2016 (11) TMI 1667 - HC - VAT and Sales Tax

Levy of compounding fee - release of detained goods alongwith vehicle - offence under Sections 71 (5) (a) and 71 (5) (b) of CST Act - HELD THAT - This Court is not able to see any merit in the submissions made by the learned Special Government Pleader for the respondent. In the instant case, the goods were detained for one reason and the order demanding compounding fee was passed on different grounds, not related to detention and goods in transit. Further, the respondent cannot usurp the jurisdiction of the Assessing Authority. It is only the Assessing Authority, who can decide, whether tax is leviable, whether there is an attempt for evasion, whether the explanation of the owner / agent is acceptable, whether the documents that are carried with the goods are sufficient, etc., This Court is of the considered view that, since the respondent is not the Assessing Officer, he is not entitled to levy and demand any amount of tax, in addition to the tax payable on the value of the goods. Therefore, the impugned proceedings of the respondent is against the provisions of the Act and the Rules framed therefor - the impugned order demanding and collecting tax has no legs to stand - petition allowed.

Summary

Issues:
Detention of goods during transport, demand of compounding fee, jurisdiction of Assessing Authority, legality of tax demand.

Detention of Goods:
The petitioner, a registered dealer engaged in re-sale of scraps, sold goods to a dealer in Delhi. The goods were intercepted and detained by the respondent citing non-compliance with Form JJ and alleged underpayment of tax for the previous assessment year. The petitioner's representation was rejected, leading to the writ petition challenging the detention.

Demand of Compounding Fee:
The petitioner argued that the demand for tax at a higher rate for an undisputed interstate transaction was illegal, making the compounding fee demand unjustifiable. The petitioner contended that Sections 71 and 72 of the Act were inapplicable to the situation.

Jurisdiction of Assessing Authority:
The respondent claimed that the petitioner had violated Sections 71 (5) (a) and 71 (5) (b) of the Act, providing an opportunity to compound the offense. However, the court found that the respondent overstepped by demanding tax beyond the Assessing Authority's jurisdiction. The court emphasized that only the Assessing Authority could determine tax liability, evasion attempts, document sufficiency, etc.

Legality of Tax Demand:
The court ruled in favor of the petitioner, stating that the respondent lacked the authority to levy additional taxes beyond what was due. The order demanding and collecting tax was deemed against the Act and its rules. Section 67 of the Act was highlighted, indicating that verification pertains to tax payment and goods documents, not past assessments or tax amounts. The impugned order was set aside, allowing the Assessing Authority to proceed lawfully.

The judgment highlighted the importance of respecting the Assessing Authority's role in tax matters and restricted the respondent's power to demand taxes beyond the prescribed limits. The decision provided clarity on the legal boundaries concerning tax demands during goods transport and underscored the need for adherence to statutory provisions.