CA K. Jitendra Babu
1. Movement of the goods either on intra-state or inter-state basis has been proving as a night mare for the assessees and transporters, in view of the wide mis-use of the powers relating to inspection, detention and seizure by the VAT department in many of the States.
2. The vehicles are intercepted, detained and seized in routine, arbitrary, illegal and high-handed manner by the officers, citing obscure and irrelevant reasons. Vehicles are detained without valid reasons, replies filed by the assessees are routinely brushed out and seizure orders are made, with requirement of huge amount as deposit for release of the goods. The attitude of the quasi-judicial officers who are required to protect the State Revenue by following judicious process is disturbing the consciousness of the trade and industry at times.
3. Study of the various judgements relating to vehicle detention cases revealed that in most of the cases vehicles were detained, huge amount was ordered to be deposited for release of the vehicles and materials and finally penalties were levied confirming intention to evade payment of tax in a routine manner without any documentary evidence. Subsequently, such penalties were considered as the basis for arbitrary addition of turnover at the time of final assessment of the asseesees, holding intention to evade payment of tax was proved by penalties levied in seizure cases and therefore books of accounts are rejected and huge amount is added to the taxable turnover, as un-disclosed turnover. Invoice and/or stock transfer note issued by the assessees which accompany the vehicle prove that the materials were accounted in the books of accounts. Without any further investigation as to how the materials were not accounted in the books of accounts, huge amounts are added to the turnover without any basis. Principle that onus lies on the department to prove with documentary evidence, in case the department alleges evasion of tax, is being completely ignored, under the guise of revenue protection.
4. Minor defects in documentation were considered as the grave mistakes with an intention to evade payment of tax, without providing an opportunity to the dealer to explain and cure the defects in the documentation, ignoring judicial decisions wherein it was held that assessee should be given opportunity to rectify the minor mistakes in documentation. Every mistake in documentation is considered as the ploy on the part of assessees to move the goods on the same invoice/stock transfer challan once again.
5. Even the stock transfer of capital goods, which are never meant for sale, but for use in the factory or plant or network of the assessee, is doubted without any basis, vehicles detained, materials seized and released only on submission huge security deposit, citing minor defects in documentation.
6. In many of the cases, the Tribunals and Courts have set aside the penalties levied on the assessees for minor defects in documentation. But, the assessees are forced to face the inconvenience of moving the higher judicial forums to get justice, spending much of their time, energy and money, as no justice is expected from the departmental appellate authorities.
7. Height of arbitrariness and high-handedness of the revenue has once again been brought to the notice of the Hon‘ble High Court of Allahabad in the recent case of M/s. SANDEEP BULK CARRIERS Vs. STATE OF U.P. [2014-VIL-404-ALH] and the Hon‘ble Court after examination of the facts of the case ordered for payment of compensation to the transporter for illegal detention of the vehicle, allowed the writ petition with costs and directed the State and Central Governments for making suitable rules/orders to protect the assessees and transporters from illegal detentions.
8. The facts of the case reveal how indifferently the taxpayers are treated by the tax administration, which calls for immediate need for reforming the rules and procedures. While the tax evaders are to be punished with harsh penalties by intelligence gathering and scrutiny, tax compliant assessees should not be treated in an indifferent manner and illegal demands should not be slapped in the guise of protecting the State revenue.
9. In the above case, the vehicle carrying bitumen was on its way from Madhura in Uttar Pradesh to Bhopal in Madhya Pradesh, which started its way on 27.06.2014. During the transit, the vehicle got mechanical problems and same were got rectified by 30.06.2014. Then, the vehicle started it onwards journey to Bhopal again. The mobile squad officer intercepted the vehicle and detained the same, on the ground that he has got the information that the vehicle crossed the toll plaza which was away from its current location. The officer has apprehended that the material was unloaded after crossing the toll plaza, came back and going with material on the strength of same documents. Therefore, evasion of tax was apprehended and vehicle detained.
10.The officer has relied upon only on the last four digits of the vehicle number provided by toll plaza. It was found and submitted that there were three vehicles with same four last digits in the registration number, which were loaded by IOCL, Madhura. But, the submission was not taken into consideration and vehicle was detained for nearly 2 months.
11. Finally, the High Court has to deliver justice to the transporter after he experienced the difficulties for quite a long period of time moving from one forum to another for getting justice.
