if he is really a transporter - Therefore, instead of being torch bearer of dishonest persons, he should allow the real consignors or consignees to come forward and assign reasons for concealing their real identity. The action of the departmental authorities in such cases to une .....

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t and Rule 58 of the Rules, the authorities under the Act have no power to seize the goods and demand security for release thereof but where, as in the present case, the transaction is sham, not genuine and make-believe and originated from a place within the State of U.P. or intended to be sold within the State of U.P. with intent to evade tax then it would be a case falling under Section 48 of the Act. Provisions of Sections 48 & 52 of the Act, have to be considered in a manner so as to hold th .....

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he applicant and Sri Suyash Agarwal, learned counsel for the respondents. This revision was admitted on 13.12.2016 on the questions of law. Facts of the Case:- 2. Briefly stated facts of the present case are that on 03.10.2016 a Truck bearing Registration No.HR38G-5557 was intercepted on NH-28 by the Assistant Commissioner (Incharge) Commercial Tax, Mobile Squad Unit, Padrauna, Kushinagar. Statement of the driver of the truck was recorded who stated that the goods in the truck have been loaded f .....

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.) as evident from weighment slip, TIN numbers mentioned in the invoices accompanying the goods are invalid, consignors and consignees are not bonafide, consignors and consignees are non-existent hence respondent cannot prove that from whom delivery of goods have been taken and to whom it is to be dilivered and from whom freight is to be received, when contacted on phone numbers mentioned in certain invoices accompanying bilties it came to light that purchasers and their place of business is in .....

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ey being transporter have no right to collect any information of any kind about the consignors and whosoever books the goods takes bilty and on place of destination the person who produces bilty, the goods are delivered to him. The goods do not relate to the State of U.P. 5. The reply submitted by the respondents was not found satisfactory. Consequently by order dated 25.10.2016, the goods (PARCHOON) valued at ₹ 9,45,600/- were seized and cash security @ 40% being ₹ 3,78,240/- was de .....

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ch was allowed by the impugned order of the Tribunal dated 29.11.2016 and the goods were directed to be released without security. Aggrieved with the aforesaid order, the applicants have filed the present revision. Submissions:- 8. Sri B.K. Pandey submits that the entire activity of the respondent is fraudulent. The goods originated from Ghaziabad and the same were being transported under the cover of forged invoices bearing fictitious TIN numbers, showing non-existent consignees. Addresses of c .....

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He further submits that pursuant to the order dated 13.12.2016 passed by this Court, requiring the applicant to clarify with some evidence that the goods were for delivery at Deoria, an affidavit of compliance was filed on 16.12.2016, after serving a copy thereof upon the respondent. Annexure 2 of the supplementary affidavit dated 16.12.2016 is the information obtained from authorities of B.S.N.L., Padruana, Kushinagar and Office of the Branch Manager of Vodafone, Kasya, Kushinagar by which they .....

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departmental website in this regard has been filed as Annexure 3 to the affidavit. He further submits that at the time of checking of the packet of goods relating to bilty no.13672, it was found that it is mentioned on the packet itself that the goods are to be delivered at Deoria. He submits that the facts on record, clearly indicate fraudulent conduct of the respondent which shows intent to deceive the department to evade payment of tax by accompanying with the goods fake and fictitious papers .....

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ribunal, but also upon this Court. He submits that despite service of the supplementary affidavit, the respondent could not courage to deny the facts stated therein. He also drawn attention of the Court to paragraph 6 of the notice at page 36 of the revision and submits that despite specific mention of facts with regard to mobile numbers mentioned in the invoices indicating intended unloading of the goods at Deoria, the respondent has not submitted any specific reply at any stage including his r .....

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n form, the place of destination has been mentioned "Mairwa, Siwan, Bihar". He submits that since the goods were being transported by the respondent from outside the State of U.P. to outside the State of U.P. and therefore, the authorities under the U.P. VAT Act, have no jurisdiction to interfere with the movement of goods or to seize the goods and demand security. In support of his submissions, he refers to the provisions of Section 52 of the Act and relied the decisions of this Court .....

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851 (para 8). He further submits that the judgment in the case of Om Logistics Ltd. Vs. C.C.T. in STR 326 of 2011, has no application on the facts of the present case. He submits that merely on the basis of information in the matter of M/s Kumar Garments and certain information with regard to mobile numbers as filed along with supplementary affidavit, no adverse inference can be drawn with respect to the entire goods. He submits that the information obtained in the matter of M/s Kumar Garments w .....

