2023 (3) TMI 291 - HC - VAT and Sales Tax

Detention of goods - Under valuation - M.R.P. can be deciding factor at this stage to under value the goods by the respondents or not - action on the part of the respondents is violative of the Article 14 and 16 of the constitution of India? HELD THAT - The petition deserves to be allowed. Though on a perusal of contents of the impugned notice, a copy of which has been kept on record, it is revealed that the same had been issued on the grounds that the documents appeared to be suspicious and needed verification; that the goods needed physical verification and appeared to be undervalued; that VAT number was not mentioned/wrongly mentioned on the documents and that the required information had not been generated at any Information Collection Centre (ICC) in the State of Punjab but on perusal of the written statement, it is crystal clear that except the allegation that the maximum retail price (MRP) printed on the boxes containing fire works was more than the price mentioned in the invoices from which it appeared that the goods were undervalued, no other objection had been taken by the respondents to justify detention of the vehicle as well as the seizure of the goods. It is well settled proposition of law that undervaluation of seized goods in transit cannot be a ground to confiscate the goods and the vehicle. There cannot be any mechanical detention of a consignment in transit on the basis that the goods being transported are undervalued. Reliance can be placed upon K.P. Sugandh Ltd. v. State of Chhattisgarh 2020 (3) TMI 890 - CHHATTISGARH HIGH COURT wherein the detention of vehicle and seizure of goods merely on the ground that there was undervaluation was not held to be sustainable by holding that it was for the department to initiate appropriate separate proceedings with regard to the alleged undervaluation and that itself could not furnish a ground for detention of vehicle. Thus, it is held that the detention of the truck and seizure of the goods carried therein, by respondent No.2 was illegal. The goods and the truck have, however, already been ordered to be provisionally released in pursuance of order passed by this Court on 07.08.2006. They are ordered to be released - petition allowed.

Summary

Issues:
Challenge to notice under Punjab Value Added Tax Act, 2005 for detention of goods and truck; Legality of detention based on alleged undervaluation of goods; Violation of constitutional rights by respondents.

Analysis:
1. The petitioner challenged a notice under the Punjab Value Added Tax Act, 2005, seeking the release of a truck and goods detained by the authorities. The petitioner argued that despite genuine documents, the goods were unlawfully detained. The key legal questions raised were the legality of detention when goods were found genuine, the relevance of Maximum Retail Price (MRP) in determining undervaluation, and whether the actions of the respondents violated constitutional rights.

2. The respondents justified the detention stating that the goods' rates were lower than those printed on the boxes, leading to suspicion of undervaluation. They argued that the petitioner had options for release and appeal under the Act. The petitioner contended that undervaluation during transit couldn't warrant confiscation, citing legal precedents.

3. After considering arguments, the Court found in favor of the petitioner. The Court noted that undervaluation alone couldn't justify detention or seizure of goods in transit. Legal precedents were cited to support this position. The Court ordered the release of the truck and goods, quashing the detention proceedings. However, the respondents were allowed to initiate separate proceedings for alleged undervaluation in compliance with the law.

In conclusion, the Court ruled the detention of the truck and goods as illegal, ordering their release and setting aside the detention proceedings. The judgment emphasized that undervaluation during transit didn't warrant confiscation and upheld the petitioner's rights in this case.