1993 (3) TMI 324 - HC - VAT and Sales Tax

Summary

Issues:
Detention of goods at sales tax check-post, suspicion of tax evasion, imposition of penalty, failure to serve order to the petitioner, challenge to the legality of the order.

Analysis:
The petitioner entered into an agreement with the Government for printing telephone directories and faced detention of goods at a sales tax check-post due to suspicion of tax evasion. The petitioner produced all necessary documents, including a letter certifying the legitimacy of the transport, but was still required to furnish a bank guarantee for the release of goods. The Enquiry Officer imposed a penalty without serving the order to the petitioner, depriving the petitioner of the opportunity to appeal. The High Court criticized the Officer's failure to communicate effectively, emphasizing that such orders impact parties' rights. The Court proceeded to review the order on its merits, deeming it illegal and unsustainable.

The Enquiry Officer's order alleged an attempt at tax evasion based on the petitioner's business activities. However, the Court noted that being an unregistered dealer alone cannot justify detention of goods under the Sales Tax Act. The Court highlighted that suspicion of tax evasion must be based on concrete facts, not merely on the lack of registration. The Court analyzed the transaction between the petitioner and the Government, concluding that it did not constitute a sale as essential conditions for a sale were not met. The Court emphasized that the Enquiry Officer's satisfaction of tax evasion lacked sufficient evidence and mens rea, as established in previous case law.

The Court interpreted Section 29A of the Act, emphasizing that detention of goods should only occur in cases of genuine tax evasion attempts. Mere suspicion or lack of registration is insufficient grounds for detention. The Court referenced a previous case to support the requirement of concrete facts for alleging tax evasion. Ultimately, the Court held that the Enquiry Officer's order lacked jurisdiction and quashed it. The Court stressed that Section 29A is not meant to address bona fide disputes over tax liability, recommending that such disputes be resolved through proper assessment procedures rather than detention at check-posts.

In conclusion, the High Court allowed the petition, quashing the Enquiry Officer's order. No costs were awarded in the matter.