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Where a person carries on any activity ancillary or incidental to or in connection with business of a dealer, any officer authorized under sub-section (1) of section 45, for the purpose of investigation into tax liability of a dealer, subject to provision of sub-section (11) of section 45, may exercise powers under subsection (1) to sub-section (10) of the said section. EXPLANATION- For the purposes of this section, following persons shall be deemed to carry on activities ancillary or incidental .....

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er capacity. Section 48. Power to seize goods.- (1) An officer authorised under sub-section (1) of section 45 shall have the powers to seize any goods - (i) which are found in a dealer's place of business, vehicle, vessel or any other building or place; or (ii) which, such officer has reason to believe to belong to the dealer and which are found in any place of business, vehicle, vessel or any other building or place, but are not account for by the dealer in his accounts, registers or other .....

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tention to evade payment of tax: PROVIDED that a list of all the goods seized under this sub-section shall be prepared by such officer and be signed by the officer and not less than two witnesses. (2) Where any officer referred to in sub-section (1) has reason to believe that the goods found in any vehicle, vessel, building or place are not traced to any bonafide dealer or documents issued by a bonafide dealer with respect to accompanying goods contains wrong particulars or that it is doubtful i .....

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cuments 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 .....

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vant 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 m .....

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irect that the goods be released without any deposit or on depositing such lesser amount, or furnishing security in such form other than cash or indemnity bond, as he may deem fit: PROVIDED FURTHER that in case of a person, who is not a registered dealer and against whom penalty order referred to in sub-section (7) has been passed, filing of return by such person and assessment of tax on him may not be necessary. (8) The penalty or such part thereof as remains after adjustment of any amount depo .....

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goods, before forwarding the list and other documents referred to in sub-section (3), or the assessing authority at any time thereafter, is of the opinion that the goods are subject to speedy and natural decay or where the tax 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 ot .....

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sited 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." (Emphasis supplied by me) Section 52. Provision for goods passing through the state.- When a vehicle coming from any place outside the State and bound for any other place outside the State carrying goods referred to in sub-section (1) of section 50, passes through the State, the driver or other person in charge o .....

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h the State, the driver or person-incharge of a vehicle shall carry such documents and follow such procedures as may be determined by general or special order issued by the Commissioner from time to time, failing which it shall be presumed that the goods carried thereby are meant for sale within the State by the owner or person-in-charge of the vehicle. Rule 59. Import or receipt of goods by rail, river or air and matters incidental thereto. (1) A registered dealer or a person other than a regis .....

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not carry on business, ordinarily resides. (2) The assessing authority to whom a declaration or certificate is submitted for endorsement shall, after satisfying himself about their correctness and completeness, sign and stamp with his official seal, retain the original portion of the declaration or the certificate and return to the registered dealer or the person other than the registered dealer, as the case may be, the duplicate portion thereof after endorsing thereon a receipt for the retained .....

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oresaid, is furnished before him. (4) The provisions in rule 54,and rule 56, except sub-rules (1), (6), (8) and (11) thereof and of rule 57 except subrule (1) and (6) thereof shall mutatis mutandis, apply in regard to the declaration or certificate, as the case maybe, referred to in sub-rule (1). (5) The commissioner may from time to time issue instructions with regard to the procedure to be followed regarding taking of delivery of goods and submission of declaration or certificate." Sectio .....

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iven in reply to any such question: Provided that the Judgment must be based upon facts declared by this Act to be relevant, and duly proved: Provided also that this section shall not authorize any Judge to compel any witness to answer any question, or to produce any document which such witness would be entitled to refuse to answer or produce under sections 121 to 131, both inclusive, if the questions were asked or the documents were called for by the adverse party; nor shall the Judge ask any q .....

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ts release under Section 48 of the U.P. VAT Act, 2008 is valid? (ii) Whether Delhi - U.P. Border area of District Ghaziabad is "no-man's land"? (iii) Whether transporters are strangers to the transaction of sale and purchase and totally ignorant about the consignors and consignees? (iv) Whether fraudulent transportation of goods and colourable devices used to give impression of transportation of goods from outside the State of U.P. to outside the State of U.P. shall fall under Sect .....

