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Gujarat High Court · body

2016 DIGILAW 726 (GUJ)

State of Gujarat v. Sundha Traders

2016-04-01

G.R.UDHWANI, HARSHA DEVANI

body2016
ORDER : Harsha Devani, J. 1. Since all these appeals arise out of a common order passed by the Tribunal in Second Appeals No. 45 to 48 of 2015 and the parties and facts are also common, the same were taken up for hearing together and are decided by this common order. 2. The appellant-State of Gujarat, has challenged the common order dated 9.4.2015 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as "the Tribunal"), in Second Appeals No. 45 to 48 of 2015 by proposing the following three questions, stated to be substantial questions of law:-- "(1) Whether the Hon'ble Tribunal has erred in holding that the liability under section 68/69 is of the transporter and not of the owner? (2) Whether the Hon'ble Tribunal has erred in law and in facts in holding that notice to transporter is not sufficient notice to the owner and thereby quashing the order? (3) Whether the Hon'ble Tribunal has erred in law and in facts in holding that no tax and penalty can be levied as no tax incidence arose in the State of Gujarat?" 3. For the purpose of appreciating the controversy in the present case, it would be germane to cull out the facts from the record of the case. The facts are that the respondent dealer had purchased goods, namely, granite from M/s. Jee Granites and Marble Tiles of Telangana State under invoice dated 23.6.2014 against 'C' Form under the Central Sales Tax Act, 1956 (hereinafter referred to as the "CST Act"). The goods were transported in the respective vehicles of the transporter, namely, M/s. Five Star Lorry Transport. It is the case of the appellant that the driver of the truck did not stop the truck at the Songadh Check-post, however, approximately, seven kilometres from the check-post, the truck was intercepted by the Anti Corruption Bureau and brought back to the check-post. The Commercial Tax Officer at Songadh Check-post, thereafter issued memos No. 240 to 243 dated 1.7.2014, to the truck driver and the truck and the goods were seized on the spot. The respondent dealer being the purchaser of the goods in question was in need of the seized goods for its commercial purpose. The Commercial Tax Officer at Songadh Check-post, thereafter issued memos No. 240 to 243 dated 1.7.2014, to the truck driver and the truck and the goods were seized on the spot. The respondent dealer being the purchaser of the goods in question was in need of the seized goods for its commercial purpose. Under the circumstances, having no other alternative, despite the absence of demand notice and an order confirming the demand under the said Act, the respondent paid the tax and penalty. After collecting the tax and penalty, the Commercial Tax Officer (2), Songadh Check Post, Songadh has passed orders dated 7.8.2014 and confirmed the demand as reflected in the said order together with penalty at 150%. The respondent carried the matter in appeal before the Deputy Commissioner of Commercial Tax, Appeal-8, Surat, who confirmed the said orders. Against the order passed by the first appellate authority, the respondent went in appeal before the Tribunal, which observed that the only question which arose for consideration before it was whether the liability of the transporter can be fastened upon the dealer under the provisions of section 69 of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "the GVAT Act") and held that it is the liability of the transporter to obtain transit pass and if the transporter has committed any default, the dealer cannot be held liable and, accordingly, set aside the orders passed by the first appellate authority and directed the Department to refund the amount paid by the respondent to get the goods released. Being aggrieved, the State has preferred these appeals. 4. Mr. Chintan Dave, learned Assistant Government Pleader assailed the impugned order by submitting that the Tribunal has failed to appreciate that the truck driver did not carry a transit pass or Form 402 as required under rule 51(2) of the Gujarat Value Added Tax Rules, 2006 (hereinafter referred to as the "rules") and, therefore, undisputedly the provisions of sections 68 and 69 of the GVAT Act have been violated. Mr. Dave further submitted that the truck driver did not stop the truck at the check-post for verification and that but for the fact that the officers of the Anti Corruption Bureau had intercepted the truck, the respondent would have never disclosed the transaction and would have evaded payment of tax. Mr. Dave further submitted that the truck driver did not stop the truck at the check-post for verification and that but for the fact that the officers of the Anti Corruption Bureau had intercepted