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Commissioner, Commercial Tax, U.P. Lucknow Versus Jai Mata Di Cargo Services Pvt. Ltd.

2017 (1) TMI 1381 - ALLAHABAD HIGH COURT

Evasion of the duty - Seizure - Invoices are fictitious - No registration under VAT - Held that: - Facts 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 and identity of real owners of the goods have been concealed by the respondents with only motive to evade tax under the Act or to help undisclosed persons to evade tax. - Once a trans .....

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citizen to pay the taxes honestly without resorting to subterfuges. No doubt, when a person transports goods from outside the State of U.P. to outside the State of U.P. in terms of Section 52 of the Act 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 for transportation from a place within the State of U.P. or inte .....

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cts of the Case:- 2. Briefly stated the facts of the present case are that a truck bearing Registration No.UP22T4924 was intercepted by Assistant Mobile Squad, Commercial Tax, Pilibhit on 27.09.2016. A show cause notice under Section 48 of the U.P. V.A.T. Act, 2008 (hereinafter referred to as the Act ) was issued by the aforesaid authority on 09.10.2016 on allegations that the goods have been loaded from Ghaziabad and the invoices accompanying it, are fictitious and the consignors are non-existe .....

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n under proviso to Section 48(7) of the Act before the Joint Commissioner (SIB), Commercial Tax, Range Barellie in which he took the stand that the goods were being transported from transshipment area at Delhi-U.P. Border. The same were accompanied with TDF-1, bills, bilties and weighment slip. The respondent also took the stand that transporter has no right to collect information about the consignor and whosoever books the goods, the same is transported by him for the given destination where th .....

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he impugned order dated 11.11.2016 directing for release of the entire goods without security except twenty articles valued at ₹ 81,000/- which was directed to be released on security of ₹ 32,400/-. Aggrieved with the aforesaid order of the tribunal, the applicant has filed the present revision. Submissions:- 3. Learned standing counsel submits that the goods were loaded within the State of U.P. Out of total 78 invoices accompanying the goods, seventy six invoices were found totally .....

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ices accompanying the goods. Invoices do not contain even addresses of alleged purchasers. He submits that in fact the goods have been sold by the respondent assessee to some undisclosed persons under the cover of fake invoices, fraudulently showing it as being transported from outside the State of U.P. to out-side the State of U.P. so as to evade payment of tax. He submits that there was clear breach of provisions of Section 48 of the U.P. VAT Act, and, therefore, the mobile squad authorities h .....

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er and is engaged merely in transportation of goods. He used to collect goods of dealers and brings it at its branch at Chikambarpur, Ghaziabad at the Ghaziabad-Delhi Border which is known as transshipment area. From there goods are loaded in trucks for transportation to its destination after weighment. He submits that in the present case, the respondent has booked the goods of various dealers for transportation from Delhi to Siliguri (West Bengal). He submits that as per circular of the Commiss .....

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tation originating from the State of U.P. He relied upon a decision of Single Bench of this court in the case of Commissioner, Commercial Tax, U.P. Lucknow Vs. Panch Kanya Road Carriers, Ghaziabad, 2012 NTN (Vol.49)-22 (at 25). He submits that the respondent has not committed breach of any of the provisions of the Act. No action can be initiated against him for the reason that the goods were being transported from outside the State of U.P. to outside the State of U.P. Consequently, the mobile sq .....

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mmissioner, Trade Tax U.P., Lucknow Vs. Vikram Tewari, Karol Bagh, Delhi, 2007 NTN (Vol.33)-376 and Dev Nandi Trading Co. Vs. Commissioner, Commercial Tax, 2013 NTN (Vol.53)-232. He supports the impugned order of the Tribunal. 5. Considering the submissions of learned counsels for the parties and the questions, following questions of law are formulated under Section 58(2) of the Act for answer in this revision:- (i) Whether under the facts and circumstances of the case, seizure of goods and dema .....

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all under Section 52 or would be a case falling under Section 48 of the U.P. VAT Act, 2008? Relevant Provisions: U.P. VAT Act, 2008: Section 46 . Power of search, inspection and seizure in case of a person other than dealer:- Where a person carries on any activity ancillary or incidental to or in connection with business of a dealer, any officer authorized under subsection (1) of section 45, for the purpose of investigation into tax liability of a dealer, subject to provision of sub-section (11) .....

