& Company Vs. Trade Tax Officer & Anr  Insc 421 (17 August 2005)
Pal & Dr. Ar Lakshmanan
out of SLP( c) No. 3387 of 2004) RUMA PAL,J.
appeal has been preferred from an order passed by the High Court of Allahabad
dismissing the appellant's writ petition. The appellant had asked for a
direction on the respondents to hand over possession of 400 bags of gambier
which had been detained on 20th August 1999
and subsequently seized.
appellant carries on business in Mumbai. It sent the gambier to one M/s Kamakhya
Like (sic) Industries, Varanasi.
declaration form (Form 31) issued under the U.P. Trade Tax Act, 1948 (referred
to as the Act) had been sent by the purchaser to the appellant in connection
with the sale of the gambier. The gambier was despatched by truck from Bombay.
Uttar Pradesh check-post the goods were detained on 19.8.1989. Certain
documents were produced. The documents were found to be discrepant. A show
cause notice was issued by the then Trade Tax OfficerII (hereinafter referred
to as TTO-II), Sahayta Kendra Trade Tax, Jhansi to the truck driver on 20th August, 1989.
It was alleged in the show cause notice, inter-alia, that the appellant dealt
in chemical and solvent and that the existence of the selling dealer was
doubtful. As far as the purchasing dealer was concerned, it was said that the
Form-31 was issued to the firm to import lime stone and coal and it was not
registered or authorized to trade in gambier. It was also said that the
registration certificate had expired and that the signature of the present
dealer on the documents produced did not tally with the signature of the
proprietor already on record. It was also noted that there was a discrepancy in
the name of the purchaser in the documents produced by the truck driver in that
the name in one place was shown as Kamakhya Like Industries, and in another as Kamakhya
Lime Industries. On the basis of these facts, the TTO-II said he was satisfied
that the goods were being imported with the intention of evading payment of tax
by adopting fraudulent means and that the goods in question were detained under
Section 28-A of the U.P. Trade Tax Act.
no copy of the show cause notice was served either on the purchaser or the appellant
as the selling dealer.
appellant submitted an application for extension of time to reply to the show
cause notice on 2nd
to the respondents, the time to file the reply was extended till 10th September 1999. As there was no reply to the show
cause notice on 11th September 1999 an order was passed by the TTO-II seizing
the goods on the grounds that the bills were discrepant and were, therefore,
bogus and that the entry of the gambier in the account books of the appellant
was doubtful. The estimated value of the gambier was given as Rs. 20 lakhs on
the basis of which the release of the gambier was permitted to deposit of a sum
of Rs. 8 lakhs either in cash or in the form of draft by 20th September 1999.
On 13th September 1999, one Mr. Arvind Desai claiming to
be a partner of the appellant submitted an application under Section 13-A(6) of
U.P. Trade Tax Act, 1948 for release of the goods. On receipt of the
application, the TTO-II who had issued the show cause notice and passed the
order of seizure, went to Mumbai and made inquiries from the Sales Tax Officer
there who, according to the respondents, certified that the said Arvind Desai
was not a partner of the appellant. The TTO also found that there were no
entries of money transactions relating to the purchase of the gambier in the
bank accounts of the appellant in Mumbai. Incidentally, the partners of the
appellant admittedly registered with the Sales Tax Authorities, confirmed that Arvind
Desai was a partner of the appellant firm.
On 8th October 1999, an order was passed by the
assessing authority under Section 15A(1)(o) against the proprietor of the
purchaser holding that the gambier had been transported with the "pre-plan
intention of tax evasion" and, therefore, penalty of Rs. 8 lakhs was
imposed. However, it was only subsequently, on 21st October 1999, that the
Assistant Commissioner (Check Post) Raksa relying on the evidence of TTO-II
regarding the enquiry at Mumbai, rejected the application submitted by the
appellant under Section 13A(6) on the grounds:
application u/s 13A(6) is not maintainable as the person is not the owner of
The goods were imported into the State without proper and genuine documents and
also with the intention to evade tax.
