2009 NTN Supreme Court & High Courts 263

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1 2009 NTN Supreme Court & High Courts NTN (Vol. 39) [ALLAHABAD HIGH COURT] Hon ble Prakash Krishna, J. Commercial Tax Revision No. 96 of 2009 M/s KMGS Road Signs Pvt. Ltd., New Delhi vs. Commissioner Commercial Taxes, U.P., Lucknow Date of Decision : 02 February, 2009 For the Appellant For the Respondent : Shri Kunwar Saxena and Shri Krishna Agrawal, Advocates : Shri K.M. Sahai, Standing Counsel [A] Seizure of goods For importing goods with Incomplete Declaration Form VAT 38 - Finding of Fact by Tribunal - U. P. VAT Act, 2008 Section 58, 48(7), 50 - Tribunal has confirmed the seizure order on the ground that the consignor has adopted Pick and Choose policy while filling up/ leaving blank various columns in the Import Declaration Form - The U.P. Consignee did not appear and made any explanation leading to the finding that there is connivance between the two parties and there is intention to evade tax - Dealer has contended that absence of Form 38 is of little consequence and it is not mandatory to carry form 38 with the consignment - Columns were left blank due to human error on the part of the consignor - Whether the finding of facts given by the Tribunal can be challenged in Revision filed U/s 58 of the U.P. VAT Act, 2008? Held No - A specific finding has been recorded that the columns were left blank intentionally - The intention to evade tax is implicit - It cannot be said that the finding recorded by the Tribunal is perverse or no prudent person can reach to such conclusion to which Tribunal has reached. Revision set aside - However lack of explanation from the registered dealer of U.P based at Allahabad noticed adversely. [B] Seizure of goods For importing goods with Incomplete Declaration Form VAT 38 - U. P. VAT Act, 2008 Section 58, 48(7), 50 -Whether the appeal or revision filed by the Ex - U.P. consignor can be entertained? - Held - Yes - The tribunal has held that the appeal filed by such a person like consignor is maintainable. It is not necessary to dwell this issue any further. [C] Seizure of goods For importing goods with Incomplete Declaration Form VAT 38 - U. P. VAT Act, 2008 Section 58, 48(7), 50 -Whether the absence of Form 38 while importing goods into the State is immaterial? - Held - No - Whatever be the legal position earlier, law as it stands today, is clear and on a plain reading of Section 50 of the VAT Act, it cannot be possibly said that absence of Form 38 is immaterial. The judicial decisions discussed and decision in Guljag Industries and Bajaj Electrical Vehicles applied.

2 264 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN Cases referred :- Guljag Industries vs. C.T.O NTN (Vol. 35) 61 (SC) Jain Sudh Vanaspathi Ltd. vs. State of U.P. UPTC 1983 (1) 198 Sodhi Transport Co. & Another vs. State of U.P. & Anr UPTC 721 Check Post Officer vs. K.P. Abdulla & Bros. 27 STC 1 Notani Brothers vs. C.S.T NTN (Vol. 24) 539 C.T.O. vs. Bajaj Electrical Vehicles 2009 (1) SCC 308 (Hon ble Prakash Krishna, J.) JUDGMENT Truck No. DL-1-LI/3781 was checked by the Assistant Commissioner, Mobile Squad, Commercial Tax, Ghaziabad on 3rd of January, 2009 while coming from Delhi side to Ghaziabad. After inspection, the goods which were being transported were seized on the ground that the Form-38 bearing No was incomplete in material respects and a show cause notice as prescribed under the provisions of U.P. VAT Act, 2008 was issued to the consignee of the goods in question. Interestingly, the consignee for whom the goods were being transported has not come forward. A reply to the show cause notice was filed by the present applicant who claims himself to be consignor of the goods in question on the ground that the goods were being transported along with the relevant forms and documents but due to inadvertent mistake of the concerned clerk few columns of the said Form-38 were not filled up. Reference of Form-38 was given in the invoice, besides the plea that the goods were accompanied with cash memo, bill, invoice, Challan and trip sheet etc. The said reply did not find favour with the authority concerned who after rejecting the case of the applicant, reached to the conclusion that the leaving column Nos. 2, 3 and 6 blank was the deliberate action of the consignor. The theory of clerical mistake as set up in reply to the show cause notice was rejected and it was held that the material columns of Form-38 were left blank deliberately and designedly. A cash security of Rs. 2,20,000/- was demanded as a condition for the release of the detained goods. The said detention order passed by the Mobile Squad was confirmed in appeal No. 366 of 1997 by the Appellate Authority and in second appeal No. 28 of 2009 by the Tribunal by the order impugned in the present revision. In the memo of revision the following questions of law have been sought to be raised:- (1) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in confirming the order of the seizure, even when there was no intention to evade payment of tax without considering the submissions of the applicant? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in drawing an adverse inference on account of incomplete Form-38 without considering that the

