Gupta Suppliers Company, vs Commissioner Commercial Tax, ...
2012 Latest Caselaw 5371 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH, LUCKNOW.
 

 
Court No. - 27
 

 
Case :- MISC. BENCH No. - 8809 of 2010
 

 
Petitioner :- Gupta Suppliers Company,
 
Respondent :- Commissioner Commercial Tax, U.P., Lucknow & Others
 
Petitioner Counsel :- Naresh Chandra Mishra,Chandra Has Mishra,Ramesh Chandra Mishra
 
Respondent Counsel :- C.S.C.
 

 
Hon'ble Devi Prasad Singh,J.

Hon'ble Arvind Kumar Tripathi, II J.

(Delivered by Hon'ble Devi Prasad Singh, J)

1. Heard Mr. Naresh Chandra Mishra, learned counsel appearing for the petitioner and Mr. H.P. Srivastava, learned special counsel engaged by the State of U.P as well as perused the record.. Affidavits have been exchanged. With the consent of the parties' counsel, we decide the writ petition finally.

2. The petitioner is a registered dealer doing business inter alia of purchasing commission agency of essential oils on behalf of Ex-UP Principal. During the period in question, the petitioner entered into a written composite agreement with M/s Jindal Drugs Ltd., Gangyal, Jammu for purchase and dispatch of 1332 MT mentha oil on their behalf on commission basis for advances made by the Ex-UP Principal by bank transfer. Actual expenses and commission were to be charged by the petitioner and the Ex-UP Principal was to provide Form F for the transaction. The registration certificate and the agreement with Ex-UP Principal have been brought on record. It is not disputed that Form F has already been provided in terms of the settlement.

3. The business of purchasing commission agency stands accepted by the assessing authority since its inception on 9.11.2005 till 2008-09 after detailed examination of the nature of transaction and books of accounts. The assessment orders of the previous years reflecting the aforesaid position have been brought on record. The petitioner purchases mentha oil from the farmers on behalf of Ex-UP Principal and dispatch as against statutory form 6R, 9R and gate pass of Mandi Samiti. Mandi fee at the rate of 2.5% is charged on removal of goods from Mandi area for dispatch of goods to Ex-UP Principal. Name of Ex-UP Principal is mentioned on 6R. The entry in books is also made on behalf of Ex-UP Principal. The goods are dispatched within two or three days of the purchase to the Ex-UP Principal as soon as one truck load of goods are purchased.

4. It has been submitted by the petitioner's counsel that such transactions are exempted under Section 7 of the U.P. Value Added Tax Act, 2008, in short 'Act', and the State Government has no legislative competence to impose tax on such transactions as held by the Supreme Court in 'Commissioner of Sales Tax and others versus M/s Bakhtawar Lal Kailash Chandra Arhti and others', (1992) UPTC 971 and in a recent judgment dated 7.9.2012 of a Division Bench of this Court, of which one of us(Hon'ble Devi Prasad Singh, J) was a member, passed in writ petition No.6281(M/B) of 2010 Reliance Industries Limited versus State of U.P.

5. The petitioner appears to have purchased 13.320 MT mentha oil from farmers by 6R between 17.7.2010 and 20.7.2010. The goods were dispatched to Ex-UP Principal M/s Jindal Drugs Limited, Jammu vide prescribed challan dated 20.7.2010 by truck vide goods receipt no. 082478 dated 20.7.2010 of M/s IRC (India) Limited, Lucknow. The consignment allegedly was accompanied with all necessary documents, namely, prescribed stock transfer challan no. 02/052 dated 20.7.2010 containing all the details, statutory form 21 prescribed for transport of goods, Mandi gate pass dated 20.7.2010, Mandi 9R dated 20.7.2010 and GR dated 20.7.2010.

6. While the goods were being transported, the Assistant Commissioner, Commercial Tax, Mobile Squad, Bareilly detained the goods on 21.7.2010 on the directions of the Additional Commissioner, Commercial Tax, Grade-I, Lucknow Zone, as communicated by Additional Commissioner, Commercial Tax (SIB), Grade-II, Bareilly against the provisions of Section 48(1) of the Act. A detention memo was issued on 21.7.2010 requiring the petitioner to be present for physical verification of the loaded goods and the documents. Thereafter a supplementary detention memo was issued on 22.7.2010, saying that purchases from 46 persons have been made at the same rate which shows that the goods being transported are different from the goods mentioned in the documents accompanying the consignment and the vouchers of purchases were not available with the consignment.

