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There is no attempt to avoid tax if the documents are produced before passing the seizure order under U.P Trade Act: Allahabad HC


The revisionist along with a reply to show cause notice has filed the relevant documents before the seizure authorities but the same was paid no weightage, in such a case it cannot be said that the revisionist was trying to evade tax. Such an observation was made by the Hon’ble Allahabad High Court before Hon’ble Justice Piyush Agrawal.

Counsel for the revisionist submits that the revisionist is a Public Limited Company and engaged in the business of manufacturing and trading of tooth paste, tooth powder, tooth brush and cosmetics etc. The revisionist used to send its goods from the place of factory to its various branches situated all over the country. He further submits that 926 cartoons of colgate tooth powder were dispatched from Aurangabad Warehouse to its Kanpur Warehouse as a stock transfer along with which all requisite documents were accompanied.

The goods while coming to Kanpur passed through various States and before passing the State of Madhya Pradesh all documents were produced at the entry exit check-post and were duly endorsed. When the goods reached the State of Uttar Pradesh at Raksa check-post at Jhansi, the driver of the truck in

question handed over all the documents for filling up the trip-sheet (Behti) in accordance with Section 28-A of the Act, 1948 to the agent.

In the truck, some goods of M/s LML Limited, Kanpur was also there. Due to the inadvertent mistake of the broker/munshi/dalal at the check-post only details of goods of M/s LML Limited, Kanpur was filled.

On the said basis, the check post authorities detained the goods and issued the show cause notice. Immediately on being noticed all documents of the revisionist goods such as Invoice, Form 31, Transport G.R., Way Bill etc. were produced before passing of seizure / penalty order but the same was not accepted and the seizure order was passed estimating the value of goods of Rs. 10 lacs and demanded the security for the release of the goods of Rs. 3 lacs. The security amount was reduced to Rs. 1.5 lacs by order dated 10.02.2005.

Thereafter, the penalty proceedings were initiated against the revisionist under Section 15-A(1)(o) of the Act, 1948 and by order dated 4.8.2005, the

penalty of Rs. 4 lacs was imposed.

Against the said order, the revisionist preferred a first appeal and by order dated 21.06.2006, the same was affirmed by the impugned tribunal order.

No documents whatsoever were produced. Thus, the penalty imposed is completely justified and bonafide in law.

The Hon’ble High Court referred to the judgment given in the case of Sarvashri Ramesh Chand Santosh Kumar Vs. Commissioner of Trade Tax, U.P. Lucknow (2010 U.P.T.C.-1113) in which it was held that “t the penalty under Section 15-A(1)(o) of the Act, 1948 could not be imposed if the dealer not found to have contravened the provision of Section 28-A of the Act, 1948. The Court has further held that if the documents have produced along with the reply to the show-cause notice, there is no attempt to evade tax and imposed the penalty is bad.

In ITI Limited Vs. The Commissioner of Trade Tax, U.P. Lucknow 2010 UPTC 643 the Court has laid down that where Form – 31 was not initially produced but was subsequently furnished before the seizure the imposition of penalty under Section 15-A(1) (o) of the Act is not justified.

 A similar view was expressed in another decision of this Court reported in 2010 UPTC 503 M/s Interarch Building Produce Ltd. Vs.  The Commissioner of Trade Tax. In this case the Form – 31 was produced by assessee/dealer before passing seizure order and the Court held, in the circumstances, that intention to evade tax was not reflected so as to attract the penalty provision.

Additionally, the Hon’ble High Court observed that it is on record that the revisionist had duly submitted all the documents before the authorities along with a reply of the show-cause notice. Therefore, it cannot be said that the revisionist had any intention to evade payment of tax or has made any contravention of the Act.

Finally, the Hon’ble High Court allowed the revision and set aside the impugned order.

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