the truck, the respondent would have never disclosed the transaction and would have evaded payment of tax. It was submitted that merely because the respondent resides and has a place of its business at Rajasthan, is not a guarantee that the goods were not intended to be sold within the State of Gujarat. It was pointed out that the legislature has specifically introduced section 69 of the Act and rule 52 of the rules for cases of "goods in transit" and that since the respondent has failed to obtain a transit pass and has also failed to produce a confirmed sale order outside the State of Gujarat, the stand of the respondent that the goods were in transit and were not destined to be delivered/consumed in the State of Gujarat is not acceptable. It was submitted that since the respondent had failed to establish that the goods were transit goods, the incidence of tax falls in Gujarat. 4.1 Referring to the provisions of section 68 of the GVAT Act, it was contended that the liability under sub-section (5) thereof is appropriately placed on the owner, as unlike section 69, section 68(5) of the GVAT Act specifically includes the owner. It was, accordingly, urged that the Tribunal has erred in holding that the liability cannot be imposed on the owner and it can be imposed only on the transporter. It was urged that even otherwise the transporter is an agent of the owner and hence, any tax imposed on the transporter, is ultimately imposed on the owner. It was, accordingly, urged that the appeals require consideration on the questions as proposed or as may be formulated by the court. 5. Vehemently opposing the appeals, Mr. Kuntal Parikh, learned advocate for the respondent dealer invited the attention of the court to the provisions of section 69 of the GVAT Act, to submit that the liability to pay penalty under the said provision lies on the driver or the person in-charge of the vehicle and that no penalty can be imposed on the owner thereof. Kuntal Parikh, learned advocate for the respondent dealer invited the attention of the court to the provisions of section 69 of the GVAT Act, to submit that the liability to pay penalty under the said provision lies on the driver or the person in-charge of the vehicle and that no penalty can be imposed on the owner thereof. It was submitted that though the order passed by the Commercial Tax Officer is purported to have been passed in exercise of powers under section 68(5) of the GVAT Act, essentially the same is an order under section 69 of the GVAT Act and hence, no tax and penalty could have been levied upon the respondent. It was submitted that having regard to the fact that the trucks and goods had been seized by the authorities under the GVAT Act, the respondent purchaser, on account of commercial exigencies was forced to get the same released by paying the entire tax and penalty amount. It was, accordingly, urged that the impugned order passed by the Tribunal being just, legal and proper and in consonance with the provisions of law, the same does not give rise to any question of law so as to warrant interference. It was submitted that the appeals, therefore, deserve to be dismissed. 6. The facts are not in dispute. The trucks in question which were carrying the goods of the respondent had crossed the Songadh Check-Post without stopping there and had been intercepted by the Anti Corruption Bureau. It appears that thereafter, the trucks were brought back to the check-post and in connection therewith the impugned order dated 7.8.2014 had been passed. It would, therefore, be pertinent to refer to the impugned order which has purportedly been made in the exercise of powers under section 68(5) of the GVAT Act and makes an interesting reading. It appears that thereafter, the trucks were brought back to the check-post and in connection therewith the impugned order dated 7.8.2014 had been passed. It would, therefore, be pertinent to refer to the impugned order which has purportedly been made in the exercise of powers under section 68(5) of the GVAT Act and makes an interesting reading. The contents thereof, as translated in English, are thus:-- "On 1.7.2014, truck No. GJ-25-U-9794 loaded with granite which was sent by M/s. HARI OM GRANITE, Khamman (A.P.) to M/s. Sundha Traders, Rajasthan had produced documents in connection therewith before the Check-post-in-charge at the Songadh Check-post established under section 68 of the Gujarat Value Added Tax Act, 2003 and since the conditions of sub-sections (2) and (3) have not been satisfied, the officer-in-charge of the Check Post has formed the opinion that-- (1) The vehicle had not stopped at the check-post, and despite the fact that the goods were being transported to Rajasthan, a transit pass had not been obtained. Hence, for the purpose of further scrutiny thereof. As indicated