TRC/248/1999 of The State of A.P Vs M/s.Vizovolie Chakasang on 30 December 2011

1. (1964) 15 STC 6442.(1985) 60 STC 14 (DB)3.(1967) 20 STC 5204.(1970) 25 STC 575.(1978) 42 STC 145 (AP)6.(1989) 8 APSTJ 507.(1992) 14 APSTJ 1218.(1992) 14 APSTJ 2729.(1999) 29 APSTJ 23510.AIR 1992 SC 11511.(2001) 5 SCC 30 : AIR 2001 SC 228212.(2009) 17 SCC 38913.(1984) 60 STC 1414.(1967) 19 STC 50615.(1968) 22 STC 54016.(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.RAOAND

THE HON’BLE SRI JUSTICE SANJAY KUMAR

WRIT PETITION No.21428 of 2009AND

30.12.2011

Between:

M/s.Vizovolie Chakasang, Nagaland represented by itsProprietrix, Smt.Vizovolie Chakhasang, W/o.K.K.Kuki

And

... Petitioner

The Commercial Tax Officer (Int.), Vijayawada And another

...Respondent

THE HON’BLE SRI JUSTICE V.V.S.RAOAND

THE HON’BLE SRI JUSTICE SANJAY KUMAR

WRIT PETITION No.21428 of 2009AND

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 AndhraPradesh General Sales Tax Act, 1957 (the Act) are filed by theState against the common order dated 14.12.1998 passed by theSales Tax Appellate Tribunal (the Tribunal). M/s.VizovolieChakasang of Nagaland (hereafter, the consignor) is therespondent in TRC Nos.151 and 248 of 1999. M/s.Bikaner AssamRoad Lines, Vijayawada (hereafter, the transporter or BARL) is the respondent in TRC Nos.184 and 249 of 1999. By the impugnedcommon order, the Tribunal allowed the Tax Appeals filed by therespondents and set aside the common order passed by theAppellate Deputy Commissioner (CT), Kakinada as well as the twoconfiscation orders passed by the Commercial Tax Officer(Intelligence), Vijayawada and Commercial Tax Officer,Kasibugga. The writ petition is filed by consignor for direction topay 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 on07.5.1993. It was found transporting cloves allegedly sold andsent by the consignor to a purchaser at Delhi. Having foundinterpolations in the waybills, the Special ACTO issued notices, inresponse to which the transporter sent reply admitting that thetransit pass is not available. Therefore the stock was seized on21.5.1993. On the same date, the CTO (Intelligence), Vijayawadainspected godowns of the BARL and seized 2250 bags of cloves(each bag weighing 40 Kgs). The documents revealed that goodswere on transport from Dimapur to Delhi to M/s.Ram Niwas andCo., (hereafter, first consignee). They were consigned by a personwho 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 thefirst consignee. The General Power of Attorney (GPA) holder ofthe consignor filed objections on 08.6.1993.

A contention was raised that Section 28(6) of the Act has noapplication as the goods are in transit and passing through theState of Andhra Pradesh. Though notice was served on the firstconsignee, he did not file objections but sought fifteen days time

for filing a representation. The CTO, Vijayawada conductedenquiry during which he recorded statements of the owners of thelorries who transported the cloves to the godowns. An officer ofthe department went to Dimapur and conducted enquiry. It wasfound that the consignor was not available in the address given onthe sale bills issued by the Nagaland Forest Officials. The CTO,therefore, on a overall consideration of the matter came to theconclusion that the consignor without any registration under theNagaland Sales Tax Act had been clandestinely bringing the goodsto the State of Andhra Pradesh, storing them in the godowns ofBARL who is their agent and effecting the sales without payingsales tax. Accordingly he ordered to confiscate the entire quantityof cloves. The consignor and the transporter filed separateappeals before the Appellate Deputy Commissioner (CT), Guntur.(ii) The CTO, Kasibugga after receiving information from thesuperiors inspected three godowns of BARL situated atIchchapuram and seized 1894 bags of cloves vide proceedingsdated 25.9.1993. After making necessary enquiries, the CTOissued notice dated 09.6.1993 proposing confiscation of the stock. The GPA of the consignor appeared and objected. They claimedthat this consignment was being transported to M/s.BabulalOmprakash at Bombay (hereinafter, second consignee). Afterconducting enquiry, the CTO passed a confiscation order dated16.7.1993. The contentions and objections raised by consignor aswell as transporter were the same. Aggrieved consignor and thetransporter filed appeals before the Appellate DeputyCommissioner, Kakinada. (iii) The Commissioner of Commercial Taxes vide proceedingsdated 02.8.1993 transferred the two sets of appeals to theAppellate Deputy Commissioner, Kakinada. The Appellate Authority heard the Counsel for the consignor and the transporterand by order dated 10.9.1993 dismissed the appeals confirmingthe confiscation orders.

(iv) Against orders of the Appellate Deputy Commissioner, theconsignor filed Tax Appeal Nos.916 and 918 of 1993 before theTribunal. The transporter filed Tax Appeal Nos.915 and 917 of1993. The four appeals were heard together and by common orderwere allowed.

(v) The writ petition is filed by the consignor seeking a writ ofMandamus to give effect to the orders of the STAT and pay theamount of sale proceeds of Rs.70,07,000/- relating to 2250 bags ofcloves 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 taxappeals were pending before STAT, the Commercial TaxDepartment confiscated goods. The consignor would contend thatin the absence of any order under Section 33C of the Act, forwithholding the refund of the amount of sale proceeds, theDepartment has no authority in law to retain the amount. We maymention that the grant of relief in this case would depend on theresult in the tax revision cases.

Submissions

Special counsel for Commercial Taxes would submit thatSTAT was in error in holding that the confiscation of the goods isillegal on the ground that Section 28(6) would not be attracted tothe facts of the case. According to the counsel, the consignor is adealer for the purpose of the Act and if the dealer is not able toaccount for the goods kept in a godown or business premises, theauthorized officer is entitled to seize and confiscate the goods.Allegedly, the goods seized were in transit from Nagaland toBombay and New Delhi but the consignor as well as transporter

Arguments

did not prove that the goods were actually intended to passthrough Andhra Pradesh. The consignees never came and claimedthe goods seized and enquiries have shown that the saletransactions between the consignor and consignees are spuriousand doubtful. According to him, a person transporting the goods toanother State is bound to prove the goods actually moved out ofthe State and in the absence of any such proof, Section 28(6) isattracted whereunder goods can be confiscated.

The special counsel would contend that after conductingseizure operations, the authorities at Vijayawada and Kasibuggaissued notices to the consignor, transporter and consignees. Thisis not denied by any of them. The consignor also sentrepresentations on three occasions denying sales in the State ofAndhra Pradesh. The competent authority considered variouscontentions, made enquiries, recorded statements from theowners/drivers of the lorries and came to the conclusion that theconsignor and the transporter were engaged in clandestinebusiness of bringing cloves to the State and selling them withoutpayment of sales tax. The Tribunal was, therefore, in error inholding that the principles of natural justice are violated whilepassing confiscation order. He relied on State of A.P. v AbdulBakshi[[1]]andTransport Corporation of India v State of A.P.,[[2]].

The counsel for consignor and transporter made thefollowing submissions. The goods entered Andhra Pradesh undervalid entry pass. They are accompanied by documents to showthat the goods were being carried to the destination throughVijayawada. Therefore, Section 28(6) is not attracted nor thegoods in transit can be confiscated by the Department. Sufficientproof was produced to show that the consignor is clovesmahaldar; she paid the cost of the cloves to the Department of Forests in Nagaland; the lorries carrying the goods passed throughnumber of check posts; the transporter was carrying necessarydocuments to establish this and the Revenue failed to establish bycogent and satisfactory evidence that out of 45 lorries whichentered the State, only four lorries crossed the border and 41others remained in Andhra Pradesh. It is also urged that the CTOdid not give opportunity before passing the confiscation order tothe consigner and consignee. The counsel relied on DeputyCommissioner, Agriculture, Income and Sales Tax v TravancoreRubber and Tea Company[[3]], Deputy Commissioner v Midland RubberProducer Co., Ltd.,[[4]], Bandamidi Rajaiah v Board of Revenue,[5]Commercial Taxes, M/s.Seetharamanjaneya Rice Mills v State ofA.P.[[6]], Shaik Basha v State of A.P.,[[7]], State of A.P., v A.P.PaperMills[[8]], State of A.P., v Sri Laxmi Srinivasa Groundnut Traders[[9]],Ramaswamy Kalingaryar v Mathayan Padayachi[[10]], Hamida v[11][12]Mohd.Khaliland Tallam Gangadharan v U.Ismail Saheb.

