2023 (9) TMI 4 - HC - VAT and Sales Tax

Penalty order - illegal detention of goods - demand of security deposit under Section 47(2) of the KVAT Act - HELD THAT - From a perusal of clause (h) of Sub-section (1) of Section 67, it would be evident that if the vehicle had been asked to be stopped, but it has not stopped, it would constitute an offence for which twice the amount tax is to be levied as a penalty under Sub-section (2) of Section 67. The Explanation to Sub-section (2) of Section 67 provides the burden of proving that any person is not liable to the penalty under Sub-section (1) shall be on such person. This Court does not find any ground to interfere with the order insofar as it relates to the imposition of penalty under Subsection (2) of Section 67; however, concerning the demand for a security deposit of Rs. 1,38,352/-, thus no security could have been directed to be deposited by the petitioner inasmuch as the goods were not detained which were required to be released after seizure and therefore, the impugned order directing the petitioner to deposit a security deposit of Rs. 1,38,352/- is set aside. The petitioner has not deposited the penalty amount of Rs. 1,38,352/-; the Department is entitled to recover the said amount along with the applicable interest as arrears. Petition allowed in part.

Summary

Issues involved: Impugning penalty order and demand notice under Article 226 of the Constitution of India, special surveillance checking of clandestine transport of live chicken, mala fide exercise of power, demand of security deposit, imposition of penalty under Section 67 of the KVAT Act.

Special Surveillance Checking of Live Chicken Transport:
The 1st respondent was deputed for special surveillance checking of live chicken transport. The vehicle was found loaded with live chicken crates, and the driver fled without completing verification. The Squad was obstructed in performing official duty, leading to a complaint and notice served to the vehicle owner.

Mala Fide Exercise of Power:
The petitioner alleged a mala fide exercise of power, claiming it was impossible for the 1st respondent to be present for checking due to duty elsewhere. The Court rejected this submission, stating it is not a criminal trial requiring proof of respondent's presence.

Demand of Security Deposit:
The petitioner argued that no security deposit was warranted as goods were not detained for release. The Court set aside the order directing the petitioner to deposit a security amount but upheld the penalty imposition under Section 67 of the KVAT Act.

Imposition of Penalty under Section 67 of KVAT Act:
Section 67 outlines offences and penalties, including failure to stop a vehicle when required. The Assessing Authority imposed a penalty of Rs. 1,38,352, double the tax amount sought to be evaded. The Court upheld the penalty imposition but overturned the demand for a security deposit due to goods not being detained.

Conclusion:
The Court allowed the writ petition in part, setting aside the security deposit demand while upholding the penalty imposition. The Department is entitled to recover the penalty amount along with applicable interest as arrears.