1. Heard Sri Ashok Kumar, learned counsel for the applicant and Sri B.K.Pandey, learned Standing counsel for the respondent.
2. Admit on the following questions of law :
(I) Whether under the facts and circumstances of the case the Tribunal is justified to direct the applicant to deposit security equivalent to the tax liability on the goods in question although it recorded a finding of fact that the applicant's society is a welfare society and has brought kota stone in question for self use ?
(ii) Whether under the facts and circumstances of the case security for release of goods can be demanded under Section 48(7) of the U.P. VAT Act, 2008 when none of the authorities including the Tribunal has recorded any finding or placed any material which may indicate the intention to evade payment of tax ?
3. Learned counsel for the applicant and learned Standing Counsel jointly submits that since the goods are lying seized and as such the revision may be heard finally on the above framed questions of law.
4. In view of the above, the revision is being heard finally with the consent of learned counsel for the parties.
5. Briefly stated the facts of the present case are that the applicant is a registered society which runs a school known as "Ganges World School, Jajmau, Kanpur". This society has been formed for welfare of children. The floor of the school was in bad condition and as such the applicant's society intended to purchase kota stone from Rajasthan for which it applied before the Competent Authority of the Commercial ax Department for issuance of Form-39 so as to bring kota stone from Rajasthan. A survey was conducted by the Competent Authority and thereafter Form-39 was issued. According to the applicant a FAX copy of Form-39 was immediately sent to the selling dealer and thereafter Form-39 in original was sent by post. The selling dealer inadvertently due to lack of knowledge handed over to the driver of the truck, Photostat copy of Form-39. The goods in question being carried on truck No. RJ-28 GS-1495 were intercepted on 18th April, 2014 by the Mobile Squad-III Unit, Jhansi. The goods were found accompanied with invoices No.09 dated 15th April, 2014 of M/s Om Enterprises, Ram Ganj, Mandi Rajasthan, Bilty No. 37 dated 15th April, 2014 of M/s Amar Jyoti Road Line, Suket Road, Ram Ganj Mandi, Rajasthan and Photostat copy of the Form-39 No. 0078643. A show cause notice was issued to the applicant on 28th April, 2014 who submitted the reply and also filed original copy of Form-32/39. It was stated that due to mistake of selling dealer and lack of knowledge of the driver of the truck, Form-39 was not accompanied with the goods. It was stated that there was no intention to evade payment of tax. The explanation of the applicant was rejected and the goods was seized by order dated 21st April, 2014 and cash security of Rs.1,20,000/- was demanded for release of the goods.
6. The applicants filed an application before the Joint Commissioner (SIB), Commercial Tax, Jhansi Zone Jhansi under the proviso to Section 48(7) of the U.P. VAT Act, 2008 ( hereinafter referred to as the 'Act') which was rejected by order dated 2nd May, 2014 on the only ground that the goods were not accompanied with original Form-39. However, neither any finding regarding intention to evade payment of tax was recorded nor any inference was drawn that the applicant's society is either engaged in purchase and sale of kota stone or intended to sell the kota stone in question.
7. Aggrieved with the order of Joint Commissioner dated 2nd May, 2014, the applicant filed Appeal No. 221/14 before the Member Commercial Tax Tribunal, Kanpur Bench-I, Kanpur which was partly allowed by the impugned order dated 25th June, 2014, directing to release the goods on furnishing cash security to the extent of the amount of tax on estimated value of the seized goods. After considering the entire facts and circumstances of the case the Tribunal has recorded the following finding of fact:
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8. Aggrieved with the aforesaid impugned order of the Tribunal dated 25th June, 2014, the applicant has filed this revision
9. Sri Ashok Kumar submits that once finding of fact has been recorded by the Tribunal that the goods in question were brought by the applicant, which is welfare society; for self use then the seizure of goods itself become wholly without jurisdiction and no security could have been demanded for release of the goods. He submits that the security is demanded to protect the realisation of penalty likely to be imposed under Section 54(1)(14) of the Act. A penalty under Section 54(1)(14) can be imposed only if there is intention to evade payment of tax. He, therefore, submits that in absence of any finding recorded by any of the authorities with regard to intention to evade payment of tax by the applicant's society, the seizure itself is invalid and without authority of law and the goods are liable to be released without any security.
10. In support of his submission he relied on Division Bench judgment of this Court in the case of Prakash Parcel Service Ltd Vs. State of U.P. & Others, 2014 (2)ADJ 669(DB) .