3 2009 NTN Supreme Court & High Courts goods were accompanied with proper bill, bilty and, therefore, there is no violation of Sections 48 and 50 of the U.P. VAT Act? (3) Whether, the Tribunal was legally justified in confirming the amount of security at such an excessive rate and in cash? 2. Heard Shri Kunwar Saxena along with Shri Krishna Agrawal, Advocates, for applicant and Shri K.M. Sahai, learned Standing Counsel for the department. 3. At the very outset it may be stated that the revision was heard finally without admitting it formally, as jointly agreed by learned Counsel for the parties, looking into the urgency of the matter. 4. Shri Kunwar Saxena submits that in view of Section 50 of the VAT Act, the seizure and detention order are illegal as the absence of Form 38 is of little consequence. In other words, according to him, it is not mandatory requirement that the goods coming in the State of U.P. must accompany Form-38 necessarily. The submission is that what is necessary is to find out as to whether there is any material to form a belief that the intention of the person is to evade payment of tax. He placed heavy reliance on a Division Bench Judgment of this Court in Jain Sudh Vanaspathi Ltd. vs. State of U.P., UPTC 1983 (1) 198. Submits that the columns of Form-38 which were left unfilled, was due to mistake of the concerned clerk and is not material. The fact that number of Form-38 has been mentioned in the retail invoice which was accompanied along with the goods in question is a pointer to show the bonafides of the applicant. 5. The learned Standing Counsel, on the other hand, submits that in view of the decision of the Apex Court in Guljag Industries vs. CTO 2007 NTN (Vol. 35) 61 (SC); (2007) 7 SCC 269 followed in Assistant Commercial Tax Officer vs. Bajaj Electricals Limited (2009) 1 SCC 308, the impugned orders are perfectly justified. Submission is that it has been held by the Apex Court, in the aforestated cases, though under the Rajasthan Sales Tax Act, blank form or incomplete form per se entails the penalty provision and such person who has been found importing the goods in a State on the basis of blank forms or not duly filled forms is liable to pay penalty under the Sales Tax Act. He further submits that the two authorities below have found that this was a deliberate attempt on the part of the applicant to evade the payment of tax. The findings recorded by them are essentially findings of fact which are liable to be upheld in view of the limited jurisdiction by this Court while hearing the present revision. 6. Considered the respective submissions of the learned Counsel for the parties and perused the record. It is an admitted position that the consignee of the goods in question though noticed by the authorities concerned, has not come forward nor has participated in the present proceedings. The applicant is the consignor of the goods in question who is contesting the present matter. An objection in this regard was raised by the department before the Tribunal, but the Tribunal held

4 266 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN that the appeal filed by such a person like consignor is maintainable. In the present revision it is not necessary to dwell this issue any further. But the fact remains that the consignee is not coming forward and there is no satisfactory explanation from his side. The second circumstance which is not in dispute is that certain columns of Form- 38 were left blank. The authorities below have found that this was a deliberate attempt on the part of the present applicant. At this stage, it is necessary to reproduce the Form-38 :- Form-XXXVIII Department of Commercial Taxes, Government of Uttar Pradesh [See Rule-54(3)(a) of UPVAT Rules, 2008] Form of declaration for import (Second Copy) Serial No. Date of issue TIN w.e.f. Name and address of the dealer to whom form issued [Seal of the issuing authority] [Circle/Sector] [The above entries to be filled in by the issuing authority] 1. Description of goods 2. Weight/Measure 3. Quantity 4. Value in figure 5. Value in words 6. Bill/cash memo/challan/tax invoice number & date 7. Name and address of seller/consignor 8. TIN I,.., the authorized signatory of the above named dealer, do hereby declare that the goods noted above are being imported/received/brought by the aforesaid dealer. 36 Signature of authorized signatory

