Transit seizure jurisdiction limited where goods merely pass through the State in inter-State movement.

Rajasthan tax authorities lacked jurisdiction to seize goods in transit and start penalty proceedings where the consignment was merely passing through the State in inter-State movement and the alleged tax evasion related to another State. The Tribunal found that the goods were accompanied by documents, the record did not show that the consignor was false or that the goods were loaded in Rajasthan, and the truck was proceeding to Delhi. Applying the principle previously recognised under the Rajasthan Sales Tax Act, 1954, it held that Rajasthan could not use transit-seizure provisions to punish an alleged evasion outside the State; at most, it could secure the exit of the goods and inform the Delhi authorities. The seizure and notices were quashed.

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Issues: Whether the taxing authority could validly seize goods in transit and initiate penalty proceedings where the consignment was moving from one State to another through Rajasthan and the alleged tax evasion related to another State.

Analysis: The goods were found in transit with accompanying documents, and the record did not establish that the consignor was false or that the goods were loaded in Rajasthan. The seizure memo itself showed that the truck was proceeding to Delhi. The Tribunal applied the principle earlier laid down for the analogous provisions of the Rajasthan Sales Tax Act, 1954, that where a vehicle carrying goods merely passes through Rajasthan in inter-State movement, the Rajasthan authority has no jurisdiction to impose penalty for an alleged evasion occurring outside the State. At most, if the consignee appeared bogus, the authority could secure the exit of the goods from Rajasthan and inform the Delhi authorities.

Conclusion: The seizure and the notices were without jurisdiction and were liable to be quashed, in favour of the assessee.

Final Conclusion: The application succeeded and the impugned seizure action and consequential notices were set aside.

Ratio Decidendi: Rajasthan authorities cannot invoke the transit-seizure and penalty provisions to punish an alleged tax evasion that is outside the State when the goods are merely passing through Rajasthan in inter-State movement.

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