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r a dealer; or (iv) person who takes delivery of goods or who dispatches goods on behalf of a dealer; or (v) person who holds in custody any goods belonging to a dealer; or (vi) person who handles goods of a dealer in any other 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, su .....

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as the case may be, containing value of goods undervalued to the extent 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: 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 tha .....

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ion 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) .....

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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 .....

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n in charge: PROVIDED that the Commissioner or such other officer, not below the rank of a Deputy Commissioner, as may be authorised in this behalf by the Commissioner, may, for sufficient reasons to be recorded in writing, direct 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 pen .....

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the sale proceeds thereof towards the penalty imposed, and subject to the provisions of section 40, refund the balance, if any, to the dealer or, as the case may be, to the person-in charge. (9) Where the officer seizing the 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 .....

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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. (Emphasis supplied by me) Section 52 . Provision for goods passing through the state.- When a .....

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gh the State.- The driver or person-in-charge of a vehicle carrying goods referred to in sub-section (1) of section 50, coming from a place outside the State and destined for a place outside the State, passes through 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 .....

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al and duplicate portions of the declaration or certificate as the case may be duly filled in and signed by him to the assessing authority within whose territorial jurisdiction he carries on business or, if he does 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 .....

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of the declaration or the certificate. (3) The concerned authority of rail, air, or post shall not deliver the consignment to the dealer or person concerned unless the declaration or certificate dully endorsed as aforesaid, 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 sub rule (1) and (6) thereof shall mutatis mutandis, apply in regard to the declaration or certificate, as the case maybe, referred to in .....

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r thing: and neither the parties nor their agents shall be entitled to make any objection to any such question or order, nor, without the leave of the Court, to cross-examine any witness upon any answer given 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 .....

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zure of goods and demand of cash security for its release under Section 48 of the U.P. VAT Act, 2008 is valid? 6. Perusal of the record shows that on 27.09.2016, a truck bearing Registration No.UP22T/4924 was intercepted by the Assistant Commissioner, Commercial Tax, Mobile Squad Pilibhit. The driver of the truck was required to produce the documents. The authorities also intended to make physical verification of the goods and for that, time was fixed at 10.30 A.M. on the next day i.e. 28.09.201 .....

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r comes. The authorities granted time as requested but none turned up even on 29th or 30th September, 2016 and instead, the aforesaid Kayyum again moved an application and stated that he shall not allow physical verification of the goods until owner of the goods or transporter comes. Again on 01.10.2016, the aforesaid person 'Kayyum' moved a similar application denying physical verification of the goods. On 02.10.2016 and 03.10.2016, he moved applications submitting that he has no inform .....

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he authorities and stated that he shall inform the driver to talk on the said mobile number. Thereafter, the driver of the truck talked to the authorities through his Mobile No.7466031686 at the aforesaid mobile number of the authority at about 12.55 P.M. He stated that he is not in Pilibhit and shall return after 2-3 days since the vehicle owner 'Imran' has told him to go after 2-3 days and to get the goods verified in the presence of the goods' owner. On 07.10.2016, none turned up .....

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Kayyum whereby the respondents authorized him as their representative for checking of the goods. Thus, the respondents and actual owner of goods did not deliberately turn up for 12 days for physical verification of the goods loaded in the truck in question. On 09.10.2016, the driver as well as the helper, namely Sri Saddam Hussain and Sri Kayyum appeared for physical verification of the goods. They produced weighment slip bearing Serial No.1950 dated 25.09.2016 of M/s Mahabir Dharm Kanta G.T. R .....

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(payal) and one bag leather washer were found undisclosed. (iv) On examination of bills/invoices and as per TIN numbers, the consignors were not found in existence and TIN numbers were fictitious. (v) On inquiry, the consignors were also not found in existence. (vi) Forged bills/invoices of non-bona fide dealers have been used for the goods loaded within the State of U.P. and to evade payment of tax, the transportation has been shown from outside the State of U.P. to outside the State of U.P. 7. .....

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er of the truck, namely, Sri Saddam and Sri Kayyum. However no one appeared on the date fixed. Consequently, Mobile Squad Authority passed an ex parte order under Section 48 of the Act for seizure of the goods giving an option for release thereof on deposit of cash security of ₹ 10,90,250/- being 40% of the estimated value of goods amounting to ₹ 27,25,624/-. 8. It is undisputed that the goods in question were loaded from Ghaziabad (U.P.) and 76 invoices out of total 78 invoices acco .....

