2017 (1) TMI 463 - HC - VAT and Sales Tax

Refund of compounding fee - release of detained goods - Held that - Though in the counter affidavit in paragraph No.8, it is stated that it is a tax component and compounding fee, the release order does not specifically say so nor there is a quantification of tax. Thus, the respondent himself is not clear as to under what head the amount has been collected. The amount has been paid under protest and so that the petitioner would able to clear the goods immediately as it was a promotional material intended to launch a product in that particular area. The respondent is directed to refund a sum of ₹ 47,095/- which was collected from the petitioner - petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Refund of compounding fee collected by the checkpost officer.
2. Detention of consignment based on alleged issues with tax returns and accompanying forms.
3. Dispute over the nature of goods transported and tax liability.

Analysis:
1. The petitioner sought a refund of the compounding fee of ?47,095 collected by the checkpost officer. While a Writ of Mandamus is typically not issued for a money claim, the petitioner challenged the action of the respondent in detaining the consignment and collecting the amount without specifying the basis for the collection. The court noted discrepancies in the tax collection process and directed the respondent to refund the amount as the purpose of collection was unclear.

2. The respondent had raised three issues in the Goods Detention Order: non-filing of returns by the consignee, missing Form JJ from the Union Territory of Pondicherry, and the nature of the goods being promotional materials not for sale. The court ruled in favor of the petitioner on all counts. It was held that the consignment could not have been detained for non-filing of returns, and any missing forms should have resulted in a penalty, not detention of goods. The respondent failed to refute the petitioner's claim regarding the nature of the goods, leading to the conclusion that the tax collection was unjustified.

3. The court found that the respondent had collected the amount without specifying the tax component clearly. While the petitioner admitted the mistake regarding the missing form and agreed to pay the associated penalty, the collection of the full amount was deemed unjustified. The petitioner claimed to have paid the amount under protest to expedite the clearance of the goods, emphasizing the promotional nature of the materials. The court, therefore, directed the respondent to refund the excess amount collected, acknowledging the petitioner's compliance with the penalty aspect.

In conclusion, the High Court of Madras allowed the writ petition, directing the respondent to refund ?47,095 to the petitioner within eight weeks. The judgment highlighted procedural errors in the tax collection process and emphasized the need for clarity and justification in such actions to prevent undue financial burden on individuals or entities.