Unauthorised stock storage under sales tax law can support compounding where it serves anti-evasion enforcement.

A fiscal provision targeting unauthorised storage of stock outside the registered godown was treated as a valid anti-evasion measure connected to the sales tax charging scheme, so it did not exceed the State Legislature's competence. The article also notes that, on the facts, goods were found in an unauthorised place contrary to registration particulars, and the dealer's initial admission that they were stock-in-trade supported an inference of contravention under section 45(2)(d). On that basis, the compounding mechanism was properly invoked and the compounding fee was upheld.

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Issues: (i) Whether section 45(2)(d) of the Tamil Nadu General Sales Tax Act, as applied to unauthorised storage of stock outside the registered godown, was beyond the legislative competence of the State Legislature. (ii) Whether the facts justified the inference of contravention and the levy of compounding fee.

Issue (i): Whether section 45(2)(d) of the Tamil Nadu General Sales Tax Act, as applied to unauthorised storage of stock outside the registered godown, was beyond the legislative competence of the State Legislature.

Analysis: A fiscal enactment may validly include provisions that are ancillary or incidental to the levy of tax, including measures intended to prevent evasion. A rule requiring a dealer to store stock-in-trade only at the places notified in the registration certificate is directed to that preventive purpose and is connected with the main charging scheme. Such a provision does not exceed legislative competence merely because breach of it is treated as an offence or made subject to compounding.

Conclusion: The provision was within legislative competence and the challenge on that ground failed.

Issue (ii): Whether the facts justified the inference of contravention and the levy of compounding fee.

Analysis: The goods were found in an unauthorised place, contrary to the registration particulars, and the petitioner had initially admitted that the goods were its stock-in-trade. The later attempt to resile from that admission weakened the explanation and supported a reasonable presumption that the storage was for concealment or avoidance. On those facts, there was a contravention within the meaning of section 45(2)(d), and the option to compound the offence was properly exercised.

Conclusion: The levy of the compounding fee was upheld.

Final Conclusion: The writ challenge to the compounding proceedings failed, and the impugned action of the revenue was sustained.

Ratio Decidendi: A provision penalising or permitting compounding for unauthorised storage of stock under a sales tax regime is valid if it is reasonably connected to preventing tax evasion, and a proven unauthorised storage coupled with an admission of ownership can support a finding of contravention.

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