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und to be fictitious. 9. The invoices accompanying the goods loaded in the truck inquestion as found with the truck are available in the records of the Mobile Squad Authority which has been produced before the court. The court perused the invoices and found that in none of the invoices, addresses of the consignees have been given. Merely Siliguri has been mentioned in the invoices. All the aforesaid fake invoices bear name of firms showing some addresses of Delhi which all were found to be untra .....

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oned even a word about the queries made in the show cause notice for seizure of goods but instead simply stated that the goods are covered by invoices and bilties and they have no right to collect information about the consignors and whosoever books the goods, they deliver it at the destination on presentation of bilti. It was also stated that the goods do not relate to the Uttar Pradesh. 11. After the seizure order, the respondents moved an application under proviso to Section 48(7) of the Act .....

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ged and non-existent and details Kachcha Parcha indicated that the actual price of goods was several times higher than those mentioned in the invoices. He also noted details of four invoices, the numbers of which were overlapping. After detailed discussion and noticing judgments of this court, he concluded as under: 12. However, in Appeal No.254 of 2016 filed by the respondents, the Member Commercial Tax Tribunal, Ghaziabad (DB)-II, Ghaziabad partly allowed the appeal by the impugned order dated .....

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The aforesaid findings of the Tribunal are not only baseless and perverse but also in conflict with the evidences on record. It is undisputed that the goods were loaded from Ghaziabad and, thereafter, TDF was downloaded whereas TDF is required to be downloaded before entry of goods within State of U.P. That apart, the invoices accompanying the goods were found to be forged and TIN numbers mentioned therein were fictitious. The name of dealers mentioned therein were found to be non-existent. Doc .....

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he goods were found to be forged, the TIN numbers were found to be fictitious and the consignors mentioned in the forged invoices were found to be non-existent. The goods were loaded at Ghaziabad within State of U.P. These facts are supported by documentary evidences on record which could neither be disputed or denied by the respondents nor the Tribunal has set aside the findings recorded in this regard by the Mobile Squad Authority and the Joint Commissioner (SIB). Three questions were put by t .....

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respondent then how the goods shall be delivered to alleged purchasers whose address are not known? Answer (ii):- In view of the provisions of Section 52 read with provisions of Rule 58 of the Rules, the jurisdiction of the authorities under the Act is confined only within the State of U.P. (c) Question (iii):- Since the entire case of the department is that the consignors are bogus and invoices are fake and the goods have been loaded within State of U.P. for transportation to another place with .....

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om the facts as afore-noted, it is evident that from own applications of persons In-charge of the vehicles moved on 29.09.2016, 30.09.2016, 01.10.2016, 02.10.2016, 03.10.2016, 07.10.2016, 08.10.2016 and the statement of the driver of the truck, Sri Kayyum dated 06.10.2016 before the Mobile Squad Authority that the goods shall be allowed to be checked in the presence of the owners of the goods who are coming. However, owners of the goods had not turned up rather respondents persuaded the matter o .....

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ein to be fictitious and the alleged dealers to be non-existent, yet none of the alleged consignors/owners of goods came forward nor respondents disclosed identity of real consignors/owners and consignees of the goods nor replied the queries made by the Mobile Squad Authority. In fact, the respondents have not only consciously suppressed material facts but also fraudulently acted to get the goods released merely on their baseless stand that the goods were being transported from outside the State .....

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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, seizure of the goods under Section 48 of the Act and demand of cash security by the Mobil Squad Authority as modified by the Joint Commissioner (SIB) for release of the goods, does not suffer from any illegality. Question No.(ii) Whether Delhi - U.P. Border area of District Ghaziabad is no-man&# .....

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ircular 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 and barriers but this provision has been omitted w.e.f. 27.08.2009 by the U.P. VAT (III Amendment) Act, 2009, (U.P. Act No.23 of 2009) published in the notification dated 27.08.2009. In the case of Om Logistic Ltd. Vs. Commissioner of Commercial Tax, 2016 NTN (V.61) 250 (All.), this c .....

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tate which person incharge of the vehicle is bound to follow. Paragraph-6 of the aforesaid circular dated 03.09.2013 provides as under: 17. The circular dated 31.01.1987 has been heavily relied by the respondents on the basis of certain judgments of this court contending that the area of Chikambarpur, Ghaziabad is a no man's land as per the circular. It is relevant to note that even the aforesaid circular has been cancelled by the Commissioner of Commercial Tax by circular dated 29.08.2016, .....

