2013 (5) TMI 369 - HC - VAT and Sales Tax

The notice has been issued to petitioner u/s 47(2) of the KVAT Act doubting evasion of tax and demanding security deposit. According to the Department the nature of contract between petitioner and its consignor is fall under the category of work contracts and therefore department detained the goods of the petitioner. - Petitioner challenged the department by filing this writ petition. Held that - Court finds that the Goods needs not be detained any further and the same shall be released to the petitioner forthwith, on satisfying the security deposit to an extent of 50% as demanded either by cash or by Bank Guarantee or by way of immovable properties to the satisfaction of the authorities concerned and on execution of a simple bond without sureties for the balance amount. Writ petition is disposed of.

Summary

Issues:
1. Ext.P6 notice issued under Section 47(2) of the KVAT Act doubting tax evasion and demanding security deposit.
2. Interpretation of the purchase order and terms of payment as a potential works contract.
3. Detention of goods transported by the petitioner.
4. Reduction of the initially demanded security deposit.
5. Release of the vehicle and machine to the petitioner.

Analysis:
1. The petitioner challenged the Ext.P6 notice issued under Section 47(2) of the KVAT Act, alleging tax evasion and demanding a security deposit. The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, sent goods to a consignee in Kerala. The notice raised concerns about the nature of the transaction, hinting at a potential works contract, which the petitioner disputed.

2. The petitioner argued that the goods supplied were to become part of the consignee's capital goods, a registered dealer in Kerala. Citing a relevant case law, the petitioner contended that there was no justification for detaining the goods. The court noted discrepancies in the supply terms and the rate of tax applied, emphasizing the need for further investigation into the nature of the transaction.

3. After considering the arguments from both sides, the court ordered the release of the vehicle and machine to the petitioner upon payment of 50% of the demanded security deposit. The remaining balance could be secured through a simple bond without sureties. The court emphasized that the release was subject to the ongoing adjudication proceedings, ensuring the respondent's right to continue with the legal process promptly.

4. The court acknowledged the reduction of the initially demanded security deposit from Rs. 3,32,262 to Rs. 1,23,060 based on a detailed analysis. The petitioner's willingness to cooperate with the adjudication proceedings was noted and recorded for future reference.

5. In conclusion, the writ petition was disposed of, with the court directing the release of the goods to the petitioner upon meeting the specified conditions. The judgment balanced the petitioner's right to possess the goods with the need for a thorough adjudication process to determine the nature of the transaction and any potential tax implications.