Contentious Issues

The briefbackground facts and submissions give rise to twobroad issues for consideration. We would deal with these one afterthe other. Before doing so, we may repeat consignor’s version andDepartment’s version of chronology of events leading to passing ofconfiscation orders by two CTOs at Vijayawada and Kasibuggarespectively to put in place the controversy in a little more detailedprospective.

The consignor obtained cloves mahaldar in Kohima Divisionfrom Nagaland Forest Department for 1992-1993 after paying anamount of Rs.30,000/-. She then entered into a contract of salewith 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 about1,890 bags of cloves. This was in the months of March, April andMay, 1993. The goods were entrusted to BARL for transportationfrom Dimapur to New Delhi and Bombay. The nearest route fromDimapur to these two destinations is via Bihar. But, due to seriouslaw and order problems in that State, and also the incidents ofconsignor’s lorries being stopped in Bihar, BARL decided totransport them to the two destinations via Andhra Pradesh. In thefirst week of May, 1993, more than forty five lorries eitherbelonging to BARL or hired by them, transporting cloves passedthrough the Commercial Tax Department integrated check post,Purushothapuram, near Itchapuram in Srikakulam District. Fortyfour lorries passed through the State of Andhra Pradesh to theirrespective destinations to be delivered to the consignees atBombay and New Delhi. But the goods being transported by somelorries, due to logistic problems, were unloaded at Vijayawada andKasibugga. They were stocked and stored in the godowns of BARLto be transhipped into other lorries for being carried to Bombayand New Delhi. These stocks were not intended to be sold inAndhra Pradesh either by the consignor, or the transporter, or anydealer, but were to be carried to the consignees. According to thepetitioner, out of forty five lorries which entered Andhra Pradesh,forty four lorries passed through the State and only goods fromone lorry were kept in godowns at two places and that these goodswere duly accounted for by producing necessary permits, traveldocuments and transit passes.

The version of the Revenue is as follows. A lorry comingfrom Dimapur with 250 bags of cloves was checked by SpecialACTO 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. Thedriver made a statement that goods would be transferred toanother lorry for onward journey from the godowns of BARL. Theofficer entertained a suspicion because it was not necessary forthe lorries going from Dimapur to New Delhi or Bombay to touchVijayawada. He also found interpolations in the waybill with regardto the date thereon. Therefore, he detained the goods and thevehicle. This was followed by an order detaining fifty five bags, thevalue of which is equal to tax due on the total value of the goodsand three times of the amount of tax pending enquiry as security.The balance quantity of goods was released. In response to thenotice, BARL submitted representation stating that the goods werenot intended for sale in Andhra Pradesh but admitted that thetransit passes were not available. He explained that as transitpasses were not available at Itchapuram, the check post officialsallowed the vehicles after being satisfied with the documentsavailable with the lorry.

As a follow up, discreet enquiries were made, when it wassuspected that the first consignee had been indulging inclandestine trade by choosing BARL and storing the goods atVijayawada. On 21.05.1993 in the presence of the Manager ofBARL, the CTO (Intelligence) inspected two godowns atVijayawada and found thousand (1,000) bags of cloves in one and1,250 bags in another. As per the statement of the Manager, thebuyer for all nine lorries was first consignee and that they werecovered by transit passes issued by Purushothapuram checkpost. He also stated that the goods were received in godown ondifferent dates but were stocked together. The CTO then seizedthe goods under Section 28(6) of the Act pending enquiry. Oncoming to a prima facie conclusion that the consignees were getting goods from Dimapur and effecting sales in Andhra Pradeshto evade payment of all taxes to the Government, the JointCommissioner (Enforcement) enquired with New Delhi, CTDepartment and came to know that the consignee is a registereddealer under Delhi Sales Tax Act but the survey of the premisesrevealed that there was no stock nor any books of accounts, andthe dealer’s representative was not available at the address givenin the documents. The Department then deputed two officials toDimapur. On conducting enquiry, they reported that the consignoris not a registered dealer in Nagaland Sales Tax, that she is acloves mahaldar for 1992-1993 holding permit dated 24.11.1992and that they could not locate the consignor at the addressindicated in the sales tax documents.

Then, the CTO Vijayawada issued show cause notice toBARL, consignor and first consignee proposing confiscation underSection 28(6) of the Act. The grounds for proposed confiscation,pointed out in the show cause notice are the goods need not take acircuitous route via Andhra Pradesh to go from Dimapur to Delhi;the consignor is not a registered dealer in Nagaland and she isonly mahaldar; consignee was not found at the address furnishedand no business activities were found going on at its registeredoffice; and in spite of service of seizure order of BARL, theconsignee (owner of the goods) did not appear before the CTOwith proper explanation.

In response to the show cause notice, the consignor sent atelegram dated 03.06.1993 seeking release of the goods and herhusband as well as GPA holder filed a representation objecting toseizure and proposed confiscation inter alia on the ground thatSection 28(6) of the Act has no application. She also submittedthat transportation of the goods via Bihar and Uttar Pradesh State borders is fraught with a lot of difficulties i.e., attacks bydacoits/unknown persons on the way. The allegation of clandestinebusiness in the State of Andhra Pradesh was denied and thetransit passes under Section 29B allegedly obtained at the boadercheck post for eleven lorries were also offered as evidence. TheBranch Manager of BARL, Vijayawada also filed an affidavit on thesame lines. He denied allegation of tax evading clandestine sale inthe State. He further stated that the BARL has to deliver the goodsto the consignee on receipt of freight charges; the lorries wereengaged upto Vijayawada where goods were unloaded in thegodowns for the purpose of transshipment by engaging otherlorries; it is BARL which is required to engage lorries and payfreight charges noted in the LR; and that freight charges werealready paid from Nagaland to Vijayawada.

The consignor also sent yet another representation on02.06.1993 requesting for release of the goods under Rule 48 ofthe Rules offering to pay the applicable tax, she expressed thatfirst consignee is unlikely to pay the price of the goods in view ofthe seizure and that she would pay delivery charges after payingapplicable taxes. The first consignee sent a telegram seekingfifteen (15) days time for filing detailed representation. The CTOrecorded the statements of owners of five lorries, as well as thatof a clerk of BARL. All the owners stated that they brought clovesfrom Dimapur and unloaded at the godowns of BARL. One of them(Kurma Nageswara Rao) who was owner of lorry No.AIR 7387stated that he brought cloves from Dimapur on two occasions anddownloaded at Vijayawada. After considering all the material, theCTO Vijayawada passed the order on 30.06.1993 directingconfiscation 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, thegoods were consigned to both first and second consignees; thesecond one being M/s.Babulal Omprakash, Narsinath Road, NearAnand Bhavan, Bombay. On enquiry, it was found that the secondconsignee was not a registered dealer in the State of Maharashtra;the address furnished in the documents was false, and the secondconsignee was a bogus dealer. The second consignee or hisrepresentative did not appear claiming the goods or objecting theseizure and confiscation.

The confiscation proceedings before the authorities The two Commercial Tax Officers in two jurisdictions foundalmost similar irregularities in the transactions. As summarized bythe appellate Deputy Commissioner, Kakinada, they are asfollows. (i) The consignor was not found registered with the SalesTax Authorities in Nagaland nor any registration under CST Actwas taken; (ii) The consignor was not available at the addressgiven in the transportation document; (iii) the consignor paid onlyRs.30,000 for goods worth of nearly two crores of rupees; (iv) theconsignee at Delhi was found to be indulging in many irregularitiesincluding violation of the provisions of the Delhi Sales Tax Act; (v)The registration certificate of the Delhi dealer was alreadycancelled; (vi) The dealer in Bombay was found to be false and notpresent at the address given; (vii) The goods had taken acircuitous route that was three times longer than the nearestNational High Way between Nagaland and Delhi or Bombay; (viii)The consignor failed to produce any evidence to show that theywere capable of carrying business in several lakhs of rupees. Theconsignor also did not show any evidence that the transactionswere made through bank;

(ix) No evidence about the proper order, agreement for, sale, advance payment, freight arrangement, Bank Accounts were filedbefore the CTO, Vijayawada and the CTO, Kasibugga; and noevidence of insurance of the goods were produced before theauthorities; and (x) at the time of seizure the goods were foundstocked at the godowns of Bikaneer Assam Road Lines,Vijayawada and Itchapuram on the plea that they were waiting fortransshipment; and the stocked cloves were not supported byproper documents.

