Intention to evade tax is required for penalty; procedural lapse alone cannot justify punitive action.

Seizure of goods was upheld where they were carried without proper endorsement of the way bill at the check-post, the import documents matched the consignment, and the statutory basis for seizure was found sufficient despite explanations about loss of the way bill and repacking. Penalty, however, could not rest on procedural lapse or suspicion alone; proof of an intention to evade tax was required. On the stated facts, the conduct was treated as inadequate to establish evasion, so the punitive penalty was set aside, while a reduced deterrent monetary payment was directed.

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Issues: (i) whether seizure of the goods under the value added tax law was justified for contravention of the way bill requirement; (ii) whether penalty was sustainable in the absence of proof of intention to evade tax.

Issue (i): whether seizure of the goods under the value added tax law was justified for contravention of the way bill requirement.

Analysis: The goods were carried without proper endorsement of the way bill at the check-post and the infraction was serious. The import documents matched the consignment and the seizure was founded on a lawful statutory basis. The explanation regarding loss of the way bill, repacking of the goods, and the conduct after the vehicle reached the destination did not displace the legality of the seizure.

Conclusion: The seizure was upheld.

Issue (ii): whether penalty was sustainable in the absence of proof of intention to evade tax.

Analysis: Penalty required proof of an intention to evade tax and not merely a procedural lapse or suspicion. The attempt to obtain endorsement of a way bill, though ill-advised and accompanied by improper handling of the goods, was treated as conduct aimed at recording the import rather than concealing it for tax evasion. The finding that the goods were different was based only on suspicion, and suspicion was held insufficient for penalty. At the same time, the conduct was disapproved and treated as warranting a deterrent monetary payment.

Conclusion: The penalty under the statutory provision was set aside, and the assessee was directed to pay a reduced amount by way of deterrence.

Final Conclusion: The challenge succeeded only in part: the punitive penalty order did not survive, but the seizure was maintained and a lesser monetary amount was directed to be paid as a deterrent measure.

Ratio Decidendi: Penalty for tax-related infringement cannot rest on suspicion or procedural irregularity alone and requires proof of an intention to evade tax.

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