The petitioner made a written request for release of the goods, submitting that the first detention order was issued on the directives of Additional Commissioner, Commercial Tax, Grade-I, Lucknow Zone which does not show any reason to believe that the goods were not accounted for by the dealer in his books of account maintained in the ordinary course of business or there was any undervaluation of more than 50%, and also that the second detention memo was based on absolutely incorrect facts, but the prayer for release of goods was not accepted and a show cause notice dated 30.7.2010 was issued.

7. In show-cause notice, it has been stated that the goods which were being transported are not the same as purchased against 6R mentioned in the transfer invoice. This inference was drawn for the following reasons:

(a) The test report of the percentage of menthol in the mentha oil obtained from the random sample from 10 drums is almost similar.

(b) The inspection of the 6R shows that names of different farmers/sellers has been written in the same manner.

(c) The purchases on 20.7.2010 have been made from 38 persons which is not possible in one day.

(d) There is difference in the entries of transfer invoice and 9R as shown below:-

Sl.No.

 
Entries in transfer invoice
 
Particular              Amount in Rs.
 
Entries in 9R
 
Particular          Amount in Rs.
 
1.
 
Commission         6,660.00
 
Commission           6,660.00
 
2.
 
Cartage                600.00
 
Cartage
 
3. 
 
Testing                  500.00
 
Testing
 
4.
 
Stamp                   46.00
 
Stamp                     1.146.00
 
5. 
 
Cost of drum/        2,33,100.00
 
Mandi fee
 
Mandi Fee               2,33,100.00
 

 

 
Total = 95,66,386.00
 
                               95,66,386.00
 

 

8. Subject to aforesaid backdrop, learned counsel appearing for the petitioner submits that a written reply was filed to the aforesaid show cause notice. The petitioner urged that without considering their reply, the order for seizing the goods has been passed. The seizure order dated 23.8.2010 is based on the grounds that similar quality of mentha oil has been purchased from different farmers, purchases were made without GLC, the 6R has been written in the same flow and purchases from 38 persons in a day show that goods mentioned in the 6R and those transported in the consignment are not the same goods. There is difference in 9R and transfer invoice.

9. Learned counsel for the petitioner while reiterating their stand, which was taken in the reply to the show cause notice, submitted that though the grounds mentioned in the detention order as well as in the show cause notice and thereafter in the seizure order are factually incorrect and are absolute misreading of the documents which were available with the goods and were also produced before the authority, but even otherwise, on the basis of such reasonings the goods could neither have been detained nor seizure order could have been passed.

10. Sri H.P.Srivastava, learned Additional Chief Standing Counsel raised question with regard to maintainability of the writ petition.

11. A Division Bench of this Court while passing an interim order dated 12.10.2010 has repelled the objection raised by the learned Addl. Chief Standing Counsel with regard to alternative remedy and admitted the writ petition on the ground that the State has acted without jurisdiction and on unfounded ground and the action suffers from the vice of arbitrariness. Hence, we proceed to decide the writ petition on merit.

12. Learned counsel for the petitioner further emphasized that the grounds of detention and seizure cannot be attributed to any of the conditions mentioned in Section 48(2) of the Act, which permits seizure when the goods are not properly accounted for by any dealer in his accounts, registers or other documents maintained in the course of his business. The submission is that the goods mentioned in the transfer invoice and 6R were the same and there being no anomaly, the same could not have been seized on the ground that they were not accounted for by the dealer in his account books.

13. On facts and legal proposition as propounded by Hon'ble Supreme Court in Commissioner of Sales Tax and others versus M/s. Bakhtawar Lal Kailash Chandra Arhti and others (1992)UPTC 971, the court has to see whether on the grounds aforesaid, the goods could have been detained or seizure order could have been passed.

14. A perusal of the detention orders aforesaid along with the show cause notice and the order of seizure shows that apparently on lurching suspicion that the goods being transported were not the same goods as purchased against 6R mentioned in transfer invoice and also because allegedly it was not practicable to make purchases from 38 persons at the same rate and on the same day, the order of seizure has been passed.

