THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION No.21428 of 2009 AND TAX REVISION CASE Nos.151, 184, 248 AND 249 of 1999 % 30.12.2011 # M/s.Vizovolie Chakasang, Nagaland represented by its Proprietrix, Smt.Vizovolie Chakhasang, W/o.K.K.Kuki ... Petitioner VERSUS $ The Commercial Tax Officer (Int.), Vijayawada ...Respondent < GIST: > HEAD NOTE: ! Counsel for Appellant: Sri M.V.J.K.Kumar ^Counsel for Respondent: Sri A.V.Krishna Kaundinya ? Cases referred 1. (1964) 15 STC 644 2. (1985) 60 STC 14 (DB) 3. (1967) 20 STC 520 4. (1970) 25 STC 57 5. (1978) 42 STC 145 (AP) 6. (1989) 8 APSTJ 50 7. (1992) 14 APSTJ 121 8. (1992) 14 APSTJ 272 9. (1999) 29 APSTJ 235 10. AIR 1992 SC 115 11. (2001) 5 SCC 30 : AIR 2001 SC 2282 12. (2009) 17 SCC 389 13. (1984) 60 STC 14 14. (1967) 19 STC 506 15. (1968) 22 STC 540 16. (2005) 242 STC 551 (AP) : 2005 (2) ALD 704 : 2005 (3) ALT 190 17. (2009) 2 SCC 681 THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION No.21428 of 2009 AND TAX REVISION CASE Nos.151, 184, 248 AND 249 of 1999 30.12.2011 Between: M/s.Vizovolie Chakasang, Nagaland represented by its Proprietrix, Smt.Vizovolie Chakhasang, W/o.K.K.Kuki ... Petitioner And The Commercial Tax Officer (Int.), Vijayawada And another ...Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE SANJAY KUMAR WRIT PETITION No.21428 of 2009 AND TAX REVISION CASE Nos.151, 184, 248 AND 249 of 1999 COMMON ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The four revision cases under Section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957 (the Act) are filed by the State against the common order dated 14.12.1998 passed by the Sales Tax Appellate Tribunal (the Tribunal). M/s.Vizovolie Chakasang of Nagaland (hereafter, the consignor) is the respondent in TRC Nos.151 and 248 of 1999. M/s.Bikaner Assam Road Lines, Vijayawada (hereafter, the transporter or BARL) is the respondent in TRC Nos.184 and 249 of 1999. By the impugned common order, the Tribunal allowed the Tax Appeals filed by the respondents and set aside the common order passed by the Appellate Deputy Commissioner (CT), Kakinada as well as the two confiscation orders passed by the Commercial Tax Officer (Intelligence), Vijayawada and Commercial Tax Officer, Kasibugga. The writ petition is filed by consignor for direction to pay the value of the goods confiscated. Background facts (i) The Special Assistant Commercial Tax Officer, Vijayawada (the Special ACTO) intercepted the lorry No.AP 16T 6489 on 07.5.1993. It was found transporting cloves allegedly sold and sent by the consignor to a purchaser at Delhi. Having found interpolations in the waybills, the Special ACTO issued notices, in response to which the transporter sent reply admitting that the transit pass is not available. Therefore the stock was seized on 21.5.1993. On the same date, the CTO (Intelligence), Vijayawada inspected godowns of the BARL and seized 2250 bags of cloves (each bag weighing 40 Kgs). The documents revealed that goods were on transport from Dimapur to Delhi to M/s.Ram Niwas and Co., (hereafter, first consignee). They were consigned by a person who is not a registered dealer. Hence, the CTO (Intelligence) proposed to confiscate the goods under Section 28(6) of the Act. He issued a show cause notice to BARL, the consignor and the first consignee. The General Power of Attorney (GPA) holder of the consignor filed objections on 08.6.1993. A contention was raised that Section 28(6) of the Act has no application as the goods are in transit and passing through the State of Andhra Pradesh. Though notice was served on the first consignee, he did not file objections but sought fifteen days time for filing a representation. The CTO, Vijayawada conducted enquiry during which he recorded statements of the owners of the lorries who transported the cloves to the godowns. An officer of the department went to Dimapur and conducted enquiry. It was found that the consignor was not available in the address given on the sale bills issued by the Nagaland Forest Officials. The CTO, therefore, on a overall consideration of the matter came to the conclusion that the consignor without any registration under the Nagaland Sales Tax Act had been clandestinely bringing the goods to the State of Andhra Pradesh, storing them in the godowns of BARL who is their agent and effecting the sales without paying sales tax. Accordingly he ordered to confiscate the entire quantity of cloves. The consignor and the transporter filed separate appeals before the Appellate Deputy Commissioner (CT), Guntur. (ii) The CTO, Kasibugga after receiving information from the superiors inspected three godowns of BARL situated at Ichchapuram and seized 1894 bags of cloves vide proceedings dated 25.9.1993. After making necessary enquiries, the CTO issued notice dated 09.6.1993 proposing confiscation of the stock. The GPA of the consignor