Check post put up to protect VAT revenue

1. Introduction

Sale of goods, whether inter-state or intra-state, includes movement of goods from one place to another. During such transportation of goods, State Government can intercept the vehicles for carrying out the inspection of the goods in order to ensure that tax has not been evaded and for the purpose of the interception, they are authorized to set up check post and barriers.

In this article, I am highlighting the provisions related to check post and barriers in the state of Haryana.

2. Checking of goods in transit:

2.1 Powers of State Government to establish check-post and barriers.

State Government may, by notification in the Official Gazette, direct

- the establishment of a check-post; or

- the erection of a barrier; or

- both,

At such place or places as may be notified by it.

2.2 Inspection of Goods in transit.

While transporting the goods from one place to another, person in charge of the goods is required to carry with him the following documents:-

- The goods carrier record, a trip sheet or log book;

- Sale invoice or tax invoice or delivery note; and

- A declaration in Form VAT-D3 duly filled in and signed by the prescribed persons.

2.3 Declaration in Form VAT-D3:

In order to dispatch goods, dealer is required to give declaration. Such declaration will be given as follows:-

- In Form VAT-D3 in case of goods are moved from any place in the State to any other place in or outside the State (Outward); and

- In VAT-D3 for bringing or receiving goods from outside the State to any place in the State (Inward).

2.3.1 Procedural aspects of Form VAT-D3 are as follows:

(i) The declaration forms shall be printed under the authority of the State Government and shall be machine numbered or bear a printed serial number. Dealers can avail the form from issuing agencies including the offices of the Excise and Taxation Department, Haryana. Moreover, its price will be fixed by the State Government.

(ii) The Commissioner is authorized to issue instructions on timely basis in respect of issue of blank declaration forms to the dealers, their use, return after use, verification and disposal, surrender of unused forms to the assessing authorities and maintenance of record in relation thereto. All the parties involved shall be bound by such instructions.

(iii) The State Government may issue notification declaring certain declaration form invalid. In such case, it will become compulsory for the dealers and issuing agencies to get them substituted by the new forms.

(iv) In case a declaration bears a period of validity, then such form can be used either before or after such period of validity if any date filled in the original foil of such declaration relating to its use falls between the periods of validity.

(v) Declaration shall be in 3 parts. Each part shall be filled in and signed by the consignor, the consignee and the transporter.

(vi) Original declaration is required to be carried along in case of movement of goods valued at Rs. 10,000/- or more in a single transaction. The duplicate part of the used declaration in Form VAT-D3 (Outward) and the original of the used declaration in Form VAT-D3 (Inward) shall be furnished by the user-dealer to the assessing authority along with the tax returns filed by him unless other arrangement for receipt of the used declarations is made in the instructions.

(vii) Declaration in Form VAT-D3 (Outward) shall be filled in by hand.

(viii) Failure on the part of dealer to furnish the account of declaration forms obtained by him or to return the used declaration forms or to surrender the blank declaration forms, then assessing authority is authorized to assess such dealer to the best of its judgment. Such authority may presume that all the declaration forms as aforesaid have been used by him for purchase and sale of goods.

(ix) Dealer is solely responsible for safe custody and use of declaration forms issued to him. In any such form is lost, dealer is required to report the loss to the assessing authority and shall furnish an indemnity bond in Form VAT-B3 to the assessing authority for such sum as the said authority may determine. Dealer can file one such indemnity bond in case more than one declaration forms are lost.

3.  What happens at Check post?

- The owner or person in charge of the goods is required to stop at every check-post or barrier if required by officer.

- The driver has to stop the vehicle for the time period required by officer.

- Person in charge is required to produce the declaration in Form VAT-D3.

However, in case of interstate transportation of goods driver is required to give declaration in Form VAT-D4 (in duplicate), to the officer in charge of the check-post and obtain from such officer a copy thereof duly verified, and shall deliver within prescribed time such copy to the officer in charge of the check-post at the point of his exit from the State.

- Officer in charge of the check-post or barrier is authorized to break open the package or packages for inspecting goods.

- Officer in charge of the check-post or barrier is also authorized to check all the records of the goods, which are in possession of driver.

