2001 (3) TMI 874 - SC - VAT and Sales Tax

Whether the check-post authority is entitled to detain the goods on the ground of under-valuation under section 29-A(2) of the Kerala General Sales Tax Act, 1963? Held that - Appeal dismissed. No merit in the submission that the words to satisfy himself that there is no evasion of tax in section 29-A of the Kerala General Sales Tax Act should be read only in the context of the words to verify the documents required by sub-section (2) of section 29 to be in the possession of the person transporting the goods . That would be to limit the power of the officer to the verification of documents and to render the words and to satisfy himself that there is no evasion of tax otiose, which cannot be done.

Summary

Issues:
- Interpretation of section 29-A(2) of the Kerala General Sales Tax Act, 1963 regarding detention of goods for under-valuation.
- Relationship between section 19-B and section 29-A(2) in determining the valuation of goods in transit.

Interpretation of section 29-A(2):
The Supreme Court analyzed whether the check-post authority is entitled to detain goods for under-valuation under section 29-A(2) of the Kerala General Sales Tax Act, 1963. The Court highlighted that goods can be detained if there is a suspicion of tax evasion, and release is subject to furnishing security. The authority can detain goods if there is a reasonable belief of tax evasion based on under-valuation, not solely on the authority's discretion. The power to detain goods is linked to the suspicion of tax evasion, not just under-valuation.

Relationship between section 19-B and section 29-A(2):
The Court clarified the distinction between sections 19-B and 29-A(2) in determining the valuation of goods. Section 19-B operates during assessment, allowing the assessing authority to estimate the value of goods based on market prices to prevent tax evasion. On the other hand, section 29-A(2) applies while goods are in transit, enabling the check-post authority to detain goods if there is a suspicion of tax evasion. The Court emphasized that the power to detain goods in transit is triggered by the suspicion of tax evasion, which can be inferred from under-valuation if not explained adequately by the owner.

Precedent and Conclusion:
The judgment referenced a previous case to support the interpretation that the power to detain goods in transit is valid when there is a suspicion of tax evasion, even if based on under-valuation. The Court dismissed the appeals, upholding the authority's right to detain goods under section 29-A(2) if there is a reasonable belief of tax evasion, regardless of the valuation determination under section 19-B. The Court rejected the argument that the power to detain goods should be limited to document verification, emphasizing its broader scope in preventing tax evasion. Additionally, the Court noted that the constitutionality of provisions was not challenged in the case before them, precluding its consideration in the appeal. Ultimately, the civil appeals were dismissed with costs.

Judges:
- BHARUCHA S.P., LAHOTI R.C., and SABHARWAL Y.K. JJ.