VAT - Whether power to seize goods is not dependent upon bona fides of past transaction, but must be exercised in backdrop of seized goods falling within mischief of Sec 48 - Yes: HC
By TIOL News Service
ALLAHABAD, OCT 28, 2016: THE issue is - Whether the power to seize goods is not dependent upon the bonafides or characteristics of a past transaction, but, it has to be necessarily exercised in the backdrop of whether the goods which are being seized fall within the mischief of Section 48 or not. YES IS THE VERDICT.
Facts of the case:
The assessee had entered into an agreement styled as a 'Logistics Agreement' with an online web portal "Naaptol Online Shopping Private Limited", whereby, the assessee was liable to collect consignments from the consignor's address furnished by the web portal. The web portal itself was, in the submission of the counsel for the revisionist, an ecommerce site which enables individuals situate throughout the length and breadth of the country to place orders for goods displayed upon the website and obtain delivery thereof on payment of consideration either online or by way of cash on delivery. The premises of the assessee/revisionist were inspected and during the course of the said search, the Department found the presence of various goods which according to it had not entered the State of U.P on the strength of certain Forms 38/39. Upon the revisionist being put to notice, no reply was submitted till the stage of initiation of proceedings u/s 47(7) of U.P. VAT Act. The revisionist contended before the authorities that the goods which were seized had all entered the State of U.P from outside the State and therefore the transactions themselves were in the nature of interState sales which could not be subjected to taxation under the 2008 Act. Finally, the Tribunal, while exercising powers u/s 48 of the Act, proceeded to record that the revisionist was liable to be treated as a "dealer" under the provisions of the 2008 Act; The transaction as effected on the ecommerce web portal and in respect of which moneys were received within the State were not liable to be treated as interState sales; and the revisionist in the course of carrying on its operation within the State did carry on "business" as defined under the 2008 Act.
On appeal, the High Court's held that,
1. It is not disputed that the power exercised by the authorities concerned are referable to Section 48, which envisages an authorized officer to seize goods where he has reason to believe that the same have not been accounted for by the dealer in his accounts, registers and other documents. From the provisions of Section 48 of the Act, this much is apparent that the enquiry which is liable to be undertaken is with respect to whether the goods, which have been seized, have been duly accounted for in the books of accounts, whether their value has been correctly declared or whether they are traceable to a bonafide dealer or whether the authorized officer finds that it is doubtful if such goods have been accounted for in the records of the dealer. From a reading of the detailed order of the Tribunal, this Court finds that no such finding in respect of the seized goods has come to be recorded. The Tribunal has while considering the issue of seizure of the goods chosen to tread a path and embark upon a course of enquiry which was perhaps not warranted at all. Since the scope of the enquiry itself was expanded by the Tribunal, it appears that the pointed issues which actually fell for or should have fallen for determination and were germane to the exercise of powers u/s 48 of the Act have been lost sight of. More fundamentally the objection which stands raised and which becomes evident from the record is that the Tribunal has completely failed to record any finding with respect to the seized goods having not been duly accounted for in the books of accounts or having not been truly or faithfully recorded in the books maintained by the dealer.
2. Doubts with respect to the business practices adopted by the revisionist arose before the Tribunal on account of certain orders placed by persons who were allegedly found to be nonexistent or where mobile numbers were shared by more than one individual. This led the Tribunal to view and paint the transactions and goods which formed the subject matter of the instant seizure with the same brush. It is not disputed before this Court that various discrepancies which were noticed by the Tribunal were not related to the goods seized but pertained to earlier transactions. This in the opinion of this Court was clearly impermissible. The power to seize goods is not dependent upon the bonafides or characteristics of a past transaction or perceived course of business. It has to be necessarily exercised in the backdrop of whether the goods which are being seized fall within the mischief of Section 48 or not.
3. The further issue which then arises is with respect to the correctness of the findings returned and recorded by the Tribunal with regard to the character of the transactions and whether they were liable to be treated as interState sales. What appears to have weighed with the Tribunal is the fact that the payment for the goods was made within the State. What the Tribunal clearly lost sight of and unjustifiably chose to ignore was its own record wherein it was admitted that the goods in question had come from outside the State of U.P. The Tribunal in its entire order nowhere places reliance or refers to any material which may have cast a shadow of doubt on the said recital which stood recorded in the course of the initial seizure proceedings. Further, the view taken by the Tribunal to the effect that the sale would stand completed only upon the payment for the goods and that the payment of price would be determinative of the issue would also, in the opinion of this Court, appear to be an issue which may not be free from debate. This Court however refrains from commenting further on this aspect. The caveat which stands entered above is primarily on account of the fact that in the opinion of this Court there was no occasion for the Tribunal to have ruled upon this aspect of the matter at all, the proceedings themselves being confined to the validity of seizure. This Court therefore without commenting any further on this aspect refrains from returning or entering any finding which may prejudice the rights and contentions of either of the parties. For the aforesaid reasons, this Court finds itself unable to sustain the order of the Tribunal.
(See 2016-TIOL-2644-HC-ALL-VAT)
