Dual-use goods and claimed exemption cannot be defeated by suspicion alone; seizure and penalty were set aside.

Goods capable of dual use cannot be seized merely because interception officers oubt the claimed end use; where the importer asserts a tax-exempt hosiery use under the West Bengal VAT framework, the authority must have a concrete basis to reject that claim. The Tribunal held that if the statutory scheme requires verification of ultimate use, such verification should ordinarily occur at the assessment stage, not on suspicion at interception. It also noted that precautionary directions may be issued to ensure sale to hosiery manufacturers, with liberty to proceed if the goods are later found to have been used otherwise. The seizure and penalty orders were therefore set aside as unsustainable.

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Issues: Whether the seizure of the consignment of polyester filament yarn and the consequential penalty were sustainable when the importer claimed that the goods were hosiery yarn and relied on the exemption regime under the West Bengal Value Added Tax Act, 2003 and the West Bengal Value Added Tax Rules, 2005.

Analysis: The goods were capable of being used both for hosiery and non-hosiery purposes, and the authorities could not determine at the interception stage the ultimate use to which the goods would be put. The Court noted that where the importer claims the goods as hosiery yarn and the statutory framework requires factual verification of end use, the checking authority cannot conclude against the importer merely on suspicion. The earlier view taken in the petitioner's own matter was followed, namely that if doubt exists about the ultimate use, the matter may be verified at assessment stage, but final seizure cannot rest only on conjecture. The Court also accepted that precautionary directions could be issued to ensure the goods were ultimately sold to hosiery manufacturers, with liberty to proceed in accordance with law if the goods were found to have been used otherwise.

Conclusion: The seizure order and the penalty order were unsustainable and were set aside.

Ratio Decidendi: Where imported goods are capable of dual use and the importer asserts a tax-exempt or non-taxable end use, seizure and penalty cannot be sustained merely on suspicion without a concrete finding that the goods are not covered by the claimed exemption or are intended for a taxable use.

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