2005 (1) TMI 664 - HC - VAT and Sales Tax

Issues Involved:
1. Legality of detaining the petitioner's vehicle and goods.
2. Authority to demand security for tax liabilities of another person.
3. Application of Section 28AA of the Karnataka Sales Tax Act, 1957.
4. Joint and several liability under the Explanation to Section 28AA.
5. Right to conduct business without unlawful interference.

Issue-wise Detailed Analysis:

1. Legality of Detaining the Petitioner's Vehicle and Goods:
The petitioner, owner of the vehicle KA-5 D1333, was transporting latex from Cochin to Kanpur through Karnataka. The vehicle was detained by the respondents on December 30, 2004, for not furnishing security or paying Rs. 1,43,655, which was determined as due under an earlier order dated September 21, 2004, against one Palanivel. The court found that the detention of the vehicle and goods was not authorized by law as the liability determined on Palanivel could not be passed onto the petitioner.

2. Authority to Demand Security for Tax Liabilities of Another Person:
The respondents demanded security from the petitioner based on an earlier liability of Palanivel. The court observed that under Section 28AA(7) of the Act, security can only be demanded from a person who has been assessed to tax earlier and has an undischarged liability. Since there was no prior assessment or undischarged liability on the petitioner, the demand for security was deemed unauthorized.

3. Application of Section 28AA of the Karnataka Sales Tax Act, 1957:
Section 28AA outlines the procedure for transit of goods through Karnataka, including the issuance and surrender of transit passes. Subsection (4) presumes goods to be sold within the state if the transit pass is not surrendered at the exit point, making the owner liable for tax. The court noted that the petitioner's vehicle was not issued a transit pass, and the demand for security was based on a misapplication of Section 28AA, as the petitioner was not the person assessed under the earlier order.

4. Joint and Several Liability under the Explanation to Section 28AA:
The Explanation to Section 28AA, as amended in 2004, states that both the owner of the vehicle and the carrier are jointly and severally liable for tax or penalty. The court clarified that while this provision allows for joint liability, the earlier order dated September 21, 2004, did not impose liability on M/s. Roshan Freight Carriers (Kanpur), the carrier, but only on Palanivel. Thus, the petitioner could not be held liable based on that order.

5. Right to Conduct Business without Unlawful Interference:
The petitioner argued that the detention of his vehicle and goods adversely affected his business. The court agreed, stating that the respondents' actions were not authorized by law and caused undue hardship and loss to the petitioner. Consequently, the court quashed the impugned endorsement dated December 30, 2004, and directed the immediate release of the vehicle and goods, along with a transit pass.

Conclusion:
The court allowed the writ petition, quashed the impugned endorsement, and directed the respondents to release the detained vehicle and goods. Additionally, the respondents were ordered to pay Rs. 2,000 in costs to the petitioner for the unlawful detention and interference with his business.

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