The person who signed the application and had shown himself as partner in the
firm M/s Bharat & Co.
has been actually found not a partner in the records of Mumbai sales tax
On 31st March 2000, the appellant's appeal before the
Trade Tax Tribunal was allowed. It found that the appellant was the owner of
the gambier since delivery was not complete.
circumstances, the appeal was allowed and the matter remanded back to the
Assistant Commissioner (Sahayata Kendra) Jhansi with the direction that he shall decide the matter afresh on merit
after looking at the comments in the order.
remand, the Assistant Commissioner again rejected the appellant's application
for release of gambier holding that the appellant had failed to substantiate
his claim of ownership of the gambier at any point of time. Some what
inconsistently it was also held that the ownership of the gambier had been
transferred to the purchasing dealer and that it had been proved indisputably
that the goods in question were "imported/transported with an intention to
defraud the Government revenue and to evade due payment of tax likely to be leviable
on the sale of the goods in question".
appellant preferred an appeal to the Sales Tax Tribunal. The Sales Tax Tribunal
directed that the goods should be released to the appellant upon the furnishing
of security of Rs. 4 lakhs. Against this order, both the appellant as well as
the respondents filed a revisional application before the High Court under
Section 10 of the Act. By an interim order dated 28th September 2000, the High Court directed the respondents to release
the goods subject to the appellant furnishing security of Rs. 4 lakhs other
than cash, bank guarantee, NSC or FDRs to the satisfaction of the Check Post Officer,
Raksa, Jhansi for the amount of security as
determined by the Tribunal. The security of Rs. 4 lakhs was furnished by the
appellant on 3rd
October 2000. These
were, according to the respondents, verified by the TTO-II on 28th October 2000.
is some dispute as to whether the goods were formally released to the appellant
or not. According to the appellant, when his agent went to take delivery of the
goods the Godown Keeper left the premises and the goods were not released to
him. The Godown Keeper sent a letter on 3rd November, 2000 to the appellant from the office of
TTO, Sahayta Kendra Raksha, Jhansi to the
are informed that your goods of 400 bags of Gambier have been taken out of the Godown
. Kindly come and take and goods.
1.11.2000 at 6.30 P.M. there was sudden pain in my stomach
and I had gone to fields to attend the call of nature and by the time I
returned, you had already left."(sic).
hearing, however, a register was produced by the respondents which purported to
show that the goods had been released to the appellant's agent and had been
signed for on 30th
October 2000. If the
entry is correct there is no explanation why the Godown Keeper wrote the letter
which speaks for itself.
therefore, undisputed that at least physical delivery of the goods was not
November 2000, an order was passed by the TTO attaching the gambier on the
ground that the recovery certificates totaling Rs. 18 lakhs had been received
by the Assistant Collector (Collection), Trade Tax, Jhansi wherein it was
directed that after the release of 400 bags of gambier to M/s Maa Kamkshya Lime
Industries, Varanasi from Sahayata Kendra, Raksa the recovery of the arrears
covered by recovery certificates against M/s. Kamakhya Lime Industries totally Rs.
18 lakhs may be made. Since the goods had been formally released they were
attached. The TTO who issued the order of attachment said that 400 bags of gambier
were being entrusted to his personal custody with the instruction that he shall
not deliver the goods to any one else without the prior permission of his
office and would make the goods available at the time of the auction
against this order that the writ petition which culminated in the impugned
order was passed. Before we consider the reasoning of the High Court it may be
noted that the High Court had issued an interim order staying the sale of the gambier
pending the disposal of the writ petition. The writ petition was dismissed on 15th November 2002. The goods have been sold by public
auction in February 2003 and according to the respondents, fetched a sum of Rs.
7, 45,000/- .
sale was approved by Assistant Commissioner (Trade Tax) on 15th February 2003. The amount of sale proceeds is
being held by the respondents.
counsel for the appellant has submitted that in law and in fact the title to
the goods had not passed from the appellant to the consignee. According to the
appellant, the issue of title had been concluded finally by the order of the
Sales Tax Tribunal dated 31st
March, 2000. The order
of the Tribunal had not been challenged and it was not open to the respondent
authorities to raise the issue again. It was then submitted that the refusal of
the respondents to release the goods to the appellant despite specific order
dated 9th August, 2000 passed by the Tribunal and its order by the High Court
on 28th September, 2000 was malafide and contumacious. It was said that false
statements had been made by the respondents to the effect that the goods had
been released to the appellant on 31st October, 2000. It was said that the order of
re-seizure was without jurisdiction. It was pointed out that the security bonds
furnished by the appellant are still with the respondents.
respondents have submitted that the alleged purchaser had not appeared at any
stage of proceedings and enquiry revealed that it was no longer an existing
to the respondents no documents had been filed at any stage by the appellant in
support of its claim of ownership to the gambier. It was further submitted that
issue of title was pending in the Revisional Application filed by the appellant
and the respondents from the order of the Tribunal dated 9th August, 2000. It was said that the documents
which were produced by the appellant were interpolated and contradictory and
that the appellant had not come to court with clean hands.
