Proportional security in seizure proceedings: seizure upheld, but excessive security reduced to match likely tax liability.
Goods found being transported without accompanying documents were validly seized, because the materials on record were sufficient to sustain the seizure and no revisional interference was warranted on that issue. However, the security demanded at 40 per cent of the goods' value was held excessive, since the applicable circular did not govern a consignment carried without papers and the security had to bear a reasonable relation to the possible tax liability. The security requirement was therefore reduced to 15 per cent of the value of the goods.
Issues: (i) whether the seizure of goods and the concurrent finding sustaining seizure called for interference in revisional jurisdiction; (ii) whether the demand of security at 40 per cent of the value of the goods was justified.
Issue (i): whether the seizure of goods and the concurrent finding sustaining seizure called for interference in revisional jurisdiction.
Analysis: The goods were being carried without any papers at the time of checking. The explanation offered for the absence of documents was not accepted on the facts then available. The matter required further investigation only for the penalty proceedings, but the materials on record were sufficient to sustain the seizure itself.
Conclusion: The seizure of goods was upheld and no interference was warranted on that issue.
Issue (ii): whether the demand of security at 40 per cent of the value of the goods was justified.
Analysis: The circular relied upon was inapplicable because the consignment was not accompanied by any documents at all. Even so, the demand of security at the maximum rate was considered excessive in relation to the tax incidence on iron and steel. The security amount was required to bear a reasonable relation to the possible tax avoidance, and a lower percentage was held sufficient.
Conclusion: The demand of security at 40 per cent was reduced to 15 per cent of the value of the goods.
Final Conclusion: The order sustaining seizure was maintained, but the security requirement was substantially scaled down in accordance with the tax rate and the facts of the case.
Ratio Decidendi: Security demanded in seizure proceedings should be proportionate to the possible tax liability and cannot automatically be fixed at the maximum rate where the tax incidence is much lower.
TaxTMI 
AI Drafter ✕
TaxTMI 
