2017 (4) TMI 677 - HC - VAT and Sales Tax

Detention of goods - stock transfer - The first respondent detained the goods on 25.03.2017, on the reason that the goods did not accompany transit pass in Form LL - The first respondent refused to accept the documents produced by the petitioner and informed that the goods will be released only if the petitioner pays the tax and compounding fee, by treating the goods, as though, deemed to have been sold within the state of Tamilnadu for not possessing the transit pass - Held that - Perusal of those documents filed in the typed set of papers would clearly indicate that the petitioner sought to stock transfer the goods from their Bangalore office to their Ernakulam Office. The only mistake committed by the petitioner, which according to the learned counsel for the petitioner, is due to inadvertence, is in not obtaining the transit pass in Form LL at the entry point check post of the state of Tamil Nadu. The first respondent is not justified in detaining the goods any more, if the petitioner pays a sum of ₹ 2000/- towards composition fee for not producing the transit pass - goods to be released on payment of composition fee - appeal allowed - decided in favor of assessee.

Summary

Issues:
Detention of goods for not possessing transit pass and imposition of tax and compounding fee.

Analysis:
The petitioner, a manufacturer and dealer in bus air conditioners, sought to stock transfer goods from their Bangalore branch to Ernakulam branch. Despite having all necessary documents, the goods were detained in Tamil Nadu for not possessing a transit pass. The petitioner argued that only a composition fee should be imposed for this oversight, citing a circular and previous court orders allowing release on payment of a fee.

The circular issued by the Commissioner of Commercial Taxes addresses situations where transit passes are not obtained, emphasizing the acceptance of alternate evidence to establish inter-state movement of goods. The circular also considers Section 70 of the TN VAT Act, 2006, which deals with transit passes and the consequences of non-compliance.

Section 70(1)(c) of the Act states that failure to produce a transit pass deems the goods to have been sold within the state, making the owner liable for tax and penalty. However, this presumption is rebuttable with legally valid and reliable documents showing inter-state transfer without sale within the state. The court noted that the deemed sale provision is not absolute and can be challenged with appropriate evidence.

In line with previous judgments, the court ruled in favor of the petitioner, directing the release of goods upon payment of a composition fee of ?2000. The court found the detention unjustified since all other required documents were available with the goods, and the only deficiency was the absence of a transit pass. The order set aside the impugned proceedings and instructed immediate release upon fee payment.

In conclusion, the judgment highlights the importance of complying with transit pass requirements but also emphasizes the possibility of challenging deemed sale presumptions with valid evidence, ultimately ensuring fair treatment for businesses in inter-state transactions.