High Court, dismissed the application on the ground that the title in the goods
had not passed to the purchaser although the price for the goods had not been paid
. It was also said that M/s. Kamakhya Lime Industries and M/s. Maa Kamakhya
Lime Industries were one and the same and that therefore the outstanding dues
of M/s. Maa Kamakhya Lime Industries could be recovered from the goods in
appellant filed an application for review of the judgment which was dismissed
by the High Court.
the special leave petition had been filed from the order dismissing the
application for review. Subsequently, an application for amendment of the
petition was filed including a challenge to the order of the High Court. At the
hearing the application for amendment was not opposed and is allowed.
opinion, the High Court was wrong in dismissing the appellant's petition. The
Trade Tax Tribunal as early as on 31st March, 2000 had held that the appellant had the
locus standi to ask for the release of goods because the appellant was the
owner of the goods. The decision of the Tribunal was not challenged by the
respondents. The decision of the Tribunal not being challenged, the issue of
title was concluded in the appellant's favour. In the face of this order, it
was not open to Assistant Commissioner, Trade Tax on remand to reject the
application of the appellant on the ground that it was not the owner of the
goods. The High Court should have considered this aspect of the matter
particularly when it had been expressly drawn to the High Court's attention.
The High Court was also precluded from re-deciding the same issue between the
the High Court's finding that the ownership of the goods had passed to M/s. Kamakhya
Lime Industries only because it had been named in the Consignment Note appears
to be incorrect. In Commissioner of Income-Tax, Madhya Pradesh and Bhopal, Nagpur
v. Bhopal Textiles Ltd., Bhopal, AIR 1961 SC 426,428, this Court said:- "A
railway receipt is a document of title to goods, and for all purposes,
represents the goods. When the railway receipt is handed over to the consignee
on payment, the property in the goods is transferred. In this case, it is a
matter of considerable doubt whether the property in the goods can be said to
have passed to the buyers by the mere fact of the railway receipts being in the
name of the consignees, as has been held by the High Court." In the second
round the Tribunal had directed the release of the goods to the appellant by
its order dated 9th August, 2000 subject to furnishing the security of Rs. 4 lakhs.
The High Court by the interim order passed in the revisional application also
directed the seized goods to be released to the appellant on the furnishing of
security by its order dated 28th September, 2000. Even according to the
respondents the goods were released formally to the appellant against security
furnished by the appellant. Yet the last order of seizure in execution of the
recovery certificates against the purchaser was issued on the basis that the
goods had been released to M/s. Kamakhya Lime Industries.
submission of the respondents that the appellant had come to the Court with
unclean hands is unacceptable. On the other hand the respondents have mis-directed
themselves by seeking to question the appellant's ownership in the property to
the goods. That could not have been in issue because unless ownership of the gambier
was with the appellant, no title could have been transferred to the purchaser
by it . The enquiry conducted by the TTO as to the business of the appellant,
the existence of its office in Mumbai, etc. was therefore not only uncalled for
but self defeating.
true that the respondents have said that the two invoices of the appellant have
been prepared bearing the same number but in respect of different quantities of
gambier. It is however, nobody's case that the total of the two invoices did
not tally with the number of bags in fact found on the truck. No material has
been brought on record by the respondents to show that the value of the gambier
as on the date of transport was less than that shown on the invoices except for
the unsupported estimate of the TTO that the gambier was worth Rs. 20 lakhs.
The appellant in any event was not concerned with any interstate sale that the
purchaser might have effected after the delivery. As far as it was concerned,
the sale was and intrastate one and subject to Central Sales Tax 1956, and
therefore, outside the purview of the State Act.
accordingly allow the appeal and direct the respondents to forthwith pay the
entire sale proceeds from the sale of the gambier to the appellant by a demand
draft in the name of the appellant within a period of four weeks from today.
payment is not made within the time aforesaid, the respondents would be liable
to pay interest on the sale price proceeds at the rate of 12% per annum. No