Both the original authorities also found that the goods keptin godowns at Ichapuram and Vijayawada were not supported byproper documents and the consignees did not even appear andclaim the goods. The authorities also considered various groundsurged on behalf of the consignee to which a reference is madesupra and came to the conclusion that there are sufficientindications to lead to the conclusion that the goods were beingbrought from Nagaland on regular basis for being sold in AndhraPradesh evading payment of tax under the Act.

Before the appellate authority, it was argued that the goodsin transit in the course of inter-State trade can be seized underSection 29B only at the check post for non-production of transitpass but when they were kept in the godown for onwardtransmission, they cannot be seized. This was repelled by theappellate authority, who observed that Section 28(6) enables theseizure of the goods at the place of a dealer if they are notaccounted for and that if the goods were intended fortransshipment, they would not have kept at the godowns for threedays before the seizure was effected by the officials. If BARLstocked the goods for further transshipment to the destinations,nothing prevented them to maintain proper records when hugestocks were stored in the godowns which were allegedly intended to go to Delhi and Bombay. The transporter did not produce anyrecord, any bank accounts or agreement of sale between theconsignor and consignees and no proper explanation was offeredby the Manager of the transporter at the godowns, which itself is aclear pointer to the clandestine activity by the consignor andtransporter. The information gathered during the enquiry to theeffect that the first consignee never received any supplies fromDimapur vide Statement dated 28.06.1993, the BARL engaginglorries of private owners only upto Vijayawada weighed with theappellate authority in rejecting the plea of the respondents.

The submission that Section 28(6) would be attracted onlywhen the person involved is a dealer was rejected observing that,when the transporter acted as a bailee in Andhra Pradesh, thegoods admittedly belonged to the consigner, she would becomedealer attracting the provisions of the Act. It was also contendedthat reasonable opportunity was denied to the consignor. Theseizure order dated 21.05.1993 which was served on BARL,consignor and consignees (first consignee refused to receive theseizure order), the statements issued by the consignor on07.06.1993 and 14.06.1993, the objections filed by the GPA of theconsignor influenced the appellate authority to reject thiscontention and to hold that the show cause notice of confiscationwas duly served. After confiscation order, the goods wereauctioned after giving notice to the advocate which was held to besufficient compliance of principles of natural justice. By orderdated 10.03.1993, two appeals filed by the consignor and the othertwo filed by BARL, were dismissed.

The Order of the STAT

After analyzing the factual background, the learned Tribunalframed 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 urgedby the appellants. We may mention that the arguments which areraised before the Tribunal were similar to those pleaded before theAppellate Deputy Commissioner. The Tribunal dealt with two mainaspects. The first one was whether the goods originated fromDimapur and reached Ichapuram and Vijayawada under validdocuments, allegedly intended to be transported to the firstconsignee at Delhi and the second consignee at Bombay. Thesecond aspect was whether the goods seized at two places by therespective competent authorities were actually and factuallyintended to be sold to the consignees or were intended for sale inAndhra Pradesh by evading tax under the Act.

After considering various documents, namely, thedocuments issued by forest officials of Dimapur, consignmentnotes, LRs and other travel documents, the learned Tribunalrecorded the finding as under.

The above discussion based on undisputed factsclearly disclose that the entire stock confiscated by orders ofthe Commercial Tax Officer (Int), Vijayawada andCommercial Tax Officer, Kasibugga were accompanied byauthenticated documents of permits issued by competentforest officials at Dimapur, consignment notes, LRs etc.,including transit passes except for one lorry load issued byPurushothapuram check post authorities. These stocks wereultimately confiscated by the authorities concerned. ... ... Weare now concerned with the validity of the orders ofconfiscation passed by the two authorities in question.

The learned Tribunal observed as follows.

There is no dispute that as per the valid permits issued byForest Officials of Dimapur, the entire stock was shown to betransported to New Delhi for delivery to the consignor M/s.Ramnivasand Company and the route from Dimapur to reach New Delhi wasshown in all the documents as proceeding through Vijayawada,Hyderabad and exit check post in Andhra Pradesh. Even in thetransit permits issued by Purushothapuram Check Post, the routewas shown as through Vijayawada. According to the Transporter atDimapur, he engaged lorries upto Vijayawada and according to hisarrangements those goods will be transshipped into other lorries for being carried from Vijayawada to New Delhi.

Further the Tribunal was of the opinion that the Departmentfailed to establish that as an agent of the consignor, thetransporter is doing business in Andhra Pradesh and therefore, thetwo ingredients of Section 28(6) are not satisfied in the cases. Thereasoning of the Tribunal is as under.

In the present batch of appeals, the goods weredetained and seized while in transit. They were not detainedand seized while they were in the godowns or places ofbusiness of the consignor or the dealer and offered for salelocally. Further, as clear from the above passage as well asdecisions of this Tribunal, Section 28(6) will be attracted only ifthe goods found in any office, establishment etc., of the dealerwere not found accounted for by the dealer in his accountsregisters and other documents maintained in the course of hisbusiness. The two ingredients of Section 28(6) are not at allsatisfied in the present batch of appeals. The first ingredient isthat the goods must be found in the place of business, shop orgodown etc., of the dealer. In the present case the consignoris to be treated as a dealer. The goods were admittedly foundwhile in transit in the godowns of the transporter and not thatof the consignor. Further the transported goods are supportedby valid documents. The second ground is that the goods didnot find place in the accounts maintained by the dealer. Thereis no question of the consignor maintaining the accounts inA.P., as she is not a dealer in A.P.

If one could sum up the findings of the learned Tribunalwhich prompted it to allow the appeals of the consignor andtransporter, they are as follows. (i) the goods were beingtransported from Dimapur to New Delhi and Bombay throughAndhra Pradesh. They were supported by valid permits, passesand travel documents. BARL engaged the lorries only uptoVijayawada and it was to make arrangements for further transportof the goods from Vijayawada to New Delhi and Bombay; (ii) theofficials of the Commercial Tax Department did not detain andseize the goods while they were in godowns or places of businessof the consignor or dealer and offered for local sale. The goods were detained and seized while in transit on the ground that theywere not accounted for in the books of accounts maintained by theconsignor; and (iii) in view of the findings 1 and 2, the twoingredients of Section 28(6) are not satisfied and thus theDepartment did not establish the allegation of clandestine sale ofgoods in Andhra Pradesh.

Before we take up the substantial issues, we may point outthat under Section 22(1) of the Act, the revision would lie to theHigh Court,“on the ground that the appellate Tribunal is eitherdecided erroneously or failed to decide, any question of law”.Indisputably, the revision lies only when it is shown that theTribunal decided a question of law erroneously or failed to decidesuch question of law. A revision would not lie on a question of fact.Hence, we are not inclined to interfere with the finding insofar asthe Tribunal holds that the consignor being cloves mahaldar ofNagaland transported the same from Dimapur to Vijayawada, thegoods were consigned to consignees at New Delhi and Bombay;and they were stocked at Itchapuram and Vijayawada godownsbelonging to BARL (transporter) allegedly for being transshipped todestinations. This takes care of the finding No.1 as wesummarized supra. Therefore, in spite of strenuous efforts by theSpecial Counsel for Income Tax even on the finding No.1, we arenot inclined to consider the same.

The next issue is whether the goods were intended to befurther transported from Vijayawada and Itchapuram to theirdestinations where the so called consignees had business ascontended by consignor/transporter or as contended by theDepartment they were brought to Andhra Pradesh for effectingclandestine sales in the State by evading payment of tax under theAct. These certainly throw up the questions of law regarding applicability of confiscation provision; burden of proof, nature ofevidence and power of department’s officials.