15. Attention of the Court has been drawn to the entries made in the transfer invoice and 9R, which have been reproduced by us in the earlier part of this order. Entries in the transfer invoice mention the amounts of commission, cartage, testing, stamp and cost of drum/Mandi fee separately whereas in 9R, entries against cartage and testing were left blank and only against entry of stamp, a sum of Rs.1146.00 was shown. The total amount shown in transfer invoice is Rs. 95,66,386.00 and the same was the amount shown in 9R. Cost of drum/Mandi fee was shown as Rs.2,33,100.00 and this was also the amount shown against entry Mandi fee in 9R. Thus, a perusal of the aforesaid entries in the documents would reveal that there was no discrepancy worth the name, at least prima facie to raise a plea that it was a case of not keeping the accounts properly or that goods under the consignment were different than the one mentioned in 6R and 9R.

Besides, in view of the Circulars issued by the Commissioner Sales Tax and also in view of the fact that the goods were accompanied by relevant documents, namely, prescribed transfer challan dated 20.7.2010 containing all the details of goods, statutory form prescribed for transport of goods, Mandi gate pass dated 20.7.2010, Mandi 9R dated 20.7.2010 and GR dated 20.7.2010 alongwith the copy of agreement with Ex-UP Principal for purchase and dispatch of goods, they could neither have been detained nor seized.

16. The question whether it was an inter-State sale or intra-State sale, obviously cannot be decided by the mobile squad and it is for the assessing authority to record a finding on the aforesaid issue during the course of assessment.

17. Learned counsel for the petitioner also relied upon various interim orders passed by this Court in different writ petitions dealing with the same issue. In one of the petitions i.e. Writ Petition No. 5624 (M/B) of 2006 in re: Rapti Commission Agency and others versus State of U.P and others, the Court also took into consideration the plea that 74 drums of mentha oil could not have been purchased in one day from the farmers and the fact that the mentha oil was purchased by the petitioners on behalf of Ex-UP Principal. The High Court passed an interim order dated 12.12.2006 directing the release of goods without any security. This case is applicable in the present case also. Their Lordships also considered the decision in Girdhari Jiva Lal versus Assistant Commissioner of Sales Tax, reported in 8 Sales Tax Cases 732 and the decision of the Hon'ble Supreme Court in the case of Deputy Commissioner of Agriculture Income Tax and Sales Tax versus Travencore Raber and Tea Company, reported in Supreme Court on Sales Tax Compilation, Volume-2, 1814 and its judgment and order dated 21.9.2006 passed in Writ Petition No. 5169 (M/B) of 2006 Jai Narain and others versus State of U.P. and others. The SLP against the said order of release was dismissed by the Apex Court.

18. Reliance has also been placed upon the case of M/s Shaw Scott Distilleries Private Ltd. Rampur and another versus Sales Tax Officer, Check Post Mobile Squad Mathura and others, reported in 1983 UPTC 387. In this case, a Division Bench of this Court held that the power to seize goods under Section 13-A of U.P.Sales Tax Act is conferred upon an officer authorised in that behalf where either the goods cannot be traced to any bona fide dealer or where it is doubtful if the goods are properly accounted for by any dealer in his accounts, registers or other documents maintained in the course of his business. If these two conditions exist, it would be open to seize the goods and not otherwise. Where, as in the present case the only allegation contained in the notice given to the petitioners was that the transaction was one of intra-State sale and the value of the goods appeared to have been shown at an amount lower than what it should properly, have been, action under the aforesaid provisions cannot be sustained.

19. Section 48 (2) of the Act also reads as under:

"Where any officer referred to in sub-section (1) has reasons to believe that goods found in any vehicle, building or place are not traced to any bona fide dealer or that it is doubtful if such goods are properly accounted for by any dealer in his accounts, register or other documents maintained in the course of his business, he shall have powers to seize such goods and the remaining provisions of this Section shall mutatis mutandis apply in relation to such seizure."

20. In the present case, it cannot be said that either of the two conditions given in the aforesaid Section 48(2) of the Act did exist. We are, therefore, prima facie satisfied that neither the goods could have been detained by the Mobile Squad nor the seizure order have been passed on such not existent facts and incorrect reading of entries in 6R and 9R and merely on conjectures and surmises that purchases could not have been done in one day.

