2016 (3) TMI 1190 - HC - VAT and Sales Tax

Imposition of Penalty - the petitioner was compelled to immediately pay the amount of penalty and when the petitioner s men insisted that there be an order - Held that - since the rule requires any seizure and detention and while imposing a penalty, unless preceded by an order, any action of seizure or detention or collection of penalty would be bad in law - even if any order is passed, it is an after-thought since it is not on record that it has been duly served on the petitioner - penalty set aside - petition allowed - decided in favor of petitioner.

Summary

Issues:
- Seizure and detention of goods transport vehicle for alleged non-compliance with tax rules
- Imposition of penalty without a proper order being passed

Seizure and Detention of Goods Transport Vehicle:
The petitioner, a company providing critical logistics services, collected a consignment of goods from the airport for delivery. During transit, the second respondent stopped and inspected the vehicle, noting that the e-Sugam forms were not stamped by the Commercial Tax Officer. Subsequently, the vehicle was detained at the premises of the third respondent until a penalty was paid, despite no order for seizure or detention being issued. The petitioner, under pressure to deliver the goods, paid a substantial penalty to release the goods. The court found this action to be in violation of the Karnataka Value Added Tax Rules, 2005, as there was no legal basis for the detention and collection of penalty without a proper order.

Imposition of Penalty without Proper Order:
The court referred to a previous case where it was held that collecting a penalty without a duly served order is illegal. In the present case, the learned Government Advocate argued that although an order was claimed to have been passed, there was no evidence of its service to the petitioner. The court emphasized that any seizure, detention, or penalty imposition must be preceded by a proper order as per the rules and the law. Since the Department failed to follow the legal procedures, the court deemed their actions illegal. Consequently, the petition was allowed, and the respondents were directed to refund the penalty amount collected promptly, within one week of receiving the court's order.