2011 (4) TMI 1250 - HC - VAT and Sales Tax

Exhibit P4 order issued by the second respondent imposing penalty under section 47(6) of the Kerala Value Added Tax Act, 2003 challenged Held that - on the facts of the case at hand, it is evident that no materials were available to prove that the petitioner was attempting to bring the goods to the State of Kerala, either for sale within the territory or for usage of the same within the territory of the State, or to prove that the transport was made with an attempt to evade payment of tax. Therefore it is of the view that a direction for conduct of a further enquiry will only be a futile exercise. Hence inclined to permit request of the petitioner to take back the goods to the State of Tamil Nadu. In the result, the writ petition is allowed and exhibit P4 order is hereby quashed. The respondents are directed to release the excavator loader (JCB) to the petitioner for the purpose of taking back the same to the State of Tamil Nadu, on production of a copy of this judgment, without any further delay.

Summary

Issues Involved:
1. Legality of the detention of the excavator loader under Section 47(2) of the Kerala Value Added Tax Act, 2003 (KVAT Act).
2. Imposition of penalty under Section 47(6) of the KVAT Act.
3. Maintainability of the writ petition in light of the availability of an alternative remedy.

Detailed Analysis:

1. Legality of the Detention of the Excavator Loader:
The petitioner challenged the detention of an excavator loader at the Kerala border by the first respondent, invoking Section 47(2) of the KVAT Act. The reason for detention, as per Exhibit P2 notice, was the suspicion that the vehicle, which was newly painted and lacked a displayed registration number, was intended for sale or contract work within Kerala. The petitioner contended that the vehicle was mistakenly driven to the Kerala border due to a route error by the driver and was never intended to enter Kerala. The court noted that Section 47(2) allows the detaining authority to intercept and demand a security deposit if there is a reasonable suspicion of tax evasion or lack of proper documents.

2. Imposition of Penalty Under Section 47(6) of the KVAT Act:
The petitioner argued that the penalty imposed under Exhibit P4 was without conclusive findings of an attempt to evade tax. The court highlighted that while Section 47(2) allows detention based on suspicion, Section 47(6) requires a conclusive finding of an actual attempt to evade tax for penalty imposition. The court found that the second respondent's findings in Exhibit P4, which were based on suspicion and missing links in the petitioner's explanation, did not constitute conclusive evidence of tax evasion. The court emphasized that penalty under Section 47(6) is a penal consequence requiring clear proof of guilt, which was not present in this case.

3. Maintainability of the Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition, citing the availability of an alternative remedy under the KVAT Act. However, the court held that the availability of an alternative remedy does not bar the writ petition when there are allegations of patent illegality or lack of jurisdiction. Given the petitioner's challenge to the legality of the proceedings initiated under Section 47, the court found it appropriate to adjudicate the writ petition.

Conclusion:
The court quashed Exhibit P4, stating that the imposition of penalty was unsustainable due to the lack of conclusive findings of an attempt to evade tax. The court directed the respondents to release the excavator loader to the petitioner for taking it back to Tamil Nadu. The court also noted that a re-enquiry would be futile as there were no materials proving an attempt to bring the goods into Kerala for tax evasion purposes.