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ddresses of consignees have not been mentioned in any of the invoices except only one invoice of M/s Shakti Trading Company in favour of M/s Kumar Garments, and instead merely "MERWA" has been mentioned in the invoices. In some of the invoices found accompanying the goods, mobile numbers were noted just below the name of the alleged consignees. The Mobile Squad Authority made a call on these mobile numbers, which revealed that the recipient of the goods are of district Deoria (Uttat Pr .....

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ere for delivery at Deoria. Thereupon, an affidavit of compliance was filed on 16.12.2016 by the applicants, after serving a copy thereof upon the respondent. Informations contained in the affidavit have not been denied by the respondents even after being asked by the court as evident from the order dated 19.12.2016. Annexure 2 of the supplementary affidavit dated 16.12.2016 are the letters of authorities of B.S.N.L., Padruana, Kushinagar and Office of the Branch Manager of Vodafone, Kasya, Kush .....

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f checking of the packet of goods relating to bilty no.13672, it was found that it is mentioned on the packet that the goods are to be delivered at Deoria. These evidences clearly indicate fraudulent conduct of the respondent with intent to deceive the department to evade payment of tax by accompanying with the goods fake and fictitious papers and making a false declaration in the transit declaration form, so as to give colour to the transportation of goods from Ghaziabad for sale within the Sta .....

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allow the real owners/ consignors or consignees to come forward. Specific queries were made by the Mobile Squad Authority based on documentary evidences regarding the invoices accompanying the goods to be fake, TIN numbers mentioned therein to be fictitious, intended unloading of goods at Deoria for sale and the alleged consignors to be non-existent, yet none of the alleged consignors/ owners of goods came forward nor the respondents disclosed identity of real consignors/ owners and consignees o .....

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d by the respondent in a fraudulent manner under the cover of bogus invoices with fictitious TIN numbers printed thereon. Respondents downloaded TDF-1 by submitting false information, suppressing material information, identity and particulars of real owners of the goods, so as to give it colour of transportation of the goods from outside the State of Uttar Pradesh to outside the State of Uttar Pradesh under Section 52 of the Act, with intent to evade tax under the Act. Under the circumstances, s .....

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s thereof shall be specified in the First Schedule. It is undisputed that District Ghaziabad is within the territory of State of U.P. Neither the Constitution of India nor any Statute provides for Delhi-U.P. Border area of District Ghaziabad to be "no man's land". The circular of the Commissioner Sales Tax dated 31.01.1987 was issued in view of Establishment of Check Posts under the U.P. Sales Tax Act, 1948. Section 49 of the U.P. VAT Act provides for establishment of check-posts a .....

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f the Commissioner cannot eclipse the same. That apart, in exercise of powers conferred under Section 52 of the Act read with Rule 58 of the Rules, the Commissioner of Commercial Tax has issued a circular dated 03.09.2013 providing for the procedure for vehicles passing through the State which person incharge of the vehicle is bound to follow. Paragraph-6 of the aforesaid circular dated 03.09.2013 provides as under:- 16. The circular dated 31.01.1987 has been heavily relied by the respondents on .....

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Border area of District Ghaziabad is not "no man's land" rather it is part of District Ghaziabad (U.P.). Question No. (iii) Whether transporters are strangers to the transaction of sale and purchase and totally ignorant about the consignors and consignees? 18. Before the authorities and the Tribunal, the respondents took the stand that they being transporter have no right to obtain information of any kind about any businessman rather the business of transportation is based on pract .....

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der: "22. In our view, transporters are not strangers to the sale or purchase of goods, to the contrary are part and parcel and are directly involved in storing the goods purchased or sold by dealers, and in many cases such transactions are fictitiously carried on in false names and addresses besides false classifications vis-a-vis transportation of such goods in and outside the State making themselves party to the episode of such fictitious transactions for the sole purpose of evasion of t .....

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s 6, 7), a Division Bench of Rajsthan High Court observed that where a transporter is stopped and it is found that consignee is fictitious and the goods are seized, it is not likely to effect the right of the transporter. In that eventuality, the consignor or the consignee should come forward and assign reasons for their concealing the real identity. The law does not help those who are torch bearers of dishonest persons. 21. In view of the above, it cannot be said that transporters are strangers .....