Applicability of Section 28(6) of the APGST Act Sections 28, 29, 29A, 29B, 30A, 31 and 32 form one group ofprovisions, which have to be read and understood as supplantedby the relevant provisions in Andhra Pradesh General Sales TaxRules, 1967 (APGST Rules). They deal with measures to preventtax evasion and the manner and method of dealing with taxevasion and attempted tax evasion. These provisions contemplatefour actions, namely, (i) search of the place of business andgodowns and seizure of accounts, registers and documents; (ii)seizure of goods not properly accounted for; (iii) confiscation ofgoods not satisfactorily accounted for; and (iv) conviction andsentence with fine. In addition to this, Section 30C authorises thedesignated jurisdictional officers to levy penalty if there is anydefault in payment of the tax, with which we are not concerned inthese revisions.

The provisions dealing with prevention of tax evasion haveconsiderable bearing on the controversy raised before this Court.Hence, it is necessary to briefly refer to them. Every personlicenced or registered, and every dealer who is required to getregistration under the Act shall keep and maintain true and correctaccount (Section 24). Section 27 requires the owner or otherperson in charge of the goods vehicle to carry with him a bill ofsale or delivery note, goods vehicle record or trip sheet and otherdocuments with all the particulars relating to the goods undertransport. These shall be submitted to the CTO having jurisdictionover the area in which the goods are delivered.

Section 28 is an important machinery provision dealing withsearch, seizure and confiscation of goods. This is intended toprevent tax evasion and acts as deterrent. The analysis of Section28 would show that any officer not below the rank of an AssistantCommercial Tax Officer authorized by the State Government inthis behalf, may require any dealer to produce before him theaccounts, registers and other documents, and to furnish anyinformation relating to his business. Sub-section (2) requires adealer to keep open for inspection all accounts, registers anddocuments maintained by a dealer in the course of his business,as also the goods in his possession, and his offices, shops,godowns, vessels or vehicles. Any officer empowered can inspectthem at all reasonable times. Sub-section (3) empowers that if anysuch officer who has reason to suspect that any dealer isattempting to evade the payment of any tax or other amount duefrom him under this Act, may, seize such accounts, registers orother documents of the dealer as he may consider necessary. Therecords so seized shall be retained by such officer only for so longas may be necessary for their examination and for any inquiry orproceedings under the Act. Sub-section (4) enables search of anyoffice, shop, godown, vessel, vehicle or any other place ofbusiness or any building or place where such officer has reason tobelieve that the dealer keeps or is keeping any goods, accounts,registers or other documents of his business, and sub-section (5)empowers to break open any box or receptacle where such things are kept. Here, we quote sub-section (6), which reads as follows:

(6) Any such officer shall have power to seize andconfiscate any goods which are found in any office, shop,godown, vehicle, vessel or any other place of business or anybuilding or place of the dealer, but not accounted for by thedealer in his accounts, registers and other documentsmaintained in the course of his business:

Provided that, before taking action for the confiscation of goods under this sub-section, the officer shall give theperson affected an opportunity of being heard and make aninquiry in the prescribed manner.

Explanation.- It shall be open to the State Governmentto authorize different classes of officers for the purpose oftaking action under sub-sections (1), (2) and (3).

In Transport Corporation of India Limited v State of A.P.[[13]], Hon’ble Sri Justice Jeevan Reddy considered the scope of Section28(6) as under.

The power under sub-section (6) of Section 28 is not apower to be exercised at the check post or the barrier. Thesaid power is to be exercised only with respect to, or in thecase of dealers alone, but not other persons. Every dealer isexpected to maintain accounts, registers and otherdocuments relating to the goods in his possession; sub-section (6) says that, if any goods are found in possession ofthe dealer which are not so accounted for, they may beseized and confiscated if it is found, after holding an enquiry,as prescribed by Rule 48, that “there is an evasion or anattempt to evade the tax thereon”. As rightly pointed out in thetwo earlier Bench decisions of this Court in Papanna v [14]Deputy Commercial Tax Officer, Guntakaland KalangiKrishna Murty & Company v Commercial Tax Officer,

Guntur[[15]], this provision is meant to operate as a deterrent,and as a penalty upon tax-evaders, and is conceived in theinterest of preventing the evasion of tax. The ides is to makethe evasion of tax higher costly and a losing proposition. It isthus a power incidental and ancillary to the substantive powerof taxation, conferred by entry 54.

Sections 29, 29A and 29B are intended to check evasion oftax. When the goods ostensibly in transit through State of AndhraPradesh to other destinations, are sold in Andhra Pradesh withoutbeing charged to the tax, these provisions empower thedesignated officers at the State borders or within a specified areaor while the goods are in movement, to stop and detain thevehicles, seize the goods and by reason of an amendment madewith effect from 30.04.2001 can even confiscate the goods whichare carried without any documents or covered by fictitious documents. After reading these provisions, we may paraphrasethe relevant aspects infra.

Section 29 has eight sub-sections which comprehensivelydeals with establishment of check posts to prevent tax evasion.The Government or Commissioner are empowered to direct settingup of check posts, erection of barriers at notified places. Thedriver of a vehicle carrying the goods has to stop the vehicle andthe officer in charge of the check post (hereafter, check postofficer) would examine the contents in the vehicle and inspect allthe records in relation to the goods carriage, which are inpossession of the driver or the person in charge of the vehicle witha view to ascertain when the goods are taxable and whether tax ispaid. If the tax is paid on the sale or purchase of the goods orproperly accounted for in the documents, he may release thevehicle with the goods carried. If the tax payable has not been paidon the sale or purchase of the goods or the goods carried are notaccounted for properly, the check post officer shall detain thegoods and direct the driver or any other person in-charge, to paythe tax or to furnish security for an amount not exceeding fivetimes the tax payable. If the tax is paid and security is furnished,the goods shall be released forthwith. If the tax is not paid orsecurity is not furnished, the officer shall detain so much of thegoods as are approximately equal in value to the amount ofdetermined tax and security directed to be furnished as long asmay reasonably be necessary. If the goods are to be detained formore than three days, the permission of the next higher authorityshall be obtained. If the goods are subject to speedy and naturaldecay, the goods can be sold in open auction. If any application ismade to prescribed authority, the sale proceeds can be paid to theperson entitled after deducting the expenses of sale and other incidental charges as well as the amount of sales tax and thepenalty due under the Act. If it is found that the goods carried arewithout paying tax under the Act or not properly accounted for, thecheck post officer shall collect the tax payable on the goods socarried and in addition levy penalty not exceeding five timesamount of tax payable on such goods (Ambica Lamp House vCTO[[16]]).

As it existed during 1993-1994, Section 29 did not contain aprovision for confiscation of the seized goods. By A.P.Act No.30 of2001, sub-section (6B) of Section 29 was inserted empowering thecheck post officer, “to seize and confiscate any goods where suchgoods are carried in the goods vehicle without any documents orcovered by fictitious documents”.

It may also be necessary to notice that the power to seizeand confiscate the goods is one of several powers to checkevasion of tax. It is intended to take all necessary steps for aproper assessment and collection of tax. It is a power to inspectany premises of dealer to seize or confiscate if the tax is not paidor the goods are not accounted for. Rule 48 of the Rules containsprocedure contemplated by the proviso to sub-section (6). Rule48(4) is important and reads as below.

48(4) Any such officer, after making such enquiry ashe deems fit and after giving the owner of the goods, if he isascertained, an opportunity of being heard, may confiscatethe whole or any part of the goods seized, if he is satisfied thatthere is evasion or an attempt to evade tax thereon in anymanner whatsoever. If the owner is not ascertained even afterthe enquiry, the officer shall order confiscation of the goods. Acopy of the order of confiscation shall be served on the ownerof the goods if he is ascertainable.