appeared and objected. They claimed that this consignment was being transported to M/s.Babulal Omprakash at Bombay (hereinafter, second consignee). After conducting enquiry, the CTO passed a confiscation order dated 16.7.1993. The contentions and objections raised by consignor as well as transporter were the same. Aggrieved consignor and the transporter filed appeals before the Appellate Deputy Commissioner, Kakinada. (iii) The Commissioner of Commercial Taxes vide proceedings dated 02.8.1993 transferred the two sets of appeals to the Appellate Deputy Commissioner, Kakinada. The Appellate Authority heard the Counsel for the consignor and the transporter and by order dated 10.9.1993 dismissed the appeals confirming the confiscation orders. (iv) Against orders of the Appellate Deputy Commissioner, the consignor filed Tax Appeal Nos.916 and 918 of 1993 before the Tribunal. The transporter filed Tax Appeal Nos.915 and 917 of 1993. The four appeals were heard together and by common order were allowed. (v) The writ petition is filed by the consignor seeking a writ of Mandamus to give effect to the orders of the STAT and pay the amount of sale proceeds of Rs.70,07,000/- relating to 2250 bags of cloves sold in public auction on 13.07.1993 and Rs.49,63,000/- relating to 1894 bags of cloves sold on 16.07.1993. When the tax appeals were pending before STAT, the Commercial Tax Department confiscated goods. The consignor would contend that in the absence of any order under Section 33C of the Act, for withholding the refund of the amount of sale proceeds, the Department has no authority in law to retain the amount. We may mention that the grant of relief in this case would depend on the result in the tax revision cases. Submissions Special counsel for Commercial Taxes would submit that STAT was in error in holding that the confiscation of the goods is illegal on the ground that Section 28(6) would not be attracted to the facts of the case. According to the counsel, the consignor is a dealer for the purpose of the Act and if the dealer is not able to account for the goods kept in a godown or business premises, the authorized officer is entitled to seize and confiscate the goods. Allegedly, the goods seized were in transit from Nagaland to Bombay and New Delhi but the consignor as well as transporter did not prove that the goods were actually intended to pass through Andhra Pradesh. The consignees never came and claimed the goods seized and enquiries have shown that the sale transactions between the consignor and consignees are spurious and doubtful. According to him, a person transporting the goods to another State is bound to prove the goods actually moved out of the State and in the absence of any such proof, Section 28(6) is attracted whereunder goods can be confiscated. The special counsel would contend that after conducting seizure operations, the authorities at Vijayawada and Kasibugga issued notices to the consignor, transporter and consignees. This is not denied by any of them. The consignor also sent representations on three occasions denying sales in the State of Andhra Pradesh. The competent authority considered various contentions, made enquiries, recorded statements from the owners/drivers of the lorries and came to the conclusion that the consignor and the transporter were engaged in clandestine business of bringing cloves to the State and selling them without payment of sales tax. The Tribunal was, therefore, in error in holding that the principles of natural justice are violated while passing confiscation order. He relied on State of A.P. v Abdul Bakshi[1] and Transport Corporation of India v State of A.P.,[2]. The counsel for consignor and transporter made the following submissions. The goods entered Andhra Pradesh under valid entry pass. They are accompanied by documents to show that the goods were being carried to the destination through Vijayawada. Therefore, Section 28(6) is not attracted nor the goods in transit can be confiscated by the Department. Sufficient proof was produced to show that the consignor is cloves mahaldar; she paid the cost of the cloves to the Department of Forests in Nagaland; the lorries carrying the goods passed through number of check posts; the transporter was carrying necessary documents to establish this and the Revenue failed to establish by cogent and satisfactory evidence that out of 45 lorries which entered the State, only four lorries crossed the border and 41 others remained in Andhra Pradesh. It is also urged that the CTO did not give opportunity before passing the confiscation order to the consigner and consignee. The counsel relied on Deputy Commissioner, Agriculture, Income and Sales Tax v Travancore Rubber and Tea Company[3], Deputy Commissioner v Midland Rubber Producer Co., Ltd.,[4], Bandamidi Rajaiah v Board of Revenue, Commercial Taxes [5] , M/s.Seetharamanjaneya Rice Mills v State of A.P.