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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 practical formula that whosoever books the goods for a place of destination, he takes bilti and on the place of destination the goods are delivered to the person who produces bilti. Before the Tribunal the respondents pleaded that they do not enquire whether the consignors and consignees are in existence or no .....

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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 tax by the dealers purchasing and selling such goods. 20. The activity of transporter or any other carrier, forwarding agent, person who holds any goods belonging to a dealer and person who handles goods of a dealer in any other capacity; have also been statutorily recognised under section 46 of the Act to be an .....

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their concealing the real identity. The law does not help those who are torch bearers of dishonest persons. 22. In view of the above, it cannot be said that transporters are strangers to the transaction of purchases and sales and totally ignorant about the consignors and consignees. In cases like the present case where transactions have been fictitiously carried on in false names and addresses, bogus invoices with fictitious TIN numbers printed therein and TDF-1 is downloaded on the basis of fa .....

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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 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 Section 52 or would be a case falling under Section 48 of the U.P. VAT Act, 2008? 23. In the case of Vodafone International Holdings BV Vs. Union of India and another, (2012) 6 SCC 613 ( .....

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IR 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 and Co. Ltd. V. CTO, (1985) 3 SCC 230, SCC pp.254-55, para 45) "45. Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that is honourable to avoid the payment of tax by resorting to dubious .....

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s/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 is what is spoken by Mishra, J. for himself and on behalf of three other judges, on which Reddy, J. has agreed. Reddy, J. has clearly stated that he is only supplementing what Mishra, J. has said on Tax avoidance. (Emphasis supplied by me) 24. In the case of United India Insurance Company Ltd. V. B.Rajendra Singh and other .....

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tate Ltd. V. Beasley 1956(1)QB 702). (Emphasis supplied by me) 25. In the case of Ram Chandra Singh Vs. Savitri Devi and others, 2003(8) SCC 319, Hon'ble Supreme Court defined fraud and considered the effect of fraud and misrepresentation and held in paragraphs 15, 16, 17, 18, 25 and 37 as under : "15. Commission of fraud on court and suppression of material facts are the core issues involved in these matters. Fraud as is well-known vitiates every solemn act. Fraud and justice never dwe .....

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ing 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 from which the representations proceeded may not have been bad. 25. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res-judicata. 37. It will bear re .....

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minary 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 that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are mean .....

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can be summarily thrown out at any stage of the litigation." (Emphasis supplied by me) 27. In the case of Jainendra Singh Vs. State of U.P., 2012 (8) SCC 748, Hon'ble Supreme Court considered the fact of appointment obtained by fraud and held in para 29.1 to 29.10 as under : "29.1 Fraudulently obtained orders of appointment could be legitimately treated as voidable at the option of the employer or could be recalled by the employer and in such cases merely because the respondent emp .....

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ed. 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 would create no equity in his favour or any estoppel against the employer while resorting to termination without holding any inquiry. 29.4 A candidate having suppressed material information and/or giving false information cannot claim right to continue in service and the employer, having regard to the nature of employment as well a .....

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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 distinct from other services and, therefore, any deliberate statement or omission regarding a vital information can be seriously viewed and the ultimate decision of the appointing authority cannot be faulted. 29.8 An employee on probation can be discharged from service or may be refused employment on the ground of suppression of mater .....

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rusted 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 Constable and so long as the candidate has not been acquitted in the criminal case, he cannot be held to be suitable for appointment to the post of Constable." (Emphasis supplied by me) 28. Similar principles with regard to fraud have been laid down by Hon'ble Supreme Court in the case of JT 2005(6) SC 391, para 7 to 15, JT .....

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the Act or to help undisclosed persons to evade tax. It is a clear case of fraud, misrepresentation and suppression of facts by the respondents. This court cannot act to protect perpetuation of legal fraud. The courts are obliged to do justice. Fraud and justice never dwell together (Frans Et Jus Nunquam Cohabitant). This maxim has never lost its temper over all the centuries. The courts are not meant to permit dishonesty even on technical pleas. Dishonesty cannot be permitted to bear the fruit .....

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disclosed the real person/owner of the goods in question. Wrong has been clearly committed and, therefore, the respondents cannot be allowed to take advantage of their own wrong on the basis of technical pleas so as to frustrate the law. Once a transportation of goods under the cover of Section 52 of the Act is shown to be fraudulent, sham, bogus, circuitous or a device designed to evade tax under the Act, the statutory authorities under the Act and the court can always examine the substance of .....

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