Goods in Transit to be detained on possibility of Evasion of Tax

2021 (1) TMI 552 - Kerala High Court in M/S. Podaran Foods India Private Limited Versus State Of Kerala

• Unless there is a possibility of tax evasion, a detention of goods and vehicles cannot be justified
• Fairness in the levy and collection of taxes that must inform the authorities entrusted with the said task, for fair implementation of the law has been recognised as an essential attribute of the rule of law in a republic such as ours.
• Section 129 is merely a machinery provision that is intended to check evasion of tax and which must be read along with the substantive provisions of the statute that provide for the levy and collection of tax.
• Although the statute provides for a detention of goods and conveyance while in transit, the procedure to be followed by the proper officer concerned is not spelt out in any Rule framed under the parent Act.
• Mere suspicion of mis-classification of goods cannot be the basis for a detention under Section 129 of the Act.
• Section 129 forms part of the machinery provisions under the Act to check evasion of tax and a detention can be justified only if there is a contravention of the provisions of the Act in relation to transportation of goods or their storage while in transit.
• Section 129 of the Act, if a proper officer who is entrusted with the task of detaining goods, finds that they have been transported in contravention of the rules, he does not have the discretion to condone the procedural lapse or relax its rigour in particular cases. He must interpret the Rule strictly keeping in mind the statutory scheme that aims to curb tax evasion
• Any person aggrieved by the order of the proper officer must necessarily approach the appellate authority before which an appeal against the adjudication order under Section 129 (3) of the Act is maintainable.
• The petitioner is relegated to his alternate remedy of preferring appeals against the said adjudication orders before the appellate authority under the Act.

Stay granted by this court, against invocation of the bank guarantee for a period of two months from the date of receipt of a copy of this judgment.