[6], Shaik Basha v State of A.P.,[7], State of A.P., v A.P.Paper Mills[8], State of A.P., v Sri Laxmi Srinivasa Groundnut Traders[9], Ramaswamy Kalingaryar v Mathayan Padayachi[10], Hamida v Mohd.Khalil [11] and Tallam Gangadharan v U.Ismail Saheb [12] . Contentious Issues The brief background facts and submissions give rise to two broad issues for consideration. We would deal with these one after the other. Before doing so, we may repeat consignor’s version and Department’s version of chronology of events leading to passing of confiscation orders by two CTOs at Vijayawada and Kasibugga respectively to put in place the controversy in a little more detailed prospective. The consignor obtained cloves mahaldar in Kohima Division from Nagaland Forest Department for 1992-1993 after paying an amount of Rs.30,000/-. She then entered into a contract of sale with consignee No.1 at New Delhi for sale of about 2,500 bags and another contract of sale with consignee No.2 for sale of about 1,890 bags of cloves. This was in the months of March, April and May, 1993. The goods were entrusted to BARL for transportation from Dimapur to New Delhi and Bombay. The nearest route from Dimapur to these two destinations is via Bihar. But, due to serious law and order problems in that State, and also the incidents of consignor’s lorries being stopped in Bihar, BARL decided to transport them to the two destinations via Andhra Pradesh. In the first week of May, 1993, more than forty five lorries either belonging to BARL or hired by them, transporting cloves passed through the Commercial Tax Department integrated check post, Purushothapuram, near Itchapuram in Srikakulam District. Forty four lorries passed through the State of Andhra Pradesh to their respective destinations to be delivered to the consignees at Bombay and New Delhi. But the goods being transported by some lorries, due to logistic problems, were unloaded at Vijayawada and Kasibugga. They were stocked and stored in the godowns of BARL to be transhipped into other lorries for being carried to Bombay and New Delhi. These stocks were not intended to be sold in Andhra Pradesh either by the consignor, or the transporter, or any dealer, but were to be carried to the consignees. According to the petitioner, out of forty five lorries which entered Andhra Pradesh, forty four lorries passed through the State and only goods from one lorry were kept in godowns at two places and that these goods were duly accounted for by producing necessary permits, travel documents and transit passes. The version of the Revenue is as follows. A lorry coming from Dimapur with 250 bags of cloves was checked by Special ACTO at Vijayawada-Hyderabad route check post No.9, Vijayawada. As per the documents produced by the driver, the goods were being transported for delivery to the consignees. The driver made a statement that goods would be transferred to another lorry for onward journey from the godowns of BARL. The officer entertained a suspicion because it was not necessary for the lorries going from Dimapur to New Delhi or Bombay to touch Vijayawada. He also found interpolations in the waybill with regard to the date thereon. Therefore, he detained the goods and the vehicle. This was followed by an order detaining fifty five bags, the value of which is equal to tax due on the total value of the goods and three times of the amount of tax pending enquiry as security. The balance quantity of goods was released. In response to the notice, BARL submitted representation stating that the goods were not intended for sale in Andhra Pradesh but admitted that the transit passes were not available. He explained that as transit passes were not available at Itchapuram, the check post officials allowed the vehicles after being satisfied with the documents available with the lorry. As a follow up, discreet enquiries were made, when it was suspected that the first consignee had been indulging in clandestine trade by choosing BARL and storing the goods at Vijayawada. On 21.05.1993 in the presence of the Manager of BARL, the CTO (Intelligence) inspected two godowns at Vijayawada and found thousand (1,000) bags of cloves in one and 1,250 bags in another. As per the statement of the Manager, the buyer for all nine lorries was first consignee and that they were covered by transit passes issued by Purushothapuram check post. He also stated that the goods were received in godown on different dates but were stocked together. The CTO then seized the goods under Section 28(6) of the Act pending enquiry. On coming to a prima facie conclusion that the consignees were getting goods from Dimapur and effecting sales in Andhra Pradesh to evade payment of all taxes to the Government, the Joint Commissioner (Enforcement) enquired with New Delhi, CT Department and came to know that the consignee