Thus, the confiscation of the goods would be necessitated ifthere is evasion of tax, if there is an attempt to evade the tax, andif the owner of the goods is not ascertainable. In case confiscation is not warranted, as per sub-rule (6), the officer who seized thegoods shall return the goods to the owner or any personauthorized by him if they had not been sold in public auction. If thegoods are already sold in public auction, the proceeds of the saleless expenses incurred on the sale, if any, shall be refunded to theowner of the goods or any person authorized by him. The sameprocedure would be followed even where the order of confiscationis set aside or modified on appeal or revision.

A reference may also be made to sub-rule (7) which provides foran opportunity to the owner of the goods to appear before theofficer who ordered confiscation, satisfy him with relevant recordsregarding the bonafides of the goods in question and regarding thereasons for his non-appearance. If the concerned officer issatisfied that there has been no evasion or attempt to evasion, hemay release the goods confiscated or refund the money realized inauction, as the case may be.

This takes us to the tax evasion preventive measures underthe Act with reference to the goods entering the State or ostensiblypassing through the State. Section 29A has two sub-sections.Sub-section (2) which was inserted by AP.Act No.30 of 2001 witheffect from 01.04.2001 empowers an officer to seize andconfiscate any goods found in office when such goods are notcovered or covered by fictitious documents. As this provision wasnot in existence during 1993-94, this has no application to thiscase. Section 29A(1) empowers an officer empowered by theGovernment to enter into and search office, shop, godown, vessel,receptacle, vehicle or any other place where the goods are kept bya carrier or bailee to whom goods are delivered for transmissionand before transmission, such carrier or bailee keeps them in aplace or places. During the search, the carrier or bailee or person

in charge of the goods shall produce bill of sale or delivery note orother prescribed documents regarding the goods and give thename and address and of the carrier or the bailee and theconsignee. Whether failure to do so would again attract Section28(6)? This is the issue, which we may have to deal with a littlewhile later.

Next, relevant provision, deals with transit pass to be obtained by the driver of the vehicle and the consequence of failure. Section 29B is relevant and reads as under.

29-B Transit of goods by road through the State and issue of transit pass:- Where a vehicle, carrying goods,coming from any place outside the State and bound for anyother place outside the State, pass through the State, thedriver or other person-in-charge of such vehicle shall obtain inthe prescribed manner a transit pass from the officer-in-charge of the first check post or barrier after his entry into theState and deliver it to the officer-in-charge of the last checkpost or barrier before his exit from the State, failing which itshall be presumed that the goods carried thereby havebeen sold within the State by the owner or person incharge of the vehicle and accordingly the tax is assessedand penalty, if any levied in accordance with theprovisions of this Act:

Provided that where the goods carried by such vehicleare, after their entry into the State, transported outside theState by any other vehicle or conveyance, the burden ofproving that the goods have actually moved out of theState shall be on the owner or person-in-charge of thevehicle.

Explanation:- If a vehicle is hired for transportation ofgoods by any person, the hirer of that vehicle shall, for thepurposes of this section, be deemed to be the owner of thevehicle.

(emphasis supplied)

Rule 46 of the Rules deals with the procedure to be followed at check posts and Rule 46A which was inserted byG.O.Ms.No.1165 dated 22.11.1993 stipulates the conditions to becomplied with by the driver or person in charge of the goodsvehicle to obtain transit pass under Section 29B. Rule 47 is aspecial provision which empowers any officer of the Department not below the rank of Assistant Commercial Tax Officer to stop thevehicle carrying the goods at any place other than check post andexempt the contents of the vehicle and inspect all the records. Ifon such inspection, it is found that any dealer is transportinggoods in a vehicle not covered by a way bill issued by the personwho signed the goods, the action contemplated under Rule 46 canbe taken which is similar to the action to be taken under Section29 at the check post when the driver or person in charge of thevehicle carrying the goods is not able to produce the documents,produce fictitious documents or fails to prove that the applicabletaxes have been paid.

The conspectus of Sections 28, 29, 29A and 29B and thecorresponding Rules, namely, Rules 46, 46A, 47 and 48 may besummed up as follows. These provisions indisputably are intendedto check tax evasion or attempted tax evasion. Such tax evasionor attempted tax evasion could occur in respect of salestransactions within the tax territory and/or at the check post oreven while the goods are in transmission to other tax territory. Thetax evasion in the tax territory may be at the instance of a dealer,an agent, a transporter involved in the sale of goods. The basicdifference between Sections 28 and 29 of the Act is that the formeris concerned with the power of seizure and confiscation of goodsat the premises of the dealer or at any other place of the dealercarrying the goods, whereas the latter is concerned withinspection of goods at check post while in transit. Indisputablyafter 01.04.2001 by reason of Section 29A(2) when the goods intransit are kept in godown, shop, office or vessel by the carrier orbailee, and they are not covered by the documents or covered byfictitious documents even those goods can be confiscated. Ofcourse, under Section 29(3)(b)(ii), at the check post, if the goods

are not properly accounted for for the purpose of payment of tax,the check post officer can demand the tax payable as well asfurnish security for an amount exceeding five times the taxpayable. As per Section 29(6) if the tax demanded is not paid orthe security is not furnished, the goods can be detained and canbe sold.

It is also indisputable that with effect from 01.04.2001 byreason of insertion of sub-section (6B) of Section 29, check postofficer is empowered to seize and confiscate the goods wheresuch goods are carried without any documents or covered byfictitious documents. Similarly, by reason of insertion of Section29A(2) by the said amendment, an officer inspecting the office,shop or godown can seize and confiscate the goods which arestored while in transit if such goods are not covered by the validdocuments. It is clear that before 01.04.2001 no power is vested inthe officer concerned to confiscate the goods either at the checkpost or the goods kept in a godown during the transit. Even inthese two situations, confiscation could be done only when thegoods are not covered by documents or covered by fictitiousdocuments. What would be the position when the goods stored ingodowns ostensibly intended to be transshipped to a consignee ina different State but in fact the goods are intended to be sold inState of Andhra Pradesh by evading payment of tax?

Whether Section 28(6) is not attracted?

Section 28(6) read with Rule 48(4) will come into operationand there is no bar in law to seize and confiscate the goods whichare kept in the godown ostensibly for the purpose of furthertransshipment if the owner is unascertainable. For readyreference, we may extract Section 28(6) and Rule 48(4) of the Act.

28(6) Any such officer shall have power to seize and confiscate any goods which are found in any office, shop,godown, vehicle, vessel or any other place of business or anybuilding or place of the dealer, but not accounted for by thedealer in his accounts, registers and other documentsmaintained in the course of his business:

Provided that before taking action for the confiscation ofgoods under this sub-section, the officer shall give the personaffected an opportunity of being heard and make an inquiry inthe prescribed manner :

Explanation:- It shall be open to the State Governmentto authorize different classes of officers for the purpose oftaking action under sub-sections (1), (2) and (3).

48(4) Any such officer, after making such enquiry as hedeems fit and after giving the owner of the goods, if he isascertained, an opportunity of being heard, may confiscatethe whole or any part of the goods seized, if he is satisfied thatthere is evasion or an attempt to evade tax thereon in anymanner whatsoever. If the owner is not ascertained even afterthe enquiry, the officer shall order confiscation of the goods. Acopy of the order of confiscation shall be served on the ownerof the goods if he is ascertainable.

The learned Tribunal came to the conclusion thatconfiscation cannot be ordered as Section 28(6) has noapplication. According to the Tribunal, Section 28(6) will beattracted only if the goods found in any office, establishment etc.,of the dealer were not found accounted for by the dealer in hisaccounts and other documents maintained in the course ofbusiness and that the revenue failed to establish that as an agentof the consignor, the transporter was doing business in AndhraPradesh. This conclusion in our considered view, suffers frommisdirection in law. The learned Tribunal ignored the relevantprovisions dealing with burden of proof; failed to appreciate thetrue scope of Section 28(6) and drew inferences from the factswhich are not warranted.

Misdirection is improper understanding of facts and law. Itis certainly a ground to fault a decision impugned before therevisional Court. If the Court or Tribunal addresses a wrong

Issues

question and not the right question, whether the jurisdiction isexercised lawfully or not, such approach would amount tomisdirection in law. It is certainly a grave error of law whichwarrants interference by the reviewing Courts, or the appellate[17]Court (APSRTC v Jayaram Reddy). We may also mention thatunder Section 22(1), a revision against the order of the Tribunalwould lie if the Tribunal decides a question of law erroneously.When the findings of facts are perverse or the issue addressed iswrong, it would be certainly an erroneous decision on question oflaw.