21. During the pendency of the writ petition, a final assessment order has been passed and the assessing authority has recorded a finding that the goods were the same which were dispatched from Barabanki for Jammu. The assessing authority vide its order dated 29.6.2012 has recorded a contrary finding that what was visualized by the authority who seized the goods in question. The observation made by the assessing authority with regard to seizure in question is reproduced as under :

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i=koyh dh tkap ij Ikk;k x;k fd O;kikjh ds fo:} oSV vf/kfu;e dh /kjk 25¼1½ ds rgr tqykbZ] vxLr o flrEcj 2010 ds fy;s izkUrh; o dsUnzh; okn esa ,d i{kh; :i ls vkns'k ikfjr dj futh o deh'ku [kkrs esa ?kksf"kr vkdMksa dks vLohdkj djds dj vkjksfir fd;k x;k gS A lHkh vkns'kksa ds fo:+) /kkjk 32 ds vUrxZr izkFkZuk i= izLrqr fd;s x;s tks vkns'k fnukad 28&3&2011 }kjk vLohdkj dj fn;s x;s ftuds fo:) ek0mPp U;k;ky; ds le{k ;kfpdk,a nk;j dh x;h A ek0 mPp U;k;ky; ds vkns'k fnukad 31&5&2011 }kjk /kkjk& 25¼1½ ds vUrxZr ikfjr lHkh vkns'ksa ,oa muds fo:) izLrqr fd;s x;s /kkjk&32 ds izkFkZuk i=ksa ds vLohdj.k dks fof/k vuqdwy u ekurs gq, mUgsa fujLr dj fn;k x;k rFkk vihy Lohdkj djrs gq, funsZ'k fn;s x;s fd dj fu/kkZj.k vf/kdkjh fu;ekuqlkj dk;Zokgh djsa rFkk ;kph dk;Zokgh esa iw.kZ lg;ksx djsaxs A ek0 mPp U;k;ky; ds bl vkns'k ls /kkjk& 25¼1½ ds vUrxZr l`ftr lHkh ekaxs lekIr gks xbZ gS A pawfd vfUre dj fu/kkzZj.k dh dk;Zokgh dh tk jgh gS A vr% /kkjk& 25¼1½ ds vUrxZr ikfjr lHkh vkns'kksa dks bl vkns'k esa lekfgr dj fy;k x;k gS A

22. Keeping in view the finding recorded by the assessing authority in his assessment order, there appears to be no room of doubt that the preliminary finding recorded by this Court while passing the interim order dated 12.10.2010 in the present writ petition as well as set up by the petitioner while approaching this Court seems to be based on correct appreciation of facts. It appears that the authorities while proceeding to seize the goods in question and serving the impugned notice have not applied their mind and their action suffers from vice of arbitrariness. It is a case of highhandedness on the part of the authorities while exercising their statutory power under the Act. No heed has been given to the objections filed by the petitioner and the statement given at the time of seizure. There appears to be no doubt that it was open for the authorities to look into the matter and take a decision with regard to seizure of goods but while exercising jurisdiction, it was incumbent on the authority concerned to be fair and just while dealing with commercial transaction. Any decision taken by the authorities arbitrarily or for unwarranted reason shall not only suffer from vice of arbitrariness but will have long effect over the business community. It is the duty of the taxing authority to deal fairly and0.79 justly while taking a hard step like seizure of goods during transaction from one place to another.

23. In the present case, the entire action of the authority is based on unfounded facts. They have not tried to apply their mind over the objections filed by the petitioner. They have at all not looked into the contents of the goods and the material brought on record by the petitioner which proves beyond doubt that the goods were the same which were dispatched from Barabanki for Jammu. Such action on the part of the authorities is deprecated. It is a fit case where the writ petition should be allowed with exemplary cost and it should be recovered from the authorities who are responsible for seizure of the goods in question.

24. In view of above, the writ petition is allowed. A writ in the nature of certiorari is issued quashing the detention memo dated 21.7.2010 and 22.7.2010 (Annexures 1 and 1A) as well as the notice No.3011 dated 30.7.2010(Annexure-2) and seizure order dated 23.8.2010 (Annexure-3) with all consequential benefits. Cost is quantified to Rs.50,000/- (Rupees Fifty thousand only). Let the cost be deposited with the Registry of this Court within one month. In case the cost is not deposited, it shall be recovered as arrears of land revenue by the Collector concerned and shall be remitted to this Court. Out of the amount of Rs.50,000/- an amount of Rs.25,000/- may be drawn by the petitioner and the rest Rs.25,000/- shall be remitted to the Mediation Centre of this Court at Lucknow. It shall be open for the State Government to recover the cost of Rs.50,000/- from the pensionary benefit of the officer or officers concerned who are responsible for the impugned order of seizure.

Registry to take follow up action.

The writ petition is allowed accordingly with costs.

(Justice Arvind Kumar Tripathi, II)	                (Justice Devi Prasad Singh)
 

 
Order Date :- 31.10.2012
 
kkb/