2005 (5) TMI 622 - HC - VAT and Sales Tax

Issues Involved:
1. Detention of vehicles and goods.
2. Compliance with Karnataka Sales Tax Act, 1957, Section 28-A(3B).
3. Validity of endorsements dated January 14, 2005.
4. Justification for further detention of vehicles and goods.
5. Levy of penalty under Section 28-A(4).
6. Right to carry on trade or business.

Detailed Analysis:

1. Detention of vehicles and goods:
The writ petitioner, a dealer from Andhra Pradesh, engaged in the business of execution of works contract, challenged the detention of two goods transport vehicles hired for transporting bitumen from Mangalore to Tirupathi. The vehicles were detained at the sales tax check-post at Kannur, Mangalore, by the respondent No. 1-Commercial Tax Officer, under Section 28-A(3B) of the Karnataka Sales Tax Act, 1957.

2. Compliance with Karnataka Sales Tax Act, 1957, Section 28-A(3B):
The endorsements in question were issued for verification of the accuracy of the particulars furnished in the supporting documents accompanying the goods. The petitioner had been called upon to produce various documents, which were subsequently provided. However, the detention was extended by another seven days as the investigation was still in progress.

3. Validity of endorsements dated January 14, 2005:
The petitioner contended that the authorities lacked the legal support to continue the detention after compliance with the earlier endorsement dated December 30, 2004. The petitioner argued that the Commercial Tax Officer could not extend the detention period at the behest of other officers, and the action was not supported by the provisions under which the vehicles were detained.

4. Justification for further detention of vehicles and goods:
The respondents justified the detention by stating that the petitioner had indulged in unloading the bitumen within the State instead of taking it to Andhra Pradesh, thus benefiting from the difference in tax rates between inter-State (4%) and intra-State (24.9%) sales. They suspected that the petitioner had not effected commensurate sales of the purchased bitumen in Andhra Pradesh and had been issuing blank "C" forms.

5. Levy of penalty under Section 28-A(4):
The respondents argued that they could levy a penalty under Section 28-A(4) if they detected any contravention or non-compliance with the provisions of sub-sections (2), (3), (3A), or (3B). However, the court noted that the levy of penalty could only be in respect of the very transaction under scrutiny. The respondents had not disputed the genuineness of the supporting documents for the current transaction but were concerned about possible misuse in earlier transactions.

6. Right to carry on trade or business:
The court found that the respondents' action of indefinite detention of the vehicles and goods was not supported by law and resulted in unnecessary harassment to the petitioner. The action was characterized as a misuse of statutory power and a violation of the petitioner's right to carry on trade or business.

Conclusion:
The writ petitions were allowed, and the endorsements dated January 14, 2005, were quashed. The respondents were directed to release the vehicles and goods forthwith. The court also ordered the respondents to pay Rs. 10,000 towards costs to the petitioner, recoverable personally from respondents Nos. 1 and 2. The respondents were, however, granted liberty to take any other action for any other violation noticed under the law and the provisions of the Karnataka Sales Tax Act, 1957.

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