Check-post detention cannot force advance tax where documents disclose an inter-State transit sale and no assessed liability exists.

Check-post interception of goods permits scrutiny of invoices and transport documents and, where justified, further proceedings on the merits, but it does not authorise a coercive demand for advance tax or compounding fee before assessment when the accompanying papers disclose an inter-State transit sale. Tax liability arises only after a completed taxable sale is established and assessed; interception powers cannot be used on an erroneous assumption that the movement is a local sale. On those facts, the detention of the goods and the demand made as a condition for release were held illegal, and the impugned order was set aside.

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Issues: Whether the detention of goods at the check post and the demand for advance tax and compounding fee as a condition for release were legally sustainable when the accompanying documents disclosed an inter-State transit sale.

Analysis: The goods were being moved under invoices and transport documents which disclosed the consignor and the nature of the movement, and the authorities were aware of the petitioner's name and the transaction details. In such circumstances, the check-post power extended to scrutiny of the documents and, if necessary, further proceedings on the merits, but not to a coercive demand for tax in anticipation of assessment where the transaction itself appeared to be an inter-State sale or transit sale. Liability to pay tax could arise only after a completed sale was established and assessed, and the existence of statutory powers to intercept goods did not justify detention on an erroneous assumption that the movement was a local taxable sale.

Conclusion: The detention and the demand for advance tax and compounding fee were illegal, and the impugned order was liable to be set aside.

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