11. Sri B.K.Pandey learned Standing Counsel submits that it is undisputed that when the vehicle in question carrying kota stone was intercepted, no valid Form-39 was found accompanied which gives to irresistible conclusion that the goods were being brought with intent to evade the payment of tax. He submits that security is demanded to protect the amount of penalty likely to be imposed. He submits that the question whether there was intention to evade payment of tax or not shall be looked into only during the course of penalty proceeding.
12. I have considered the submission of learned counsel the parities.
13. There cannot be any dispute on principle that the issue whether there was intention to evade payment of tax or not is looked normally in penalty proceeding. But if the Tribunal itself recorded a finding of fact that the goods were being brought for self consumption by the applicant society for use in floorings of the school then it cannot be said even remotely that there may be any intention to evade payment of tax. The Tribunal should have directed for release of goods without security. In the case of Prakash Parcel Service Ltd. (supra) the Division Bench of this Court, while considering the provision of Section 52 of the Act; held that in the absence of any finding that there was an intention to evade the payment of tax, irresistible conclusion is that the seizure order is bad and cannot be allowed to stand.
14. The law laid down by the Division Bench of this Court in the case of Prakash Parcel Service Ltd (supra) is squarely applicable on the facts of the present case, inasmuch as the Tribunal itself has recorded a finding of fact that the applicant is a welfare society and was bringing the goods in question for self use. Even the seizing authority as well as the Joint Commissioner have neither doubted the bringing of the goods in question by the applicant for self use nor recorded any finding that the goods in question were intended for sale or the applicant intended it to sell to evade payment of tax.
15. Section 48(7) of the Act provides as under :
"48(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 mentioning the fact of such seizure and indicating the amount, not exceeding such amount as would be sufficient to cover the penalty likely to be imposed, on deposit whereof in cash, the goods so seized may be released in favour of the dealer or, as the case may be, the person in charge:
PROVIDED that the Commissioner or such other officer, not below the rank of a Deputy Commissioner, as may be authorized 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 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. "
16. The relevant provision of penalty may be found in Section 54(1) (14) of the Act which provides for penalty as under : -
"Section 54 . Penalties in certain cases:-
"The assessing authority, if he is satisfied that any dealer or other person, as the case may, has committed the wrong described in column-(2) of the table below, it may, after such inquiry, if any, as it may deem necessary and after giving dealer or person reasonable opportunity of being heard, direct that such dealer or person shall in addition to the tax, if any, payable by him, pay by way of penalty, a sum as provided in column (3) against the same Serial No. of the said table:"
Sl. No. Wrong Amount of Penalty -1- -2- -3- ...............
.............
Where the dealer or any other person, as the case may be,-
(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 manufacture, processed or packed by using such goods ; or
(ii) transports, attempts to transport any taxable goods in contravention of any provisions of this act;
40% of value of goods EXPLANATION - For the purposes of this section-
(i) the assessing authority includes an officer not below the rank of an officer appointed and posted by the Commissioner at a check - post or an officer empowered to exercise powers under sections 45, 46, 47, 48, 50, 51 and 52 of this Act ;
(ii0 if the value of goods described or mentioned in tax invoice, sale invoice or any such other document is under valued 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 transaction has taken place, the estimated value prevalent at the relevant time in such local market are where the transaction has taken place, the estimated value prevalent at the relevant time in such local market area shall be deemed to be the value of such goods,
(iii) if the value of goods is not described or mentioned in tax invoice, sale invoice or any such other document the estimated value prevalent at the relevant time in the local market area where the transaction has taken place, shall be deemed to be the value of such goods. "
17. Section 48(7) empowers the authorities to demand security for release of goods, not exceeding such amount as would be sufficient to cover the penalty likely to be imposed . Penalty under Section 54(1)(14) of the Act can be imposed in the circumstances mentioned therein provided there was intention to evade payment of tax on sale of such goods.
18. Before the applicant's society was issued Form-39 to import kota stone for self use the concerned authority conducted survey of the premises of the applicant's society to satisfy with regard to need for self use of kota stone. No doubt has been raised with regard to the self use of kota stone. The Tribunal has recorded a finding of fact that kota stone was being brought for self use by the applicant society which is a welfare society. In the circumstances, there was no occasion to ask for cash security for release of the goods in question. The goods in question are liable to be released without security.
19. In view of the above discussion, the revision succeeds and is hereby allowed. The order dated 25th June, 2014 passed by the member Commercial Tax Tribunal, Kanpur Bench-II, Kanpur in Appeal No. 221/2014 (A.Y.2014-13), under Section 48(7) is hereby set aside and the seized goods are directed to be released forthwith without security.
Order Date :- 17.7.2014 Mukesh (Surya Prakash Kesarwani,J.)