Some of the observations of the High Court are extracted hereunder which will throw light as to the manner in which the case was dealt with:
“For the reasons best known to the authorities concerned, they detained the tanker in question and seized the bitumen despite the fact that the information received was not tallying with the full registration number of the tanker in question”. (para 14)
“Respondents have also submitted unconditional apology by supplementary counter affidavit dated 20.8.2014. All these facts leaves no manner of doubt that the tanker in question was detained and bitumen continued to be seized illegally, arbitrarily and without any basis by the authorities for more than 58 days. The seizure itself was beyond the power conferred under Section 48 of the Act…….. The respondents acted most arbitrarily, and negligently in not verifying the information received by them from toll plaza so as to find out the complete registration number of vehicle and further not verifying the facts with regard to loading of the tanker in question from the Indian Oil Corporation, Mathura which they did while filing supplementary counter affidavit dated 20.8.2014. Even the reply dated 4.7.2014 (Annexure 8) submitted by the petitioner was not given any weight either by the respondent No.4 or by the Joint Commissioner. The Tribunal also acted mechanically”. (para 16)
“Under the circumstances the impugned seizure order dated 5.7.2014, the order of Joint Commissioner under proviso to Section 48 (7) of the Act dated 8.7.2014 and the impugned order of the Commercial Tax Tribunal, Bench-I, Agra dated 16.7.2014 passed in IInd Appeal No. 223/2014 cannot be sustained and are hereby set aside. The provisional release of the tanker and bitumen in question by order dated 28th August, 2014 is hereby confirmed. Any undertaking furnished by the petitioner before the Respondent No.4 pursuant to the order dated 28th August, 2014 is discharged”. (para 16)
“In view of the above discussions the respondent No.1 is directed to determine the compensation within 30 days from today and to pay the amount of compensation to the petitioner by account payee bank draft within two weeks thereafter. The state government shall be at liberty to conduct an inquiry in the matter of illegal detention of the tanker and seizure of bitumen in question and may take action in accordance with law against the guilty officers/employees”.(para 19)
“Now the last point that needs consideration is the undertaking of the State Government given through the learned Additional Advocate General and also of the Central Government as given by the learned Central Government counsel as recorded in paragraph 8 and 12 of this judgment. Learned Additional Advocate General has stated that State Government is considering to issue a government order to provide remedy including compensation for wrongs committed by government officers or employees. A statement has been made on behalf of the Central Government that the Department of Revenue, Ministry of Finance, Government of India, New Delhi is considering for making appropriate laws/guidelines/instructions which may have a check on the arbitrary exercise of power by authorities so as to minimise the possibility of harassment of transporters and dealers in general and to facilitate free flow of trade and commerce. Harassment and injury to persons particularly a person of poor class of society, by officers/employees of governments by their arbitrary, negligent and illegal actions can be effectively checked provided there is a law providing efficacious remedy for consequential liability of such officers/employees on one hand and on the other hand appropriate compensation to aggrieved person. Such a law/government order may also provide for speedy disposal of such matters. This shall also effectively check corruption. Learned Additional Advocate General for the State Government as well as the central Government Counsel have stated that the State Government as well as Central Government is considering to enact a law or to issue a government order for this purpose. Under the circumstances this Court hopes and trusts that the State Government as well as the Central Government shall consider the matter in the light of the undertakings as recorded in paras 8 and 12 above and may take appropriate decision/action in accordance with law preferably within three months from today”. (para 20)
“In result the writ petition succeeds and is hereby allowed with cost of Rs. 20,000/- which the respondent No.1 shall pay to the petitioner within a month from today apart from compensation as directed above”. (para 21)
Full Judgment can be accessed at the following link :-
12. In line with the assurance given by the Central and State Government representatives before the Hon ‘ble High court to frame necessary rules/orders to facilitate smooth movement of materials and free flow of trade and industry, the rules/orders should be framed in such a way that the arbitrary powers of the authorities are curtailed and assessees should be allowed to carry on trade and industry with least hindrance.
13.The rules/orders should remove the powers of mobile squad officers or check post authorities to detain the vehicles, except in case of illicit transport of materials that are prohibited such as arms and ammunitions, drugs etc. The power to detain the vehicles is the root cause for the corruption, as any threat of detention would shake the transporter and the assessee, considering the financial implication on them and drives them into the net of corruption. The officers can carry out the investigation, subject to release of the vehicle immediately, by taking copies of the documents accompanying consignment, for subsequent probe at their end, if they apprehend tax evasion. Any evasion of tax can be handled based on the documentation and there is no need for detention of vehicles, seizure of materials, security deposit etc. Officers can get the information exchanged with their counter-parts in the other States and get the cases finalized in case evasion is proved.
14. In case of intra-state movement of the materials, the department has absolute control over the assessee, both consignor and consignee. Therefore, there is no obstacles in deciding the case and there is absolute no reason for detention of vehicle, seizure of the materials etc. In case of inter-state movement of the materials, originating from the State, the State VAT department has absolute control over the consignor and can take action against him in case of any evasion of tax, after scrutiny of the documents, since movement of goods on the same documents is not possible without connivance of the consignor. Therefore, there is no need for detention, seizure, security deposit etc. In case of inter-state movement originating from other State and moving through the State, the State VAT department can collect the documents, scrutinize the same and pass on the intelligence to their counter-parts in other States, to take action against the consignor/consignee located in other State(s). In this case also, there is no requirement of any detention, seizure, security deposit etc.
15. Keeping in view the practical situations faced by the departmental officers in the field, as to the various ways of evasion of tax by tampering with the documents, powers can be bestowed on them in specific cases/circumstances to protect the revenue, but not sweeping powers in each and every case.
(Author may be contacted firstname.lastname@example.org)