5 2009 NTN Supreme Court & High Courts Name & address of the Transporter/carrier etc. 2. Service Provider no. of the carrier, if any 3. Carrier/Truck No. 4. Name & address of Driver 5. Driving License No. 6. Signature of the vehicle 7. Here, the said Form can be divided in three parts. Part (1) is required to be filled up by the issuing authority, Part (2) is required to be filled up by the 1 [consignee] that is the person who brings the goods into the State and Part (3) consists of particulars of name and address of the transporter etc. Each and every column of the Part (2) of the said declaration Form-38 is material and are to be filled up by the 1 [consignee]. Editor's Note: [1] Although Rule 54(3)(a)(i) provides that the owner, driver or person in charge of the vehicle shall carry Form 38 in duplicate duly signed by the purchaser/consignee and seller/consignor of the goods, but surprisingly no column has been prescribed in the Form 38, to be signed specifically by the purchasers/consignees. In Form 31, under the U.P. Trade Tax Act, columns for the signatures of the purchasers as well as sellers were prescribed, but the declaration contain in Form 38 is as follows: 1. Description of goods 2. Weight/Measure 3. Quantity 4. Value in figure 5. Value in words 6. Bill/cash memo/challan/tax invoice number & date 37 (Editor's note continued on next page)

6 268 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN 8. 2 [Column No. 2 which requires the mention of weight of the goods under transportation, column No. 3 requires to mention quantity of the goods and column No. 6 wherein bill number and date of bill are required to be mentioned, are blank.] All these columns admittedly were required to be filled up by 3 [the present applicant]. It may be noted Editor's Note : 7. Name and address of seller/consigner 8. TIN I,, the authorized signatory of the above named dealer, do hereby declare that the goods noted above are being imported/received/brought by the aforesaid dealer. 38 Signature of authorized signatory. Above this declaration there exist column No. 7 & 8 containing the name and address of the seller/consignor and his TIN No. and not the name and address of the purchaser/ consignee. The seller/consignor may also import or bring the goods inside the State to deliver them to the purchasers/consignees and practically it is most often done. So the declaration does not require to be signed specifically by the purchaser or consignee of the goods, and can be signed by the seller/consignor also, if he is bring the goods inside the State. Moreover Rule 57(1) of the UPVAT Rules lays down the responsibility of the consignee only to send the Form 38 to the seller/consignor and does not require him either to sign the Form 38 or to fill up the columns No. 1 to 8 of the Form 38. Moreover the details of columns 1 to 8 of Form 38 are not necessarily known to the purchaser/consignee at the time of sending blank Forms 38 to the seller/consignor. Hence fixing the responsibility of the purchaser for the unfilled columns is something beyond his control. [2] As far as the columns of weight and quantity in Form 38 are concerned, they are found relevant only when the sale has been affected on the basis of weight and quantity. If the sale has been affected on the basis of number of items like TV, Fans, motors etc or if the sale has been affected according to the length of the goods like cloth, wires & cables etc. (sold in meters) and the goods are not weighed at the time of sale then the columns of weight and quantity become immaterial and practically impossible to mention on Form 38. [3] Present applicant is the consignor and not the consignee in this case. If the present applicant was responsible to fill up the columns, then why the consignee should be penalized for the default of the other i.e. consignor.

7 2009 NTN Supreme Court & High Courts 269 that after filling the aforesaid columns, a declaration has to be given by the 4 [person bringing the goods] in the State of U.P. The said declaration has been given 5 [by the applicant]. The Third part of the Form-38 which was required to be filled up by the Transporter, is also incomplete. In all, it contains six columns, but except column No. 3, all other columns were left blank. The submission at this stage that the unfilled/blank columns are not material part of the Form, ex facie is liable to be rejected. It was argued that the said details can be gathered from the cash memo/bill accompanied with the goods. Even if the desired information could be gathered from the accompanying documents, it does not follow that those informations should not be incorporated in the Form-38 or the columns relating to those informations are not material, otherwise the very purpose and object of prescribing the Form-38 would be frustrated. It may be mentioned here that the Form-38 has been prescribed to prevent the evasion of tax and to protect the honest dealers so that they may compete with the dealers who indulge in the activities outside the books. Form-38 is issued by the officer of Commercial Tax Department to the dealer registered under the VAT Act for forwarding the same to the consignor who dispatches the goods to a dealer in the State of U.P. The cash memo/bill is a private document and it can be replaced by the parties conveniently on mutual understanding for their benefit. To prevent such activities, Form-38 has been prescribed. It will not be out of place to mention here that the validity of Section 28A of the U.P. Trade Tax Act which corresponds to Section 50 of VAT Act, 2008 has been upheld by the Apex Court in the case of Sodhi Transport Company and Another vs. State of U.P. and Another, 1986 UPTC Copy of the Form-38 is collected by the Entry Check Post Authority for forwarding the same to the Assessing Authority of the dealer concerned to enable the Assessing Officer to frame the assessment order. If the said columns regarding the bill number, date, quantity, etc. are left blank, the whole purpose of prescribing such form would be frustrated. Editor's Note: [4] Person bringing the goods Person bringing the goods has to give the declaration in Form 38. The consignor may also be the person bringing the goods for making delivery to the purchaser. Then why the consignee should be made responsible for incompletion of the declaration form. [5] Judgment says that the said declaration has been signed by the applicant. In this case KMGS is the applicant who is also the consignor. Then why the consignee should be made responsible for completion of the declaration form. 39