- If the Officer in charge of the check-post or barrier or other specified officer has reasons to suspect that

- the goods under transport are not covered by proper and genuine documents; or

- the person transporting the goods is attempting to evade payment of tax

Then such officer may order unloading and detention of goods only after recording the reasons in writing and giving the opportunity of being heard.

Goods detained: In case goods are detained due to some reasons by check post officer, such officer shall be required to issue receipt to the driver stating that the description and quantity of the goods detained and their value. Value of such goods may be ascertained from the bills (section 31(2)) or worked out keeping in view the prevailing market rates in respect of such goods.

Goods in safe Custody: It becomes the responsibility of the officer detaining the goods to ensure the safe custody of the goods. The person to whom  goods are handed over for safe custody is not authorized to hand over them to anyone except with the written permission of the officer detaining the goods.

Goods released: once the goods are detained by officer in charge, they can be released only after the driver furnishes the security, or if the owner of the goods is a registered dealer, furnishes a personal bond. Security can be in the following forms:

(a) cash deposit in the Government Treasury.

(b) post office saving bank account, the account being pledged to the Commissioner or any officer authorized by him in writing in this behalf;

(c) bank guarantee from a Scheduled Bank agreeing to pay to the State Government on demand the amount of security;

(d) personal bond with solvent surety /sureties for the amount of security to the satisfaction of the authority before whom it is required to be furnished under these rules, which shall be in Form VAT-B2 on a non-judicial; paper of the appropriate value; and

(e) such saving certificates or bonds or fixed deposit receipts as are issued by the Government of India, the State Government, or Reserve Bank of India or Scheduled Bank, from time to time, to be pledged to the Commissioner or any other officer authorised by him on this behalf.

The Officer accepting the security or surety bond shall pass an order in writing while releasing the goods, after giving cash receipt in Form VAT-G4 where security is furnished by deposit of cash or an acknowledgement where security is furnished in any other form.

Statement to be recorded: The officer detaining the goods is entrusted the responsibility of recording the statement given by the owner of the goods or his representative.

- If the tax authorities conclude that there has been an attempt to evade tax, penalty shall be imposed on the owner of the goods. However, such penalty shall be imposed on the driver or person in charge of the goods in case such person does not disclose the identity of the owner of the goods. Such penalty shall be computed by multiplying the value of the goods with three times the rate of tax applicable on their sale subject to a maximum of 30% of the value of the goods. Along with the penalty advance tax is also required to be deposited which shall be computed by multiplying the value of the goods with the rate of tax applicable on their sale.

- However, if the dealer tries to evade the tax by under pricing the goods, penalty shall be computed by multiplying the difference between their market price and the value shown in the documents with three times the rate of tax applicable on their sale.

- Unless the reasonable opportunity of being heard is given to owner of goods or his representative or person in charge of the goods, as the case may be, neither penalty will be imposed nor dealer will forced to deposit the advance tax.

- In case of failure of payment of penalty by the owner of the goods within prescribed time limit, the goods detained shall be liable to be sold by public auction, after following the procedure as laid down below -

(a) The Authorized Officer is required to put up a list of the goods detained and intended for sale on the notice board of his office. He is also required to specify the day, date, venue and time where such detained goods are to be sold. Such list shall also be displayed in the office of officer in charge. However, Notice is required to be given at least ten days before the auction.

(b) Intending bidders shall deposit as earnest money a sum equal to ten per cent of estimated value of goods.

(c) On the day of auction, the goods shall be put up in one or more lots and shall be sold to highest bidder subject to confirmation of the sale by the Officer in charge of the district.

(d) Successful bidder shall be allowed to take away the goods along with him only after making the whole payment. However, on failure of making such payment, earnest money received from such bidder shall be forfeited but the earnest money of all the unsuccessful bidders shall be returned. The goods shall be resold by auction in the same manner as provided in clauses (a), (b) and (c).

(e) In case of reversal of orders goods shall be released, if they have not been sold and in case such goods have been sold before such reversal of order then the proceeds thereof shall be paid to the owner of the goods.
 