is a registered dealer under Delhi Sales Tax Act but the survey of the premises revealed that there was no stock nor any books of accounts, and the dealer’s representative was not available at the address given in the documents. The Department then deputed two officials to Dimapur. On conducting enquiry, they reported that the consignor is not a registered dealer in Nagaland Sales Tax, that she is a cloves mahaldar for 1992-1993 holding permit dated 24.11.1992 and that they could not locate the consignor at the address indicated in the sales tax documents. Then, the CTO Vijayawada issued show cause notice to BARL, consignor and first consignee proposing confiscation under Section 28(6) of the Act. The grounds for proposed confiscation, pointed out in the show cause notice are the goods need not take a circuitous route via Andhra Pradesh to go from Dimapur to Delhi; the consignor is not a registered dealer in Nagaland and she is only mahaldar; consignee was not found at the address furnished and no business activities were found going on at its registered office; and in spite of service of seizure order of BARL, the consignee (owner of the goods) did not appear before the CTO with proper explanation. In response to the show cause notice, the consignor sent a telegram dated 03.06.1993 seeking release of the goods and her husband as well as GPA holder filed a representation objecting to seizure and proposed confiscation inter alia on the ground that Section 28(6) of the Act has no application. She also submitted that transportation of the goods via Bihar and Uttar Pradesh State borders is fraught with a lot of difficulties i.e., attacks by dacoits/unknown persons on the way. The allegation of clandestine business in the State of Andhra Pradesh was denied and the transit passes under Section 29B allegedly obtained at the boader check post for eleven lorries were also offered as evidence. The Branch Manager of BARL, Vijayawada also filed an affidavit on the same lines. He denied allegation of tax evading clandestine sale in the State. He further stated that the BARL has to deliver the goods to the consignee on receipt of freight charges; the lorries were engaged upto Vijayawada where goods were unloaded in the godowns for the purpose of transshipment by engaging other lorries; it is BARL which is required to engage lorries and pay freight charges noted in the LR; and that freight charges were already paid from Nagaland to Vijayawada. The consignor also sent yet another representation on 02.06.1993 requesting for release of the goods under Rule 48 of the Rules offering to pay the applicable tax, she expressed that first consignee is unlikely to pay the price of the goods in view of the seizure and that she would pay delivery charges after paying applicable taxes. The first consignee sent a telegram seeking fifteen (15) days time for filing detailed representation. The CTO recorded the statements of owners of five lorries, as well as that of a clerk of BARL. All the owners stated that they brought cloves from Dimapur and unloaded at the godowns of BARL. One of them (Kurma Nageswara Rao) who was owner of lorry No.AIR 7387 stated that he brought cloves from Dimapur on two occasions and downloaded at Vijayawada. After considering all the material, the CTO Vijayawada passed the order on 30.06.1993 directing confiscation of all the goods seized at the godowns of BARL. The version of the Department insofar as confiscation of the goods by CTO, Vizianagaram is the same. But, in this case, the goods were consigned to both first and second consignees; the second one being M/s.Babulal Omprakash, Narsinath Road, Near Anand Bhavan, Bombay. On enquiry, it was found that the second consignee was not a registered dealer in the State of Maharashtra; the address furnished in the documents was false, and the second consignee was a bogus dealer. The second consignee or his representative did not appear claiming the goods or objecting the seizure and confiscation. The confiscation proceedings before the authorities The two Commercial Tax Officers in two jurisdictions found almost similar irregularities in the transactions. As summarized by the appellate Deputy Commissioner, Kakinada, they are as follows. (i) The consignor was not found registered with the Sales Tax Authorities in Nagaland nor any registration under CST Act was taken; (ii) The consignor was not available at the address given in the transportation document; (iii) the consignor paid only Rs.30,000 for goods worth of nearly two crores of rupees; (iv) the consignee at Delhi was found to be indulging in many irregularities including violation of the provisions of the Delhi Sales Tax Act; (v) The registration certificate of the Delhi dealer was already cancelled; (vi) The dealer in Bombay was found to be false and not present at the address given; (vii) The goods