2016 (9) TMI 614 - HC - VAT and Sales Tax

Release of attachment of goods - Section 45(1) of the VAT Act - non-ferrous metals - aluminium - lead - zinc - copper - nickel - customs bonded warehouse - VAT liability - Held that - In terms of Section 45(1) of the VAT Act, the competent authority undoubtedly has the power of provisional attachment where during the pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, he is of the opinion that for the purpose of protecting the interest of Revenue, it is necessary to do so. However, such powers being in the nature of attachment before judgement need to be exercised with due care and caution and only in appropriate cases, where the material is available justifying exercise of such extreme power. In the present case, it would prima facie appear that the goods stored by the petitioner in the bonded warehouse being sold before the import is completed, there would be no liability to pay value added tax on such transaction. Classification - Nickel Cathode - Nickel Full Plates - Held that - there is no mismatch in the goods brought by the petitioner from abroad and that is sold to the Indian customers. Minor difference in description of the goods in two sets of documents can be attributed to different but synonymous terms being used by the same set of goods. The petitioner keeping the bank guarantee of ₹ 30 crores in favour of the department alive till the assessments are framed and subject to the orders contained therein, the petitioner would be free to deal with the goods in question without there being any further attachment - petition disposed off - decided in favor of petitioner.

Summary

Issues:
Challenging the action of Value Added Tax Authorities in attaching goods on the allegation of duty evasion.

Analysis:
The petitioner, a company trading in non-ferrous metals, challenged the attachment of goods by VAT Authorities alleging duty evasion. The petitioner imports goods from overseas suppliers and sells to domestic buyers after transfer of title at a bonded warehouse. Authorities attached goods worth ?50 crores citing possible tax liability. The petitioner contended no VAT is payable on such transactions, relying on a Supreme Court judgment. Despite cooperation, assessment was incomplete, leading to the petition.

The petitioner argued no breach of VAT Act occurred as goods are transferred at the bonded warehouse to Indian buyers without VAT liability. Authorities claimed a mismatch between imported and sold goods, citing different descriptions. Petitioner provided documents showing synonymous terms used for goods, denying discrepancies. Section 45(1) of VAT Act allows provisional attachment to protect revenue, but extreme caution is required. The Supreme Court precedent supports no VAT liability in such transactions, and goods' nature remained unchanged.

The Court refrained from final observations due to pending assessment but noted the petitioner's bank guarantee covering tax liability. No further conditions were imposed on the petitioner, allowing dealing with goods freely with the bank guarantee maintained. The petitioner was directed to keep the bank guarantee alive until assessments are completed. The petition was disposed of with these directions.