8 270 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN 10. Jain Sudh Vanaspathi Limited vs. State of U.P. (supra) is the star case on which very heavy reliance was placed by the learned Counsel for the applicant to support his submission that the Form-38 (which corresponds to Form 31 under the U.P. Trade Tax Act) has been held to be not mandatory. Para 23 in particular was relied upon by him wherein it has been stated that power to detain the goods and levy penalty cannot be exercised merely for the reason that the said goods were not accompanied by the requisite documents or that the documents accompanying them were false. For the sake of convenience the said paragraph ire reproduced below: The provision contained in Section 28-A as it stands after enactment of U.P. Act No. 33 of 1979 are materially different. It cannot be said that there is any assumption underlying therein that the goods to which the provision of Section 28-A applies has actually been sold inside the State and the Section does not authorize the sales tax authorities either to seize the said goods or to penalize the importer thereof on any such assumption. Its present basis is the attempt to evade tax. The power to detain the goods and levy penalty in respect thereof cannot be exercised merely for the reason that the said goods were not accompanied by the requisite documents or that the documents accompanying them were false. This power can be exercised only if the goods detained are not accompanied by the requisite documents or that the documents accompanying them are false and if there is material before the detaining authority to indicate that the goods are being imported in an attempt to evade assessment or payment of tax due or likely to be due under the Act. The instant case, therefore, in our opinion, clearly falls outside the ratio of the case of Check Post Officer vs. K.P. Abdulla & Bros., 27 STC 1 as decided by the Supreme Court. 11. The said observation should be read and understood in the context of the subject. It cannot be torn and read out of the subject. The aforesaid observations have been made by the Court with reference to Section 28-A as it then stood while considering the constitutional validity of the said provision. The Court was not called upon to decide as to what would happen if the said declaration form is absent or is not duly filled in. While upholding the validity of Section 28-A as it then stood, it was observed that power under Section 28-A cannot be exercised merely for the reason that the said goods were not accompanied by the requisite documents or that the documents accompanying them were false. Section 28-A as it then stood was subdivided by the Court into three parts as is evident from para 14 of the report. Accordingly, Section 28- A (1) shows that it obliges only such persons to comply with the provisions under (i) they intend to bring, import or otherwise receive into the State from any place outside the State goods in connection with their business; (ii) the goods so imported are liable to tax under the Act; and (iii) are in excess of such quantity, measure or value notified by the State Government in that behalf.

