2011 (4) TMI 1233 - HC - VAT and Sales Tax

Whether before proper declaration could be made and tax to the extent of goods, which were to be off-loaded in Gujarat could be paid, the vehicle was intercepted and goods seized? Held that - All issues are required to be first adjudicated by the competent authority before whom the petitioners may have opportunity to produce all necessary documents. However, this is bound to take some time. During this period, the goods of the petitioners could be released on certain conditions. At the time of release of the goods petitioner No. 1 shall file declaration regarding quantity of the betel nuts that they intend to transport outside the State and the quantity they intend to off-load in the State. Necessary transit pass shall be issued by the State authorities in the light of such declarations. Upon ultimate transit of the goods outside the State, petitioner No. 1 shall produce necessary documentary proof in this regard with the competent authority adjudicating the issues

Issues:
Interception of goods at the Gujarat-Maharashtra border, detention of goods, dispute over intended destination of goods, validity of seizure order, liability for tax and penalty, release of goods on conditions, verification of petitioner's credentials, adjudication of tax and penalty liability.

Interception and Detention of Goods:
The case involved the interception of goods at the Gujarat-Maharashtra border by state tax authorities under the belief that the vehicle did not have necessary documents and that the goods were to be off-loaded in Gujarat, leading to their detention. The petitioners, a trader/purchaser and a transporter, claimed that the goods were in transit from Maharashtra to Delhi, with only a small portion intended for delivery in Gujarat. The state authorities had also passed an order for the sale of the seized goods.

Dispute over Intended Destination and Liability:
The respondents contended that the details of the petitioner's registered office were inaccurate, and the driver of the vehicle had stated that the goods were meant to be off-loaded in Gujarat. The petitioners argued that even if the goods were intended for sale in Gujarat, the liability would be limited under section 68 of the Gujarat Value Added Tax Act, 2003, to pay tax and penalty not exceeding 1.5 times the tax on such goods. The court emphasized the need for adjudication to resolve these issues.

Release of Goods on Conditions:
After considering the arguments, the court directed that the goods be released on certain conditions. These conditions included depositing the full tax amount under protest, providing a bank guarantee for 1.5 times the tax liability, and ensuring the authenticity of the bank guarantee. The goods would be released once these conditions were met, and the bank guarantee would remain in place until the final decision on tax and penalty liability was made.

Verification of Petitioner's Credentials and Adjudication:
The court highlighted the importance of verifying the petitioner's credentials and whereabouts to protect the revenue's interests. It was decided that all questions regarding tax and penalty liability would be adjudicated by the competent authority, allowing the petitioners to present necessary documents and arguments. The orders for the sale of goods were set aside for this purpose.

Conclusion:
In conclusion, the court disposed of the petitions with directions for the adjudication of tax and penalty liability, the release of goods on specified conditions, and the verification of the petitioner's declarations regarding the intended transport of goods. The petitioners were required to comply with the conditions set by the court for the release of their goods pending the final decision on their tax and penalty liabilities.

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