2012 (11) TMI 1047 - HC - VAT and Sales Tax

Stop delivery orders - Held that - The goods are not kept in any vessel, vehicle or place by a carrier or bailee or any person to whom the goods were delivered for transport. Further, the Commissioner cannot be stated to have reason to believe that the tax on such goods is or is likely to be evaded. Even if the stand of the respondents that the petitioner was not entitled to take tax credit on the purchases made from M/s Surya Vinayak Industries Ltd. was valid, failure to see how the authority can hold a belief that the goods which are detained, are such on which the petitioner was likely to evade tax payment. Even if both these conditions were satisfied, the power with the Commissioner was only to enter the vehicle, vessel or the place, and inspect the goods and records relating to the goods in question and elicit such information as was relevant. In the present case, the respondent No.2 has acted well beyond such powers. Plainly, the power under section 67(b) of the said Act was simply not available with the respondent No.2 for passing stop delivery order. Thus the action of the respondents in ordering stop delivery of the goods of the petitioner communicated through the impugned communication dated 12/15.10.2012 is declared illegal and hereby quashed

Summary

Issues Involved:
1. Legality of the tax credit denial for purchases made from M/s Surya Vinayak Industries Ltd.
2. Authority and jurisdiction of the Assistant Sales Tax Commissioner to detain goods under section 67(6) of the Gujarat Value Added Tax Act, 2003.
3. Availability of alternative remedies for the petitioner.

Detailed Analysis:

Issue 1: Legality of the Tax Credit Denial
The petitioner challenged the denial of tax credit on purchases made from M/s Surya Vinayak Industries Ltd. after its registration was canceled effective from January 1, 2011. The respondent argued that under section 11(5) of the VAT Act, tax credit is not allowed for purchases from a dealer whose registration has been canceled. The court examined section 11 and section 27 of the VAT Act, which outline the conditions under which tax credit can be denied. The court noted that clause (mmmm) of section 11(5) specifies that tax credit is disallowed for purchases made after the dealer's name has been published under section 27(11). Since the order of cancellation was passed on March 6, 2012, and the publication would be subsequent to this date, the court concluded that tax credit cannot be denied for purchases made before March 6, 2012.

Issue 2: Authority to Detain Goods
The Assistant Sales Tax Commissioner detained the petitioner's goods under a "stop delivery" order, citing section 67(6) of the VAT Act. The court analyzed section 67, which pertains to the production and inspection of accounts and documents and the search of premises. Sub-section (6) allows the Commissioner to stop and search vehicles or places where goods are kept by a carrier or bailee if there is a belief that tax on such goods is or is likely to be evaded. The court found that neither condition was satisfied in this case, as the goods were not kept by a carrier or bailee, and there was no reason to believe that tax was likely to be evaded. The court held that the Assistant Commissioner's action exceeded the powers granted under section 67(6).

Issue 3: Availability of Alternative Remedies
The respondents contended that the petitioner had alternative remedies available and thus should not invoke writ jurisdiction under Article 226 of the Constitution of India. The court reiterated that the availability of alternative remedies does not bar the court from exercising its writ jurisdiction, especially if the order is ex-facie illegal, opposed to natural justice, or passed without authority or jurisdiction. The court decided to entertain the petition given the circumstances.

Conclusion:
The court declared the "stop delivery" order communicated on 12/15.10.2012 as illegal and quashed it. The respondents were directed not to prevent the petitioner from moving the goods. The rule was made absolute with no order as to costs.