9 2009 NTN Supreme Court & High Courts After segregating the Section 28-A of the U.P. Trade Tax Act, as indicated above, the Court proceeded to hold that the goods liable to be taxed are those goods which are covered by Section 3-A to 3-D of the U.P. Sales Tax Act. The learned Standing Counsel points out and lightly so that after the aforesaid pronouncement, Section 28-A was amended and it has been provided that any goods other than the goods exempt under Clause (a) of Section 4 have been substituted for the words any goods liable to tax under the Act. The scope and ambit of Section 28-A has been widened. Goods which are not exempted item under Section 4(a) of the Act (which deals with the general exemption) if are being imported in the State of U.P. beyond the prescribed quantity or value, it should be accompanied with the prescribed Form-31 after the amendment in Section 28-A. The matter does not end here. The State Legislature while enacting the Value Added Tax Act, 2008 which replaced the U.P. Trade Tax Act, has made a provision under Section 50 that any person who intends to bring, import or otherwise receive into the State from any place outside the State any goods other than the goods named and described in the Schedule-I in any such quantity or measure.. shall obtain form of declaration, in the prescribed manner from the Assessing Authority. It follows that in the case of transportation in the State of U.P. in respect of only such goods named and described in Schedule-I, declaration form as required under Section 50 of the VAT Act shall not be required. In the other cases, it is requirement of law that any person who intends to bring, import or otherwise receive in the State the other goods not described in the Schedule-I the goods shall accompany the prescribed form of declaration. It is not the case of the applicant that the goods which he intended to bring in the State of U.P. falls within the descriptions of goods of Schedule-I. This being the position, it is difficult to accept the argument of the applicant that it is not necessary to carry the prescribed form of declaration while importing any goods from any place outside the State of U.P. The decision given in Jain Sudh Vanaspathi Limited (supra) should be understood in the light of the legal provision as it then stood. The legislatures have consciously amended law to plug the loophole of Section 28-A for the purposes of preventing the evasion of tax. Whatever may be the legal position earlier, law as stands today, is clear and on a plain reading of Section 50 of the VAT Act, it cannot be possibly said that absence of Form-38 is immaterial. 13. The use of word shall in sub-section (1) of Section 50 of the VAT Act further fortifies the above view. This disposes of the question No The other limb of the argument is that sub-section (4) of Section 50 of the Act does not authorizes an officer to seize and detain the goods that were being transported, when no attempt was made to evade the payment of tax due or likely to be due under the Act. It was submitted by the dealer that it was not a case of any attempt to evade the assessment of payment of tax due or likely to be due under the Act. It 41

10 272 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN was submitted by the dealer that it was not a case of any attempt to evade the assessment of payment of tax due or likely to be due under the Act as Form -38 was there. Rule 54 framed under the Act provides for establishment of check-posts. Sub-rule (3) (a)(i) of Rule 54 reads as follows:- 42 (3)(a) The owner, driver, any other person-incharge of the vehicle or vessel shall, in respect of such goods carried in the vehicle or the vessel as are notified under or referred to in sub-section (1) of Section 50 and exceeding the quantity, measure or value specified in the notification therein, carry with him the following documents- (i) form of declaration for import in Form XXXVIII or certificate in Form XXXIX hereinafter in these rules referred to as declaration or certificate, as the case may be, in duplicate; 6 [duly filled and signed by the purchaser and seller of the goods] or where goods are Editor's Note: [6] Although Rule 54(3)(a)(i) provides that the owner, driver or person in charge of the vehicle shall carry Form 38 in duplicate duly signed by the purchaser/consignee and seller/consignor of the goods, but surprisingly no column has been prescribed in the Form 38, to be signed specifically by the purchasers/consignees. In Form 31, under the U.P. Trade Tax Act, columns for the signatures of the purchasers as well as sellers were prescribed, but the declaration contain in Form 38 is as follows: 1. Description of goods 2. Weight/Measure 3. Quantity 4. Value in figure 5. Value in words 6. Bill/cash memo/challan/tax invoice number & date 7. Name and address of seller/consigner 8. TIN I,, the authorized signatory of the above named dealer, do hereby declare that the goods noted above are being imported/received/brought by the aforesaid dealer. (Editor's Notes continued on next page)