vide the order at reference (2), the truck together with the goods has been seized under Sub-section (4) and the order has been served upon the driver/person in-charge of the goods and the possession of the goods has been taken over on 2.7.2014 at 03:50 hours at the check-post. In this regard, no representation has been received from the driver of the vehicle/owner of the goods/transporter/purchaser of the goods. The dealer has passed the vehicle without stopping it at the check-post and without producing the bill-bilty at the check-post and has also not obtained the Transit Pass in terms of section 69(1). It is compulsory to produce the bill bilty etc. documents in respect of the goods which are transported and the legal obligation to produce them before the in-charge of the check-post in their correct form at the time of transport is cast upon the person in-charge of the vehicle/dealer. And in respect of the goods being transported by way of OUT TO OUT transactions, it is the responsibility of the dealer to obtain a transit pass specified by the Government in Form 405. In not doing so, it appears that the intention of the dealer is to sell the goods within the State and to evade tax. And in respect of the goods being transported by way of OUT TO OUT transactions, it is the responsibility of the dealer to obtain a transit pass specified by the Government in Form 405. In not doing so, it appears that the intention of the dealer is to sell the goods within the State and to evade tax. Hence I, D.J. Rana, Commercial Tax Officer (2), Songadh Check Post Gujarat, in exercise of powers under sub-section (5) of section 68 of the Gujarat Value Added Tax Act, 2003 direct the payment of tax of Rs. 37,290/- and 150% of penalty of Rs. 55,940/-, in all, Rs. 93,230/- towards the seized goods. The amount shall be paid immediately and challan shall be produced here." 7. These, in sum and substance, are the contents of the order dated 7.8.2014 passed by the Commercial Tax Officer, which has given rise to the present proceedings. 8. As is evident on a plain reading of the impugned order, it has been passed in the exercise of powers under sub-section (5) of section 68 of the GVAT Act. Reference may, therefore, be made to the provisions of section 68 of the Act, which provides for inspection of goods in transit. Sub-section (2) thereof provides that at every check-post or barrier set up or erected under sub-section (1), the driver or any other person in charge of any vehicle shall stop the same, and keep it stationary so long as may reasonably be necessary and allow the officer-in-charge of the check-post or barrier to examine the contents in the vehicle and inspect all records relating to the goods carried in the vehicle which are in the possession of such driver or other person in-charge who shall, if so required, give his name and address and the names and addresses of the owner of the vehicle as well as of the consignor and consignee of such goods; and where any of the consignors or consignee is a dealer registered under the Act or the Central Sales Tax Act, 1956, the driver or any other person in-charge of the vehicle shall also give the number and place of issue of the certificate of registration, if any, of such dealer. Sub-section (3) provides for further documents which the driver or person in-charge is required to carry. Sub-section (3) provides for further documents which the driver or person in-charge is required to carry. Clause (b) thereof provides that such documents are required to be produced when requested to do so by the officer-in-charge of check-post or barrier. Sub-section (4) provides that if the officer-in-charge of the check-post or barrier is of the opinion that the eventualities mentioned thereunder are not satisfied, he may, after recording the reasons, seize the goods and detain the vehicle and give receipt thereof to the person from whose possession or control the goods are seized. Sub-section (5) provides for imposition of penalty in addition to tax payable under the Act after giving an opportunity of being heard to the owner, driver or person-in-charge of the goods. Thus, section 68 of the GVAT Act provides for action to be taken at the time when a truck passes through the check-post or barrier set up under sub-section (1) of section 68. It is at that stage that the officer-in-charge of the check-post or barrier would call upon the driver to produce the documents which he is required to keep with him and in case of any defect in the same, he is empowered to seize the goods and detain the vehicle and thereafter, to levy penalty in addition to tax payable, after affording an opportunity of hearing to the owner, driver or the person in-charge of the vehicle. 