Whether consignor and transporter are ‘dealers’

The facts which are not disputed would show that theconsignor at the relevant time was not registered as a dealer inNagaland. She allegedly entered into an agreement – which did notsee the light any time, anywhere during the proceeding - to sell thegoods to the first consignee at Delhi and second consignee atBombay. She engaged BARL to transport the goods. Instead oftaking the nearest highway to Delhi and Bombay, the transporterschose a circuitous route three times longer than the normal route(see Revised Memorandum of Grounds). A large convoy of lorriesnumbering more than 45 – entered Andhra Pradesh atPurushothapuram border check post of the Department. All ofthem are not covered by transit passes as required under Section29B of the Act. A large quantity of goods was unloaded atKasibugga and was stored in the godowns of BARL. Some morelorries travelled all the way to Vijayawada at distance of about 400KMs and another consignment of large quantity of goods foundway to the godowns of BARL. At both the places, concerned officials seized the stock and after conducting enquiry confiscatedthe goods.

The fact that the goods were seized in the godowns situatedfar away from the check post stands proved. Section 29 and Rule46 empowering check post officer to detain and seize the goods and also sell the goods if necessary,however are not applicable. The two provisions which immediatelyspring into action are Section 29A and 29B. As already noticed,Section 29A deals with the power of the empowered officer toinspect goods delivered to a carrier or a bailee, which are kept inthe godown, vessel, receptacle, vehicle or any other place. Insuch a case it shall be the obligation of the carrier or bailee or theperson in-charge of the goods, to produce the records andaccounts as well as the documents supporting the claim that thegoods inspected were for the purpose of transmission.

If the goods are alleged to be in transit and only kept in thegodown for further transshipment, Section 29B has to be satisfied.This Section provides that any vehicle carrying the goods comingfrom any place outside the State shall obtain transit pass from thecheck post officer and deliver it to the check post officer at theexit/last check post while passing through the State of AndhraPradesh. The proviso to Section 29B casts burden of proving thatthe goods have actually moved out of the State shall be on theowner or person in charge of the vehicle. If the burden is notdischarged by producing proper documents, it shall be presumedthat the goods carried are sold in the State by the owner or theperson in charge of the vehicle and accordingly tax is assessedand penalty levied in accordance with the provisions of the Act.

Thus, as per Section 29B, if the owner or the person incharge of the goods, fails to discharge the burden of proving that the goods have actually moved out of the State, the law presumesthat the goods carried are sold in the State of Andhra Pradesh. Insuch an event, there cannot be any bar for seizing andconfiscating the goods under Section 28(6).

A submission is made by the counsel for the consignor and BARLthat Section 28(6) would be attracted only when the owner of thegoods is a dealer. According to them, the goods were stored in thegodowns of BARL (transporter) who are not registered in the Stateof Andhra Pradesh; the consignor or consignee are not registeredin the State, and therefore, Section 28(6) would not be attracted.We are afraid the submission is devoid of any merit.

Section 2(e) of the Act defines ‘dealer’. To the extent necessary, the same is quoted as below.

2(e) ‘dealer’ means any person who carries on thebusiness of buying, selling, supplying or distributing goods ordelivering goods on hire purchase or on any system ofpayment by instalments, or carries on or executes any workscontract instalments, or carries on or executes any workscontract involving supply or use of material directly orotherwise, whether for cash, or for deferred payment, or forcommission, remuneration or other valuable consideration,and includes-

(i) local authority, a company, a Hindu undivided familyor any society (including a cooperative society), club,firm or association which carries on such business;

(ii) a society (including a cooperative society), club, firmor association which buys goods from or sells,supplies or distributes goods to its members;

(iii) a casual trader, as hereinbefore defined; (iii-a) any person, who may, in the course of business ofrunning a restaurant or an eating house or a hotel (bywhatever name called), supply by way of or as part ofany service or in any other manner whatsoever, ofgoods, being food or any other article for humanconsumption or any drink (whether or not intoxicating);(iii-b) Any person, who may transfer the right to the use ofany goods for any purpose whatsoever (whether ornot for a specified period) in the course of business toany other person;

(iv) A commission agent, a broker, a del credere agent,an auctioneer or any other mercantile agent, bywhatever name called, who carries on the business of buying, selling, supplying or distributing goods onbehalf of any principal or principals.

Explanation I:- Every person who acts as an ‘agent of a non-resident dealer’, that is, as an agent on behalf of a dealerresiding outside the State, and buys, sells, supplies ordistributes goods in the State or acts on behalf of such dealeras-

(i) a mercantile agent as defined in the IndianSale of Goods Act, 1930 (Central Act III of1930); orSale of Goods Act, 1930 (Central Act III of1930); or(ii)an agent for handling goods or documents oftitle relating to goods; ortitle relating to goods; or

(iii) an agent for the collection or the payment of thesale price of goods or as a guarantor for suchcollection or payment and every local branch ofa firm or company situated outside the State,shall be deemed to be a dealer for the purposeof this Act.sale price of goods or as a guarantor for suchcollection or payment and every local branch ofa firm or company situated outside the State,shall be deemed to be a dealer for the purposeof this Act.

Whether a person be it a consignor or agent of consignor orconsignee, who is not registered under the Act, as a dealer canalso be subjected to the extreme action of confiscation of goodson which tax was not paid or an attempt was made to evadepayment of tax in the State of Andhra Pradesh? The answer mustnecessarily depend on construing Section 2(e) which defines“dealer”. As is usually done, the Legislature defined term “dealer”as “means” and also “including other aspects”. The main definitionpart defines dealer as to mean any person who carries on thebusiness of buying, selling, supplying or distributing goods ordelivering goods or executes a works contract. The Explanation Ispecifically deals with “agent of a non-resident dealer”, on behalfof the dealer residing outside the State, who buys, sells, suppliesand distributes goods in the State of Andhra Pradesh or acts onbehalf of such dealer residing outside the State.

Section 2 (m) defines “registered dealer” as to mean “thedealer registered under the Act”. The procedure for registration ofdealers is contained in Section 12 of the Act and Rule 28 of the Rules. A perusal of these provisions would show that a personwho carries on business in all or any of the goods or executesworks contracts is a dealer. He is under law required to getregistered under the Act irrespective of the quantum of histurnover (Section 12(2)). Thus, every registered dealer is certainlydealer within the meaning of Section 2(e), but that does not lead toan inference or conclusion that the person who is not registered asrequired under the relevant provisions ceases to be dealer if hecarries on business of buying, selling the goods or executes workscontracts or involved in any deemed sale either as the seller or aspurchaser, as the case may be.

The view as above is supported by decision of three JudgeBench of Supreme Court, in Abdul Bakshi, which is a caseinvolving the construction of Section 2(e) of the HyderabadGeneral Sales Tax Act, 1950, which is similar to the definition ofdealer in APGST Act. Therein the dealer was engaged in thebusiness of tanning and selling hides and skins. He disputed thelevy of tax on purchase turnover of tanning bark required in theirbusiness. Their contention that the bark was purchased forconsumption in the tannery not for sale found favour and the HighCourt held that if the person buys any commodity for consumptionin his business but not for sale, cannot be regarded as a dealer.This view was turned down by the Supreme Court observing asfollows.

A person to be a dealer must be engaged in thebusiness of buying or selling or supplying goods. Theexpression ‘business’ though extensively used is a word ofindefinite import. In taxing statutes it is used in the sense of anoccupation, or profession which occupies the time, attentionand labour of a person, normally with the object of makingprofit. To regard an activity as business there must be acourse of dealings, either actually continued or contemplatedto be continued with a profit motive, and not for sport orpleasure. But to be a dealer a person need not follow theactivity of buying, selling and supplying the same commodity.business of buying or selling or supplying goods. Theexpression ‘business’ though extensively used is a word ofindefinite import. In taxing statutes it is used in the sense of anoccupation, or profession which occupies the time, attentionand labour of a person, normally with the object of makingprofit. To regard an activity as business there must be acourse of dealings, either actually continued or contemplatedto be continued with a profit motive, and not for sport orpleasure. But to be a dealer a person need not follow theactivity of buying, selling and supplying the same commodity.

