2012 (12) TMI 198 - HC - VAT and Sales Tax

Kerala Value Added Tax Act - Evasion of tax alleged that appellant/petitioners are in arrears of tax for which goods can be detained as provided under section 47(4) of the Kerala Value Added Tax Act, 2003 - appellant/petitioner submits that section 47(4) does not authorize recovery of arrears of tax by detaining goods under transport at the check-post Held that - There is no provision in section 47(4) to detain the goods until full arrears are paid. However, section 47(4) does not bar the Department from exercising right of attachment and sale of the detained goods under transport under other provisions of the Act or under the Revenue Recovery Act for recovery of arrears if the dealer does not clear arrears or at least makes arrangement for payment of arrears as a condition for release of goods - commodity brought is not for sale but is capital goods for installation in the factory which is a matter which the assessing officer/ check-post authorities or departmental officials can verify after release of goods - appellant will furnish a post dated cheque drawn on a local branch of a nationalized bank for ₹ 10 lakhs in favour of their assessing officer towards arrears of tax

Summary

Issues:
Detention of goods for tax arrears under section 47(4) of the Kerala Value Added Tax Act, 2003.

Analysis:
The judgment addressed the detention of goods belonging to a party in arrears of tax under section 47(4) of the Kerala Value Added Tax Act, 2003. The appellant/petitioner was in arrears of tax amounting to around Rs. 60 lakhs for the assessment years 2002-03 till 2008-09. The goods were detained by check-post officials on the grounds of attempted tax evasion and the arrears of tax owed by the appellant. The single judge directed adjudication before the release of goods, leading to the filing of a writ appeal and writ petitions by the petitioner seeking direction for disposal of statutory appeals pending against assessments with arrears.

The main contention revolved around the interpretation of section 47(4) of the Act. The appellant's counsel argued that the section does not authorize the recovery of tax arrears by detaining goods but allows for the detention of goods pending payment of tax due. On the other hand, the Government Pleader defended the detention of goods based on the grounds of tax arrears and the authority provided under section 47(4). The court analyzed the provision of section 47(4) and concluded that the check-post officials were within their rights to detain goods if the dealer transporting the goods was in arrears of tax, as was the case with the appellant.

Furthermore, the judgment highlighted that while section 47(4) does not explicitly allow the detention of goods until full arrears are paid, it does not prevent the Department from utilizing other provisions for recovery if the arrears are not cleared. The court emphasized the need for effective implementation of section 47(4) by updating check-post officials about tax arrears to ensure timely detention and release of goods only upon arrears clearance or satisfactory payment arrangements. The Commissioner was directed to issue appropriate instructions to ensure this process.

In the specific case at hand, the court allowed the writ appeal with modifications to the single judge's judgment. The appellant was required to provide a post-dated cheque for Rs. 10 lakhs towards tax arrears, with the balance to be paid in six monthly installments. Goods would be released upon furnishing the cheque and a simple bond without surety, ensuring payment of arrears as per the agreed schedule. The assessing officer would collect the arrears in line with the modified tax demand and complete adjudication post the release of goods.

Additionally, the judgment disposed of the writ petitions by directing the appellate or revisional authority to resolve the pending appeals/revisions within three months. Compliance with the judgment was mandated, with the appellant required to produce a copy for verification, and the Government Pleader instructed to forward a copy to the Commissioner of Commercial Tax for immediate action.