9. Adverting to the facts of the present case, it is an admitted position that the truck had not stopped at the check-post, which is also evident from the order dated 7.8.2014 passed by the Commercial Tax Officer. However, after the truck had passed the check-post, the same was intercepted by the Anti Corruption authorities and was brought back to the check-post. In the opinion of this court, the powers under section 68 of the Act can be exercised at the time when the truck passes through the check-post. The same does not apply to a truck which has already crossed the check-post and has entered the State. Insofar as a truck which has already entered the State is concerned, it is the provisions of section 69 of the GVAT Act which are applicable. 10. The same does not apply to a truck which has already crossed the check-post and has entered the State. Insofar as a truck which has already entered the State is concerned, it is the provisions of section 69 of the GVAT Act which are applicable. 10. Section 69 of the GVAT Act provides that where a vehicle carrying goods coming from any place outside the State is bound for any other place outside the State, the driver or any other person in-charge of such vehicle shall obtain in the prescribed manner a transit pass for such vehicle from the officer-in-charge of the first check-post or barrier after his entry into the State and deliver the same to the officer-in-charge of the last check-post or barrier before his exit from the State. Sub-section (2) of section 69 provides that if the driver or person-in-charge of such vehicle fails to deliver such transit pass throughout the State, he shall be liable to pay such penalty not exceeding one and a half times the amount of tax on goods carried by him as may be determined, after giving a reasonable opportunity of being heard. Thus, under Sub-section (1A) of section 69 of the GVAT Act, it is the liability of the driver or the person in-charge of the vehicle to pay the penalty as may be determined after giving him a reasonable opportunity of being heard. 11. On a conjoint reading of sections 68 and 69 of the GVAT Act, it can be discerned that a transit pass, as contemplated under section 69(1) of the GVAT Act, is required to be obtained at the first check-post or barrier after the entry of the vehicle into the State. Therefore, in the facts of the present case, the vehicle in question was required to obtain the transit pass at the Songadh Check-post; however, undisputedly in the facts of the present case the trucks in question have entered into the State without stopping at such check-post. Therefore, the authorities under the GVAT Act would have been justified in invoking the provisions of section 69 of the GVAT Act and taking action thereunder. Therefore, the authorities under the GVAT Act would have been justified in invoking the provisions of section 69 of the GVAT Act and taking action thereunder. However, curiously, the concerned authorities have adopted a novel course of action, inasmuch as, trucks which had already crossed the check post without obtaining transit passes, had been intercepted by the Anti Corruption Bureau and brought back to the check post, whereafter powers under section 68(4) of the GVAT Act came to be exercised on account of breach of the provisions of section 69 of that Act. In the opinion of this court, having regard to the scope and ambit of section 68 and section 69 of the GVAT Act, it would not be possible to exercise powers under both the sections simultaneously in case where the check-post is the first check-post after entry into the State, for the reason that if the truck is intercepted at such check-post, the same can be detained and the goods can be seized under section68(4) of the Act, but ultimately, it is at that check-post that a transit pass is required to be issued and hence, it follows as a necessary corollary that there cannot be a breach of section 69 at the stage where the truck is stopped at the first check-post after its entry into the State. Besides, for breach of the provisions of section 69 of the GVAT Act, action can be taken under that provision and not under section 68 thereof as both the provisions operate in different fields. Sub-section (4) of section 68 of the GVAT Act provides for the eventualities where action can be taken thereunder and breach of section 69of the Act does not find place therein. 