Mere buying for personal consumption, i.e., without a profitmotive, will not make a person dealer within the meaning ofthe Act, but a person who consumes a commodity bought byhim in the course of his trade, or use in manufacturing anothercommodity for sale, would be regarded as a dealer. TheLegislature has not made sale of the very article bought by aperson a condition for treating him as a dealer : the definitionmerely requires that the buying of the commodity mentionedin rule 5(2) must be in the course of business, i.e., must be forsale or use with a view to make profit out of the integratedactivity of buying and disposal. The commodity may itself beconverted into another stable commodity, or it may be usedas an ingredient or in aid of a manufacturing process leadingto the production of such salable commodity.

In Travancore Rubber Company, reiterating the view in AbdulBakshithat, “a person to be dealer must be engaged in the businessof buying, selling or supplying of goods”, the Supreme also held that,“to infer from a course of transactions that it is intended thereby to carryon business, ordinarily, the characteristics, volume, frequency,continuity and regularity indicating the intention to continue the activityof carrying of transactions must exceed: but no test is decisive of theintention to carry on the business”. All the circumstances justmentioned might lead to an inference that a person, who carries onbusiness of selling goods is dealer. It is beneficial to excerpt the following observations.

The expression ‘business’ though extensively used intaxing statutes, is a word of indefinite import. In taxingstatutes, it is used in the sense of an occupation, orprofession which occupies the time, attention and labour of aperson, normally with the object of making profit. To regard anactivity as business there must be a course of dealings, eitheractually continued or contemplated to be continued with aprofit motive, and not for sport or pleasure. Whether a personcarries on business in a particular commodity must dependupon the volume, frequency, continuity and regularity oftransactions of purchase and sale in a class of goods and thetransactions must ordinarily be entered into with a profitmotive. By the use of the expression ‘profit motive’ it is notintended that profit must in fact be earned. Nor does notexpression cover a mere desire to make some monetary gainout of a transaction or even a series of transactions. Itpredicates a motive which pervades the whole series oftransactions effected by the person in the course of his activity. In actual practice, the profit motive may be easilydiscernible in some transactions: in others it would have to beinferred from a review of the circumstances attendant uponthe transaction. ... ... ... To infer from a course of transactionsthat it is intended thereby to carry on business ordinarily thecharacteristics of volume, frequency, continuity and regularityindicating an intention to continue the activity of carrying onthe transactions must exist. But no test is decisive of theintention to carry on the business: in the light of all thecircumstances an inference that a person, desires to carry onthe business of selling goods may be raised.

Giving plain meaning of Section 2(e), it becomes clear thatirrespective of the fact that whether a person is a registered dealeror not as defined under Section 2(m) of the Act, any person whocarry on the business of buying and selling of goods shall bedealer as defined in Section 2(e) for the purpose of Section 28(6)of the Act. The charging Section i.e., Section 5 of the Actmandates that, “… every dealer shall pay a tax under this Act for eachyear on every rupee of his turnover of sales or purchases of goods ineach year irrespective of the quantum of his turnover at the rates of taxand at the points of levy specified in the Schedules”. The words“registered dealer” are very conspicuous by its absence in Section5 as well as Section 28(6) of the Act and we cannot read Section28(6) as empowering the officer of the Department to seize thegoods not accounted for only by the registered dealer. The word‘dealer’ used in Section 28(6) cannot be given such a narrowmeaning, especially when the said provision is intended to act as adeterrent measure to prevent evasion of tax by any personwhether registered dealer or dealer who carries on business ofbuying and selling of goods in the State of Andhra Pradesh.

Before the original/appellate authority as well as theTribunal, the consignor admitted that the provisions of Sections29, 29A and 29B of the Act apply to the seizure of stocks andcollection of revenue at the border check post. They, however,

contend that Section 28(6) would not have any application as thegoods were being transported from Dimapur to Delhi and Bombay.This argument is also pressed before this Bench. After giving dueconsideration, we cannot countenance the submission on the non-applicability of Section 28(6). The reasons for this conclusion areas follows. Indisputably, huge quantities of cloves were seizedfrom the transporter’s godowns at Vijayawada and Kasibugga/Ichapuram. Section 28(6) empowers the officer to seize andconfiscate the goods found in any office, shop, godown, vehicle ofthe dealer. Therefore, insofar as seizure is concerned, therecannot be any objection. Even at the check post, if the goodsbeing transported are not properly accounted for, the goods can bedetained under Section 29(3)(b)(ii) of the Act and Rule 46 of theRules. Further in case of absence of proof of movement of thegoods outside the State, the law presumes that the goods havebeen sold in the State. This is dealt with by Section 29B of the Actwhich is quoted under.

29-B Transit of goods by road through the Stateand issue of transit pass:- Where a vehicle, carrying goods,coming from any place outside the State and bound for anyother place outside the State, pass through the State, thedriver or other person-in-charge of such vehicle shall obtain inthe prescribed manner a transit pass from the officer-in-charge of the first check post or barrier after his entry into theState and deliver it to the officer-in-charge of the last checkpost or barrier before his exit from the State, failing which itshall be presumed that the goods carried thereby havebeen sold within the State by the owner or person-in-charge of the vehicle and accordingly the tax is assessedand penalty, if any levied in accordance with theprovisions of this Act:

Provided that where the goods carried by such vehicleare, after their entry into the State, transported outside theState by any other vehicle or conveyance, the burden ofproving that the goods have actually moved out of theState shall be on the owner or person-in-charge of thevehicle.

Explanation:- If a vehicle is hired for transportation ofgoods by any person, the hirer of that vehicle shall, for the purposes of this section, be deemed to be the owner of thevehicle.

(emphasis supplied)

The driver or any person in charge of the vehicle carryinggoods coming from any place outside the State shall have toobtain a transit pass from the check post officer. The driver or theperson in charge of the vehicle shall have to carry the transit passwhile passing through the State and shall have to deliver it to thecheck post officer at the exit check post i.e., the last check post ofbarrier before exit from the State of Andhra Pradesh. If transitpass is not obtained or the transit pass is not delivered at the exitcheck post, the legal consequence is that it shall be presumed thatthe goods carried by the vehicle have been sold within the Stateby the owner or the person in charge of the vehicle. In such adeemed sale, the goods are exigible to tax and penalty can alwaysbe levied in accordance with the provisions of the Act. In everycase of non-delivery of transit pass, at exit check post or whilepassing through the State of Andhra Pradesh, the burden ofproving that the goods actually moved out of the State shall be onthe owner or person in charge of the vehicle. In such a situation, itis rather difficult to accept the plea that Section 28(6) of the Acthas no application. Even where the goods seized from the godownare allegedly in the process of inter-State movement to the placeof consignee, if the proof is not offered as required under provisoto Section 29B, the officer can always seize and confiscate thegoods allegedly in transit under Section 28(6) of the Act.Therefore, we are convinced that the Tribunal decided the questionof law erroneously by misdirecting itself.

Burden of Proof

Section 7A of the Act casts the burden of proving that any sale or purchase effected by the dealer is not liable to any tax orliable to be taxed at the reduced rate on the dealer. This is ageneral rule of burden of proof insofar as the levy of tax on salesand purchase of goods as well as exemptions claimed underSection 9 of the Act. Section 29B of the Act is a special rule ofburden of proof which requires the owner or person in charge ofthe vehicle carrying goods coming from outside the State and passthrough the State, to show that the goods have actually moved outof the State. In case of failure to do so, the law presumes that thegoods carried by vehicle from outside the States have been sold inthe State and are exigible to tax and penalty. When the languageof the provision is plain, it is not permissible to give any differentmeaning. The Tribunal, however, ignored the presumption underthe proviso to Section 29B and cancelled the confiscation orderobserving that, “the Department of the Commercial Taxes failed toprove that the goods seized from the godowns of the BARL did notcross the borders of Andhra Pradesh after reaching Vijayawada”. TheTribunal was certainly in error when it considered the law ofburden of proof and went wrong in observing that the Revenuefailed to establish by cogent and satisfactory evidence, that thegoods have not crossed the borders of Andhra Pradesh. Havingnoticed that even according to the consignor and transporter,Sections 29, 29A and 29B of the Act would be attracted to thefacts of the case, casting burden of proof on the department wouldamount to erroneous decision on a question of law and as held bythis Court in Jayaram Reddyis misdirection in law, warrantinginterference.