11 2009 NTN Supreme Court & High Courts 273 transferred otherwise than by way of sale, by consignor & consignee of the goods with status and address. 15. The said rule also prescribes that owner, driver or any other person in charge of the vehicle shall carry Form-38 in duplicate duly filled and signed by the purchaser and seller of the goods. Duly filled means that the document is filled up in all respects. Omission of bill number, its date, weight of goods and the quantity of goods are the relevant information to enable the Assessing Authority to frame the assessment order and by leaving these columns blank in Form-38, it cannot be said that the form was duly filled up. The authorities below have found that these columns were left blank intentionally. 16. The learned Counsel also referred the Rules 53(iii) of Rajasthan Sales Tax Act as reproduced in the case of Bajaj Electrical Vehicles Ltd. (supra) (See pages 326 and 327 of the report) and contents that therein the requirement was that declaration form should be completely filled in all respects which is not so under the Rule 53 of the VAT Act. The requirement as prescribed under Section 50(4) of the VAT Act is that the goods should be covered by proper and genuine documents. Rule 54(1)(i) prescribes only this much that the prescribed form should be duly filled. In my considered view the distinction pointed out by the learned Counsel for the applicant is distinction without there being any distinction. The words duly filled convey the same idea as filled in all respects. 17. Then, it was urged that the Tribunal has wrongly placed reliance upon a judgment of the Apex Court in the case of Guljag Industries vs. Editors' Note : 43 Signature of authorized signatory. Above this declaration there exist column No. 7 & 8 containing the name and address of the seller/consignor and his TIN No. and not the name and address of the purchaser/ consignee. The seller/consignor may also import or bring the goods inside the State to deliver them to the purchasers/consignees and practically it is most often done. So the declaration does not require to be signed specifically by the purchaser or consignee of the goods, and can be signed by the seller/consignor also, if he is bring the goods inside the State. Moreover Rule 57(1) of the UPVAT Rules lays down the responsibility of the consignee only to send the Form 38 to the seller/consignor and does not require him either to sign the Form 38 or to fill up the columns No. 1 to 8 of the Form 38. Moreover the details of columns 1 to 8 of Form 38 are not necessarily known to the purchaser/consignee at the time of sending blank Forms 38 to the seller/consignor. Hence fixing the responsibility of the purchaser for the unfilled columns is something beyond his control.

12 274 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN C.T.O. (supra). He submits that under the Rajasthan Sales Tax Act, the fact that form was not duly filled up is sufficient to attract the penal provision, while it is not so under the U.P. VAT Act. A distinction in this regard was sought to be drawn in between the U.P. VAT Act and Rajasthan Sales Tax Act. It was submitted that unless there is an intention to evade the tax, no seizure or detention order detaining the goods can be passed under Section 50 (4) of the Act. While under the Rajasthan Sales Tax Act intention to evade tax is not relevant and the levy of penalty is automatic. Certain provisions of Rajasthan Sales Tax Act as reproduced in the judgment of Guljag Industries (supra) as also in the case of CTO vs. Bajaj Vehicles Limited (supra) were referred by the learned Counsel. 18. Having given careful consideration to the above submission of the learned Counsel for the applicant, I find that under the VAT Act, the authority concerned is entitled to seize and detain the goods in exercise of power conferred on it under sub-section (4) of Section 50. For the sake of convenience the said section is reproduced below:- 44 (4) Where the officer making the search or inspection under this section finds any person transporting or attempting or abetting to transport any goods to which this section applies without being covered by the proper and genuine documents referred to in the preceding sub-sections and if, for reason to be recorded, he is satisfied after giving such person an opportunity of being heard that such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, he may order detention of such goods [The officer making the search or inspection is authorized to detain the goods if the goods is being transported without being covered by the proper and genuine documents.] The use of words proper and Editor's Note: [7] Hon ble High Court has observed in para 19 of the judgment that the officer making the search or inspection is authorized to detain the goods if the goods is being transported without being covered by the proper and genuine documents and did not mention, perhaps due to oversight, the other necessary condition if such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, joined with the first condition by the word and. Thus under Section 50(4) the goods cannot be detained unless both the conditions are satisfied i.e. (i) Where the officer making the search or inspection under this section finds any person transporting or attempting or abetting to transport any goods to which this section applies without (Continued on next page)

13 2009 NTN Supreme Court & High Courts 275 genuine documents referred in the Statute means the document should be complete in all material respects besides being genuine. A conjoint reading of Section 50(4) with the Rules 54 and 55(3) makes the position clear. Sub-rule (3) of Rule 55 which deals with inspection of goods in transit provides that the Officer if finds on examination or has reason to believe that the requisite documents are false, bogus, incorrect and incomplete or invalid, entitles the officer to issue a show cause notice to the driver or the person in charge of the goods seeking a reply as to why the goods should not be seized. If the officer is not satisfied with the reply under sub-rule (5) of Rule 55 he shall order the seizure of the goods [Plea of mens rea sought to be put forward by the learned Counsel for the dealer at this stage, in my considered opinion, is premature.] The scheme of U.P. VAT Act, 2008 shows that after passing of the seizure and detention order and realizing security amount to ensure the Editor's Note: being covered by the proper and genuine documents referred to in the preceding sub-sections and (ii)if, for reason to be recorded, he is satisfied after giving such person an opportunity of being heard that such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, he may order detention of such goods. [8] In Para nos. 20 and 21 of judgment, Hon ble High Court has held that mens rea of tax evasion is not to be seen at the stage of seizure and it can be looked only at the stage of penalty proceedings. This observation of the Hon ble High Court, makes ineffective, the provisions of Section 50(4) which is as under:- (4) Where the officer making the search or inspection under this section finds any person transporting or attempting or abetting to transport any goods to which this section applies without being covered by the proper and genuine documents referred to in the preceding subsections and if, for reason to be recorded, he is satisfied after giving such person an opportunity of being heard that such goods were being so transported in an attempt to evade assessment or payment of tax due or likely to be due under this Act, he may order detention of such goods. Thus Section 50(4) requires the involvement of mens rea of tax evasion for the detention of the goods and Section 54(1)(14) separately provides the involvement of mens rea of tax evasion for penalty proceedings, which is as under:- Where the dealer or any other person, as the case may be, - (Editor's Note continued on next page) 45