had taken a circuitous route that was three times longer than the nearest National High Way between Nagaland and Delhi or Bombay; (viii) The consignor failed to produce any evidence to show that they were capable of carrying business in several lakhs of rupees. The consignor also did not show any evidence that the transactions were made through bank; (ix) No evidence about the proper order, agreement for, sale, advance payment, freight arrangement, Bank Accounts were filed before the CTO, Vijayawada and the CTO, Kasibugga; and no evidence of insurance of the goods were produced before the authorities; and (x) at the time of seizure the goods were found stocked at the godowns of Bikaneer Assam Road Lines, Vijayawada and Itchapuram on the plea that they were waiting for transshipment; and the stocked cloves were not supported by proper documents. Both the original authorities also found that the goods kept in godowns at Ichapuram and Vijayawada were not supported by proper documents and the consignees did not even appear and claim the goods. The authorities also considered various grounds urged on behalf of the consignee to which a reference is made supra and came to the conclusion that there are sufficient indications to lead to the conclusion that the goods were being brought from Nagaland on regular basis for being sold in Andhra Pradesh evading payment of tax under the Act. Before the appellate authority, it was argued that the goods in transit in the course of inter-State trade can be seized under Section 29B only at the check post for non-production of transit pass but when they were kept in the godown for onward transmission, they cannot be seized. This was repelled by the appellate authority, who observed that Section 28(6) enables the seizure of the goods at the place of a dealer if they are not accounted for and that if the goods were intended for transshipment, they would not have kept at the godowns for three days before the seizure was effected by the officials. If BARL stocked the goods for further transshipment to the destinations, nothing prevented them to maintain proper records when huge stocks were stored in the godowns which were allegedly intended to go to Delhi and Bombay. The transporter did not produce any record, any bank accounts or agreement of sale between the consignor and consignees and no proper explanation was offered by the Manager of the transporter at the godowns, which itself is a clear pointer to the clandestine activity by the consignor and transporter. The information gathered during the enquiry to the effect that the first consignee never received any supplies from Dimapur vide Statement dated 28.06.1993, the BARL engaging lorries of private owners only upto Vijayawada weighed with the appellate authority in rejecting the plea of the respondents. The submission that Section 28(6) would be attracted only when the person involved is a dealer was rejected observing that, when the transporter acted as a bailee in Andhra Pradesh, the goods admittedly belonged to the consigner, she would become dealer attracting the provisions of the Act. It was also contended that reasonable opportunity was denied to the consignor. The seizure order dated 21.05.1993 which was served on BARL, consignor and consignees (first consignee refused to receive the seizure order), the statements issued by the consignor on 07.06.1993 and 14.06.1993, the objections filed by the GPA of the consignor influenced the appellate authority to reject this contention and to hold that the show cause notice of confiscation was duly served. After confiscation order, the goods were auctioned after giving notice to the advocate which was held to be sufficient compliance of principles of natural justice. By order dated 10.03.1993, two appeals filed by the consignor and the other two filed by BARL, were dismissed. The Order of the STAT After analyzing the factual background, the learned Tribunal framed sole point for consideration; whether the confiscation orders separately passed by the CTO, Vijayawada and CTO, Kasigugga are liable to be set aside for any of the reasons urged by the appellants. We may mention that the arguments which are raised before the Tribunal were similar to those pleaded before the Appellate Deputy Commissioner. The Tribunal dealt with two main aspects. The first one was whether the goods originated from Dimapur and reached Ichapuram and Vijayawada under valid documents, allegedly intended to be transported to the first consignee at Delhi and the second consignee at Bombay. The second aspect was whether the goods seized at two places by the respective competent authorities were actually and factually intended to be sold to the consignees or were intended for sale in Andhra Pradesh by evading tax under the Act. After considering various documents, namely, the documents issued by forest