Validity of Confiscation Orders

The confiscation order was passed by the jurisdictionalCTOs drawing inferences and applying the presumption of sale in

the State from the following undisputed facts. The consignor is notregistered under the Nagaland Sales Tax – the consignor was notavailable at the address given in the travel documents; thetransport vehicles took a circuitous route avoiding nearest route tothe place of consignees; the first consignee was indulging indoubtful activities without carrying any business from theregistered premises at Delhi; the second consignee was not evenregistered with the Maharashtra Sales Tax authorities and he hadgiven a wrong address. Examining these aspects with reference tothe material and records collected and gathered by theDepartment, the learned Tribunal sought to justify the lacunapointed out by the confiscating authorities in invalidating theconfiscation proceedings.

Relying on Seetharamanjaneya Rice Mills, Shaik Basha andA.P.Paper Mills as well as the two decisions of the Supreme Court,dealing with the scope of Section 100 of Code of Civil Procedure,1908, the counsel for the consignor and transporter vehementlyurge that these revisions do not involve any question of law. Thelegal position is not disputed nor can be denied that a revisionunder Section 22(1) of the Act would lie to the High Court onlywhen a question of law is decided erroneously by the Tribunal orfailed to decide such question of law. This case, however, clearlyraised the questions of law. If the Tribunal misdirected itself inaddressing a wrong question of law either with reference to thecontentious factual issues or debatable and arguable legal issue, itwould certainly give rise to a question of law. If the appreciation offacts is perverse or the inference drawn from the evidence onrecord is a surmise than a conclusion after objective considerationof the matter, it would certainly a case warranting the exercise ofrevisional jurisdiction by the High Court.

There is no dispute that the consignor and secondconsignee were not even registered at the relevant time. In ourconsidered opinion, even if the consignor at Dimapur got herselfregistered under the Nagaland Sales Tax Act with effect from01.04.1993 having regard to the admitted fact that she entered intothe alleged sale contracts with the consignees in March itselfwould not lend any support to the case of the consignee. There isno dispute that the first consignee gave a statement to Delhi SalesTax officials admitting that he never received any supplies fromDimapur. This was thrown away by the Tribunal observing that thedetails as to which authority obtained the statement are notcoming forth and that it does not contain a signature. Evenaccording to the Tribunal, the fax message sent by the DeputyCommissioner (Enforcement) contained english translation of theStatement given by the first consignee, one cannot doubt thesame. Further, burden of proof was shifted to department which isnot proper. It may be reiterated that when the goods are in transitfrom any other State, the burden of proving that those goods werenot sold in Andhra Pradesh but actually moved out of tax territoryis always on the person – be it owner or person in charge of thevehicle carrying the goods or else the presumption would springinto action. It shall have to be concluded that the goods brought toAndhra Pradesh ostensibly for the purpose of moving out wereactually sold within the State without payment of tax. When thecredibility of the consignor and the consignees is doubtful andwhen no written contract of sale is produced with regard to thepayment, delivery etc., and based on the statement made by theconsignor and the transporter, the presumption under Section 29Bdoes not get dislodged.

The finding that there was no proper notice or opportunity

The finding that there was no proper notice or opportunity prior to seizure and confiscation are belied by the very fact thatduring the seizure, the manager or concerned person employed byBARL was present, notices were issued, consignor sent threerepresentations and all were considered by the confiscatingauthorities. It is very curious that during the proceedings eitherbefore the CTO, Vijayawada or CTO, Kasibugga, consigneesnever appeared claiming the goods. The Tribunal in our consideredopinion also lost sight of the provisions of Sections 29A, 29B andRules 46, 47 and 48 and failed to see that admittedly thetransporter did not produce all the duplicate copies of the transitpasses when all the 45 lorries entered via the border check post atKasibugga passed through Vijayawada and allegedly moved out ofAndhra Pradesh.

According to the consignor, she agreed to sell hugequantities of cloves to the consignees at New Delhi and Bombayfor the purpose of transporting the goods from Dimapur to thosedestinations she entrusted the goods to BARL. The authorities inNagaland, Delhi and Maharashtra found that the consignees areeither not registered, and even if they are registered dealers, theywere not carrying on any business. This itself would lead to asuspicion about the transaction. Secondly, as per Section 20 ofthe Sale of Goods Act in the absence of any contract to thecontrary, the property in the goods will pass to the buyer themoment when the goods are put in motion to a transporter to aplace where the consignee desires the goods to be delivered.Curiously, when the proceedings for seizure and confiscation weregoing on and the related enquiries were being conducted by theauthorities in the three States, the consignees did not even turn uponce. It is always the consignor and/or the transporter who wereappearing before the authorities and defending the cases against confiscation of the goods.

When statedly the consignor entered into contract with theconsignees, and in law the property in goods passed to the latter,it is curious that consignees did not even file any application forrelease of the goods. As noticed supra, when the owner of thegoods seized at the check post or the owner of the goods seizedin godown, ostensibly waiting to be transported to other State isnot known, it is always open to the authorities under the Act toinitiate appropriate procedure. If the owner (if he is available), thedriver or the person in charge of the vehicle carrying goods is notable to prove that the goods statedly in transit through the State ofAndhra Pradesh to another State actually passed out of the State,it has to be presumed that they were sold in the State of AndhraPradesh. This is a strong militating circumstance against therespondents. No explanation is forthcoming from any of them as towhy the consignor sold the goods even without obtainingregistration to a dealer in Maharashtra who did not have anyregistration or to dealer in New Delhi who was not actuallyengaged in any business of cloves. It is also not properlyexplained by the respondents as to why the circuitous and longerroute is chosen when the goods could have been transported bytaking a shorter route saving a lot of cost to the consignor as wellas consignees.

Even the conduct of the consignor militates against her.Initially having taken a plea that the goods were sold to theconsignees at Delhi and Bombay, subsequently she came forwardoffering to pay the tax component on the goods seized. Therespondent thus failed to discharge the burden which lies on themunder Section 7A and the proviso to Section 29B in which event itshall be presumed that the goods have been sold in the State which attracts Section 28(6) when there is a tax evasion. In ourconsidered opinion, the Tribunal ignored the relevant provisionsregarding the burden of proof and proceeded in a manner which isnot appropriate to the facts and circumstances of the case. TheTribunal also decided the questions of law erroneously requiringinterference in these revisions.

Conclusion

In the result, for the above reasons, these revisions mustsucceed. Accordingly the tax revision cases are allowed and theorder of the Sales Tax Appellate Tribunal is set aside confirmingthe orders of the confiscation passed by the CTO (Intelligence),Vijayawada and Kasibugga. The writ petition is dismissed. Thereshall be no order as to costs.

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(V.V.S. RAO, J)

30.12.2011Pln

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(SANJAY KUMAR, J)

Note: LR copy be marked. (By order) pln

[2](1985) 60 STC 14 (DB)(1985) 60 STC 14 (DB)

[5](1978) 42 STC 145 (AP)(1978) 42 STC 145 (AP)

[6](1989) 8 APSTJ 50(1989) 8 APSTJ 50

[7](1992) 14 APSTJ 121(1992) 14 APSTJ 121

[8](1992) 14 APSTJ 272(1992) 14 APSTJ 272

[9](1999) 29 APSTJ 235(1999) 29 APSTJ 235

[10]AIR 1992 SC 115AIR 1992 SC 115

[11](2001) 5 SCC 30 : AIR 2001 SC 2282(2001) 5 SCC 30 : AIR 2001 SC 2282

[12](2009) 17 SCC 389(2009) 17 SCC 389

[16](2005) 242 STC 551 (AP) : 2005 (2) ALD 704 : 2005 (3) ALT 190(2005) 242 STC 551 (AP) : 2005 (2) ALD 704 : 2005 (3) ALT 190

[17](2009) 2 SCC 681(2009) 2 SCC 681