14 276 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN recovery of penalty amount which may be ultimately levied, the penalty proceedings will be initiated thereafter. Two tiers of proceedings are contemplated under the said Act- (i) for detaining the goods and passing the order ordering the deposit of security amount and (ii) penalty proceedings. The present proceeding, as noted herein above, arises out of seizure and detention order. However, so far as the plea of mens rea is concerned, the Apex Court recently in the case of 9 [Guljag Industries (supra)] has made the following observations: Existence of mens rea is an essential ingredient of an offense. However, it is a rule of construction. If there is a conflict between the common law and the statute law, one has to construe a statute in conformity with the common law. However, if it is plain from the statute that it intends to alter the course of the common law, then that plain meaning should be accepted. Existence of mens rea is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals. A penalty imposed for Editor's Note: (i) imports or attempts to import or abets the import of any goods, in contravention of the provisions under section 50 or section 51 with a view to evading payment of tax on sale of - (a) such goods; or (b) goods manufactured, processed or packed by using such goods; or (ii) transports, attempts to transport any taxable goods in contravention of any provisions of this Act; [9] The decisions of Apex Court in Guljag Industries Vs CTO and Bajaj Electrical Vehicles were passed against the penalty orders and not against the orders seizing the goods. They were based upon entirely different provisions of Rajasthan Sales Tax Act, which are not para materia with the provisions of U.P. Trade Tax Act or U.P. VAT Act. Under Rajasthan Sales Tax Act Part A of Form 18 is required to be filled up and signed by the Consignee and non-filling up of this part attracted the attention of Apex Court in the above-referred cases where as in Form 38 of the UP VAT Act the situation is totally different and it does not contain any column for the signature of the consignee/purchaser. Rajasthan Sales Tax Act has not included mens rea in this regard whereas under Section 50(4) and Section 54(1)(14) of the UP VAT Act and sub-section (6) of Section 28-A of the erstwhile U.P. Trade Tax Act, 1948 mens rea was made essential ingredient for the seizure and penalty proceedings for violation of provisions of Section 50 and 51 of the U.P. VAT Act and Section 28-A of the erstwhile U.P. Trade Tax Act.

15 2009 NTN Supreme Court & High Courts a tax delinquency is a civil obligation, remedial and coercive in its nature, and is different from the penalty for a crime. 21. The learned Counsel also referred M/s Notani Brothers vs. The Commissioner of Sales Tax, 2004 NTN (Vol. 24) 539 and submits that there are various decisions of this Court wherein it has been held that if there is some irregularity in the prescribed form, it is not necessary to pass a penalty order. This may be so, but at the present, the decision referred to above does not advance the case of the applicant. The proceedings giving rise to the present revision arises out of seizure and detention order. The authority concerned has only demanded a security to be furnished by the applicant as per Section 48(7) of the Act. The said section provides that a security amount for the release of the detained goods, not exceeding such amount as would be sufficient to cover the penalty likely to be imposed, be paid as a condition for the release of the goods. The penalty proceeding is subsequent to the deposit of the security. The pleas sought to be raised here will be open for consideration in the penalty proceedings which may ultimately take place against the applicant. To ensure the proper payment of the penalty amount which may be levied in future, the law enjoins for deposit of the security amount under the aforesaid section. The cases, thus, relied upon by the applicant relating to levy of penalty, at this stage are irrelevant. 22. Shri Kunwar Saxena, Advocate, who is a very seasoned Counsel, could not place even a single case law either of this Court or of Apex Court, relating to seizure and detention wherein it has been held that mens rea is sine qua non in respect of an order of detention. 23. No argument was advanced in respect of question No. 3. Even otherwise also the applicant is not a registered dealer nor it has a place of business in U.P. In the absence of any material it does not deserve any relief. 24. Before saying omega to the case a recent pronouncement of the Apex Court in Assistant Commercial Tax Officer vs. Bajaj Electrical Vehicles (2009) 1 SCC 308 wherein it has reiterated its earlier view taken in Guljag Industries Ltd. (supra), be noticed. The said judgment of the Apex Court is with respect to Rajasthan Sales Tax Ac t, a cognate Statute. In this case the Supreme Court in para 9 of the report has made certain general observations to the effect that the State is loosing Revenue on account of consignee s failure to supply particulars in the prescribed declaration form, in large number of cases every year. Para 9 from the case of Bajaj Electricals (supra) is reproduced below:- (9) As a matter of preface, we may state that we have come across a number of matters where the Department has sought to impose penalty under Section 78 (2) read with Section 78 (5) of the said 1994 Act. It appears that in large number of cases evasion has taken place on account of the importer s (consignee s) failure to fill in Declaration Form ST 18-A. Moreover, in all these cases we found

