2004 (8) TMI 657 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Detention of goods at the check-post.
2. Imposition of penalty on the detained goods.
3. Legality of recovering penalty without providing a copy of the penalty order.
4. Scope and manner of exercise of powers under section 14-B of the Punjab General Sales Tax Act, 1948.

Detailed Analysis:

1. Detention of Goods at the Check-Post:
The petition challenges the notice dated March 21, 2004, regarding the detention of goods at the Information Collection Centre (ICC) check-post. The petitioner, a consignment stockist of GAIL (India) Ltd., argued that the goods were accompanied by all necessary documents, including a challan-cum-stock transfer invoice and goods receipt. Despite this, the detaining officer issued a notice suspecting evasion of tax because the names of the consignor and consignee were different. The Court observed that the relevant documents were duly produced, and the consignor was a Government of India undertaking. There was no law mandating that the consignor and consignee must be the same person. The petitioner also produced an agreement showing it was the agent of the consignor. The Court concluded that the detention of goods was uncalled for and clearly an abuse of power.

2. Imposition of Penalty on the Detained Goods:
The notice dated March 23, 2004, imposed a penalty on the detained goods. The petitioner contended that the imposition of the penalty was without basis. The Court noted that the detaining authority did not doubt the genuineness of the consignment agreement and did not record any finding that the transfer of goods amounted to a sale rather than a stock transfer. The Court emphasized the distinction between a contract of sale and a contract of stock transfer by the transferor to its agent, stating that an agent can be a different person from the transferor. The Court held that the imposition of the penalty was patently illegal and an abuse of authority.

3. Legality of Recovering Penalty Without Providing a Copy of the Penalty Order:
The petitioner argued that the attempt to recover the penalty from the bank guarantee was illegal as no copy of the penalty order was supplied, nor any demand notice was served. The Court agreed, citing previous decisions that emphasized the necessity of supplying a copy of the order to enable the petitioner to seek remedies in accordance with the law. The Court found no justification for recovering the penalty without furnishing a copy of the penalty order to the affected party.

4. Scope and Manner of Exercise of Powers Under Section 14-B of the Punjab General Sales Tax Act, 1948:
The Court examined the scope and manner of exercise of powers under section 14-B of the Act, which allows the establishment of check-posts or information collection centres to prevent or check the avoidance or evasion of tax. The provision permits the detention of goods if there is reasonable suspicion of tax evasion. However, the Court emphasized that this power should not be exercised arbitrarily or without reason. The Court found that in this case, the detaining authority acted without a reasonable basis, as the relevant documents were in order and there was no evidence of an attempt to evade tax.

Conclusion:
The Court allowed the petition, quashing the orders regarding the detention of goods and the imposition of the penalty. The Court directed the Commissioner, Sales Tax, Punjab, to examine the conduct of the detaining authority and the authority passing the penalty order, suggesting that they did not act fairly and lacked the minimum knowledge of law expected from such authorities. The State was ordered to pay costs of Rs. 10,000, recoverable from the erring officers. The writ petition was allowed.