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dealers. By seizure of goods in such cases transporter is not affected if he is really a transporter. Therefore, instead of being torch bearer of dishonest persons, he should allow the real consignors or consignees to come forward and assign reasons for concealing their real identity. The action of the departmental authorities in such cases to unearth evasion of tax is one of their fundamental duties under the Act. Question No. (iv) Whether fraudulent transportation of goods and colourable devic .....

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x Planning. Ranganath Mishra, J. on his and on behalf of three other Judges, after referring to the observations of S.C. Shah, J. in CIT v. A. Raman and Co. AIR 1968 SC 49, CIT v. B. M. Kharwar (1969) 1 SCR 651, the judgments in Bank of Chettinad Ltd. v. CIT, (1940) 8 ITR 522, Jiyajeerao Cotton Mills Ltd. v. CIT, Bombay AIR 1959 SC 270; CIT v. Vadilal Lallubhai (1973) 3 SCC 17 and the views expressed by Viscount Simon in Latilla v. IRC, (1943) AC 377 : 25 TC 107 (HL) stated as follows: (McDowell .....

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at he is entirely agreeing with Mishra, J. and has only supplemented what Mishra, J. has stated on tax avoidance, therefore, we have to go by what Mishra, J. has spoken on tax avoidance. Reddy, J. has depreciated (sic deprecated) the practice of setting up of tax avoidance projects, in our view, rightly because the same is/was the situation in England and Ramsay (W.T.) Ltd. v. IRC, 1982 AC 300 and other judgments had depreciated the tax avoidance schemes. In our view, the ratio of the judgment i .....

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rans et jus nunquam cohabitant) is a pristine maxim which has never lost its temper overall these centuries. Lord Denning observed in a language without equivocation that "no judegment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for fraud unravels everything"(Lazarus Estate Ltd. V. Beasley 1956(1)QB 702). (Emphasis supplied by me) 24. In the case of Ram Chandra Singh Vs. Savitri Devi and others, 2003(8) SCC 319, Hon'ble Supreme Court .....

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nduct of former either by word or letter. 17. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. 18.A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive .....

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araya Naidu (dead) by L.Rs Vs. Jagannath (dead) by L.Rs and others, AIR 1994 SC 853, the Hon'ble Supreme Court held in para 7 as under : "7. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court tha .....

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rt is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal-gains indefinitely. We have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation." (Emphasis supplied by me) 26. In the case of Jainendra Singh Vs. State of U.P., 2012 (8) SCC 748, Hon' .....

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e employer. 29.2 Verification of the character and antecedents is one of the important criteria to test whether the selected candidate is suitable to the post under the State and on account of his antecedents the appointing authority if find not desirable to appoint a person to a disciplined force can it be said to be unwarranted. 29.3 When appointment was procured by a person on the basis of forged documents, it would amount to misrepresentation and fraud on the employer and, therefore, it woul .....

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n is for the purpose of verification of the character/antecedents at the time of recruitment and suppression of such material information will have clear bearing on the character and antecedents of the candidate in relation to his continuity in service. 29.6 The person who suppressed the material information and/or gives false information cannot claim any right for appointment or continuity in service. 29.7 The standard expected of a person intended to serve in uniformed service is quite distinc .....

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inasmuch as such a situation would make a person undesirable or unsuitable for the post. 29.9 An employee in the uniformed service pre-supposes a higher level of integrity as such a person is expected to uphold the law and on the contrary such a service born in deceit and subterfuge cannot be tolerated. 29.10The authorities entrusted with the responsibility of appointing Constables, are under duty to verify the antecedents of a candidate to find out whether he is suitable for the post of a Const .....

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acts of the present case as noted above, leave no manner of doubt that the alleged invoices accompanying the goods are fake, the TIN numbers printed therein are fictitious, the alleged consignors are non-existent, the goods were to be unloaded/ delivered at Deoria (U.P.) and identity of real owners of the goods have been concealed by the respondents with the only motive to evade tax under the Act or to help undisclosed persons/ non-bonafide dealers to evade tax. It is a clear case of fraud, misr .....

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in such circumstances, the court should not allow perpetuation of fraud by entertaining the technical pleas. The very foundation of the case of the respondent is based on falsehood and fraud. The respondents have suppressed material facts and did not disclose it despite being repeatedly asked by the Mobile Squad Authority. Even they abstained to answer the queries made by the court as afore-noted. They have not disclosed the real person/ owner of the goods in question. Wrong has been clearly com .....

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