16 278 KMGS Road Signs Pvt. Ltd. vs. C.C.T NTN 48 that when scrutiny takes place declaration form(s) is sought to be produced after incorporating the details required to be given in that form. In all these cases, declaration forms are duly signed but important columns are left blank. Those columns are filled in either when scrutiny begins or at the stage of investigation/enquiry. It is important to note that these declaration forms are similar to returns under the Income Tax Act. We are not on the veracity of the contents of that form. Our preface is confined to the importer s (consignee s) refusing to supply particulars which they are required to give in the declaration form(s). we have come across numerous cases where columns are left blank. The forms are duly signed. However, relevant columns are left blank. 25. The Apex Court has further noticed the significance of declaration form. Thereafter, it examined the declaration form as prescribed under the Rajasthan Sales Tax Act which contains two parts. One part is required to be filled up by consignor and the other part by the consignee. Further it has observed that the quantity of taxable turnover is dependent on the declaration made by the consignee in the said declaration form and the State is loosing Revenue on account of consignee s failure to supply the particulars in prescribed declaration form. The aforesaid observations made by the Apex Court in my considered opinion is fully attracted to the declaration Form-38 as prescribed under the VAT Act. In absence of the requisite informations as required to be given in the Part (2) of the said Form, as observed by the Apex Court in the case of Bajaj Electrical Vehicles Ltd. (supra), the Assessing Authority cannot determine the taxable turnover correctly and accurately. In absence of requisite particulars, there is every possibility of leakage of Revenue. 26. Last but not the least, it may be noted that the present revision has been filed under Section 58 (wrongly mentioned as Section 81) of the VAT Act which provides that the High Court can interfere in the order on the ground if the case involves any question of law. The authorities below have found that the declaration form was not duly filled and some of the columns were left blank deliberately. The material columns which relate to the weight of the goods, quantity and number & date of bill have been left blank which shows the intention of the applicant to use the said declaration form again and again. 10 [A specific finding has been recorded that the columns were left blank Editor's Note: [10] The decision of Hon ble High Court is based upon the considered opinion of Tribunal that there was intention to evade tax. As such the confirmation of Seizure clearly comes into the ambit of provisions of Section 50(4) of the U.P. VAT Act, 2008 in which mens rea of tax evasion has been prescribed as an essential condition for the seizure of the goods not accompanying proper and genuine Form 38.

17 2009 NTN Supreme Court & High Courts 279 intentionally. The intention to evade the payment of tax is implicit as is evident from the incomplete declaration form. Even in the bilty, the weight of the goods, quantity and bill number have not been mentioned as a result of which the possibility that the form may be used subsequently as per convenience, is not ruled out. These findings are essentially findings of fact based on the assessment of the attending facts and circumstances of the case. It cannot be said that the inference drawn on the facts of the present case by the Tribunal is perverse or no prudent person could reach to such conclusion to which the Tribunal has reached.] 27. The other factor which was highlighted by the learned Standing Counsel is that why the consignee, the registered dealer living at Allahabad, has not come forward may be noticed. 28. Viewed as above, there is no merit in the revision. It is dismissed accordingly, but no order as to costs