Note: Goods of perishable nature shall be sold on immediate basis to the highest of at least three offerors dealing in such goods making the offer on invitation.

Right & Duties: No driver or person in charge of a goods carrier or any person in charge of a place of loading or unloading of goods shall accept any consignment of goods for transport or give delivery of any consignment of such goods, other than personal luggage or goods for personal consumption;

No dealer or any person including a carrier of goods acting on behalf of a dealer, shall take delivery of, or transport from any station of transport of goods, bus stand or any other station or place, of loading or unloading of goods, airport or any other place, whether of similar nature or otherwise, any consignment of goods referred to above.

Record to be maintained by the carrier –

(i) Every carrier of goods shall be required to maintain true record of goods transported, delivered, or received for transport in the form of Transport Receipt, Forwarding Note, Waybill, Dispatch Register and Delivery Register, which shall be in Forms VAT-T2, VAT-T3, VAT-T4, VAT-T5 and VAT-T6 respectively. It is the responsibility of such dealer only to preserve such records for a period of five years.

(ii) Transport Receipts and Waybills shall be serially numbered in consecutive order. The last serial number shall go up to 1,00,000 where after a fresh series of Transport Receipt and Way Bill shall start, intimation regarding which shall be given by the transporter to the officer in charge of the district before bringing the fresh series in use. The Dispatch Register and the Delivery Register before use shall be got authenticated from the officer in charge of the district or Excise and Taxation Officer of Assistant Excise and Taxation Officer in whose jurisdiction the place of business of the transporter is situated.

(iii) No carrier of goods or agent of a Transport Company or Booking Agency shall transport, accept for booking or release any consignment of goods, the sale or purchase of which is taxable under the Act, unless –

- the consignment is covered by a copy of purchase invoice or sale bill or delivery note, as the case may be;

- the particulars regarding consignment intended to be booked are furnished in the forwarding notes in Form VAT-T2 by the consignor;

- the Transport Receipt bears stamped endorsement from the consignee indicating his full particulars and Registration Certificate number, if any;

- the person taking delivery of goods or delivering the goods for booking furnishes a letter of authority from the consignee or consignor containing his specimen signatures duly attested; and

- the transport receipt or the forwarding note in respect of consignment of goods brought from a place outside the State or intended to be booked for a place outside the State by a dealer not registered under the Act is countersigned by the Excise and Taxation Officer of the district or any other officer authorised by him.

(iv) It is compulsory for the driver or the person in charge of the vehicle to carry with him a copy of waybill in Form VAT-T4 and a copy of the Transport Receipt in respect of each consignment of goods while transporting the goods.

(v) Record of delivery of consignment is required to be made in a register in Form VAT-T6 in case delivery of consignment is given to the consignee without the aid of Transport Company. However it is the responsibility of driver to maintain such record.

4. Case Laws

4.1 Furnishing false or forged documents by driver/person in charge of vehicle at the time of inspection may amount to imposition of penalty:

At the time of interception of vehicle carrying goods from one state to another, the driver/person in charge of vehicle is require to furnish the requisite documents providing the details of the goods. However, penalty can be imposed in following two situations:-

(a) If the documents found to be incomplete or forged,

(b) If no documents are found with driver.

Such submission of false or forged documents or declaration at the check-post or even thereafter can safely be presumed to have been motivated by the desire to mislead the authorities. Similarly, where, despite opportunity having been granted if the requisite documents are not produced, even though the same should exist, would clearly prove the guilty intent. Once the intentions of tax evasion are established, after giving a hearing and complying with the principles of natural justice, there is no discretion not to levy or levy lesser amount of penalty.

If by mistake some of the documents are not readily available at the time of checking, principles of natural justice may require some opportunity being given to produce the same. The Legislature thought it fit to specify a fixed rate of penalty and not give any discretion in lowering the rate of penalty.

State Of Rajasthan V. D.P. Metals (2001) 124 STC 611 (SC)

4.2 Vehicles carrying goods cannot be detained at check post if Declaration form is not found with driver because of failure of department to make available the printed forms.

