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CASE NO.: Appeal (civil)  5081 of 2005

PETITIONER: M/s Bharat & Company                     

RESPONDENT: Trade Tax Officer & Anr.                      

DATE OF JUDGMENT: 17/08/2005

BENCH: Ruma Pal & Dr. AR Lakshmanan

JUDGMENT: J U D G M E N T (Arising out of SLP( c)  No. 3387 of 2004)

RUMA PAL,J.

       Leave granted.

       This 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.   The appellant carries on business in Mumbai.  It sent the  gambier  to one M/s Kamakhya Like (sic) Industries, Varanasi.   A 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.   At the 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 Officer\026II (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.          Although no copy of the show cause notice was served  either on the purchaser or the appellant as the selling dealer.  The appellant submitted an application for extension of time to  reply to the show cause notice on 2nd September 1999.   According to the respondents, the time to file the reply was  extended till 10th September 1999.  As there was no reply to the

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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: (i)     the application u/s 13A(6) is not  maintainable as the person is not the  owner of the goods.

(ii)    The goods were imported into the  State without proper and genuine  documents and also with the  intention to evade tax.

(iii)   The person who signed the  application and had shown himself as  partner in the firm M/s Bharat & Co.  Mumbai has been actually found not  a partner in the records of Mumbai  sales tax records.

          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.          In the 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. On 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

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Government revenue and to evade due payment of tax likely to  be leviable on the sale of the goods in question".   The 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.   There 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 following effect: "You are informed that your goods of 400  bags of Gambier have been taken out of the  Godown .  Kindly come and take and goods.   On 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).

       At the 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.   It is, therefore, undisputed that at least physical delivery of the  goods was not made.          On 4th 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 proceedings.         It was 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/- .  The sale was approved by Assistant Commissioner (Trade Tax)  on 15th February  2003.  The amount of sale proceeds is being  held by the respondents.         Learned counsel for the appellant has submitted that in

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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.          The 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 firm.  According 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.         The 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 question.     The appellant filed an application for review of the judgment  which was dismissed by the High Court.                Initially 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.         In our 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 same parties.         Besides, 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

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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.         The 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.          It is 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.         We 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.  If the 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 costs.