12. One may then wonder as to why when the trucks were intercepted after they had passed the check posts and the drivers of the trucks did not produce the requisite transit passes, the authorities did not directly invoke the provisions of section 69 of the GVAT Act but chose to resort to the provisions of section 68 thereof. The reason is not far to seek. Under sub-section (2) of section 69 of the GVAT Act, it is the driver or the person-in-charge of the vehicle who is liable to pay penalty as prescribed thereunder. The reason is not far to seek. Under sub-section (2) of section 69 of the GVAT Act, it is the driver or the person-in-charge of the vehicle who is liable to pay penalty as prescribed thereunder. Moreover, section 69 does not empower the authorities under the GVAT Act to seize the goods or detain the truck in case the driver or person-in-charge of the vehicle fails to carry a transit pass. Sub-section (2) of section 69 of the GVAT Act provides for levy of penalty not exceeding one and a half times the amount of tax of goods carried by the driver or person in-charge of the vehicle and sub-section (3) thereof provides for levy of tax and penalty not exceeding one and a half times the amount of tax as may be determined, on the driver or person in-charge of the vehicle. Therefore, in case of breach of the provisions of section 69 of the GVAT Act, inasmuch as the authorities cannot seize the goods and detain the truck, the authorities would not be in a position to coerce the owner of the goods to pay the penalty levied thereunder. Therefore, it appears that the authorities under the GVAT Act with a view to circumvent the provisions of section 69 of the GVAT Act which does not permit them to seize the goods and detain the vehicle have in the purported exercise of powers under section68(4), seized the goods and detained the trucks for breach of the provisions of section 69 thereof and thereby coerced the respondent dealer who is the purchaser of such goods to pay the tax and penalty without there being any demand notice or order confirming the demand under the GVAT Act. It cannot be gainsaid that the seizure of goods and detention of vehicles is a drastic action whereby the owner of the goods is visited with serious consequences which result on account of non-receipt of such goods. Therefore, with a view to ensure that his business is not prejudicially affected, a dealer succumbs to pressure and pays the tax and penalty demanded by the authorities under the GVAT Act despite there being no liability on his part to pay the amounts demanded. Therefore, with a view to ensure that his business is not prejudicially affected, a dealer succumbs to pressure and pays the tax and penalty demanded by the authorities under the GVAT Act despite there being no liability on his part to pay the amounts demanded. In the opinion of this court, the action taken by the authorities under the GVAT Act of seizing the goods and detaining the vehicles for breach of the provisions of section 69 of the GVAT Act in the manner described hereinabove, which is not backed by any statutory power is required to be deprecated in the strictest terms. At this stage it may be appropriate to sound a note of caution to the authorities under the GVAT Act that the indemnity granted to them under section 90 thereof is limited to anything that is done in good faith or intended to be done under the Act or the rules and not actions taken contrary to and in excess of the jurisdiction vested in them and which on the face of it are not done in good faith. Some day the concerned officers may have to face an action for damages or any other claim from the person who has to suffer the consequences of their illegal acts. 13. In the light of the above discussion, this court is of the view that the entire exercise carried out by the authorities under the GVAT Act of seizing the goods and detaining the truck for breach of the provisions of section 69(1) of the GVAT Act is without any authority of law inasmuch as under the provisions of section 69, the concerned officer has no power of authority to detain such truck. Consequently, the recovery of the tax and penalty from the respondent dealer for release of the goods which had been seized in the purported exercise of powers under sub-section (4) of section 68 of the GVAT Act was without any authority of law. 14. The Tribunal in the impugned order has held that it is the transporter's liability under section 69(1)to obtain a transit pass from the check-post authority at the time of entry of the vehicle in the State and not of the owner and hence, whatever may be the consequences of the lapses on the part of the transporter, the owner of the goods cannot be made answerable. Having regard to the view adopted by this court as discussed hereinabove, the court does not deem it fit to enter in the merits of the reasoning assigned by the Tribunal and dismissal of these appeals may not be construed as the court having approved of the reasoning adopted by the Tribunal. Since the court is in agreement with the final conclusion arrived at by the Tribunal, it is not possible to state that the impugned order gives rise to any question of law, much less, a substantial question of law, warranting interference. The appeals, therefore, fail and are accordingly dismissed.