Since the relevant declaration forms have not been printed by the Sales Tax Department and made available to the dealers, the vehicles and persons transporting goods cannot have the obligation of carrying those forms with the vehicle and therefore the vehicles not carrying the forms cannot be detained at the check post.

Ramesh Chawla V. Commissioner Of Sales Tax (2003) 132 STC 1 (SC)

4.3 Powers of the check post officer includes not only to verify the documents, but also to ensure that there is no evasion of tax.

Section 29 of the Kerala General Sales Tax Act, 1963 provides that power of the check post officer is not limited. He has powers to satisfy himself that there is no evasion of tax by taking the relevant steps.

Shahnas Trading Co And Ors. V. State Of Kerala (2002) 127 STC 1 (SC)

4.4 Check post officer has the power to issue notice as well as impose penalty in case specified documents are not found with the transporter.

Transporter carrying the goods, notified by the department, is required to carry necessary declarations and documents and show the same to sales tax authority if stopped for checking.

If such search and verification shows that the declaration that has been filed in respect of the goods is false or incorrect in respect of, inter alia, the value thereof, the authority may presume until the contrary is proved that an attempt is being made to evade sales tax. He must then record his reasons on this behalf and supply a copy thereof to the transporter. If after considering the transporter's explanation, the authority remains unsatisfied, he is required so to record and to serve on the transporter a notice to show cause why a penalty should not be imposed upon him.

Commissioner of Sales Tax V. P.T. Enterprises (2000) 117 STC 315 (SC).

4.5 Whether goods and vehicle, seized at check-post for violation and show cause notice is issued to the transporter who does not file any reply, are to be released against bank guarantee, it is the matter to be decided by the authorities.

Varuna Roadlines v. Assistant Commercial Tax Officer (2010) 36VST 160 (Mad)

4.6 If the vehicle is intercepted at exit check post and the driver of the vehicle fails to produce transit pass for the goods then sales tax along with the penalty is leviable on the transporter on the presumption that goods have been sold within the state. Therefore the finding by the Tribunal that the goods sold by the transporter to owner and sale by the owner would be second sale was perverse and hence not sustainable.

State of Karnataka v. Manoj Jalan ; State of Karnataka v. Smt. Sheela Jalan (2010) 32 VST 42 (Kar)

4.7 It can be presumed that sales has been effected within the state if the transit pass issued at the entry check-post along with endorsement of the exit check-post is not surrendered within the prescribed period. However, such presumption is rebuttable. Moreover, if the transit pass without the endorsement of the exit check-post is produced before the assessing authority he has to examine the same and cannot simply reject and make the assessment.

Industrial Carriers v. State of Assam (2010) 34 VST 470 (Gau)

4.8 Penalty under Rajasthan VAT law is leviable, if there are Over writings and cuttings in columns of declaration form ST-18A, which means that such form is re-used.

On checking of vehicle in transit, driver produced challans issued by a supplier of Agra and also a declaration Form ST-18A. On perusal of documents, it was found that in some columns of declaration form, there were cuttings/over writings with regard to price of goods, date and number of vehicle and name of Transport Company. Department concluded that such mistakes were deliberate with a view to evade tax and, accordingly, levied penalty on owner of goods viz. assessee

Hon’ble high court of Rajasthan held that, if there is a blank declaration form, or material particulars have been left blank then there is every apprehension that it could be reused and in such case, penalty can be imposed. In present case, there were over writings and cuttings in columns of declaration form as regards material particulars and, therefore, Department had rightly levied penalty. In view of judgment of Supreme Court in Asstt. Commercial Taxes Officer v. Bajaj Electricals Ltd. [2009] 1 SCC 308, penalty could be levied on owner of goods as well.  Accordingly, levy of penalty was upheld.

[2014] 41 taxmann.com 174 (Rajasthan) Assistant Commercial Taxes Officer v. Jeet Iron Traders Bharatpur

5. Conclusion

Every state puts up a check post on the boarder of the state to protect carriage of goods in and out of the state. The Officers on duty insures that the goods travelling outside and inside the state is represented and correspond to the invoice that transporter has. There have been numerous cases on this aspect which has already been discussed with you and also birds eye view of important cash laws are being given in the table below :

CA Rajat Mohan

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