Tax credit and detention powers under Gujarat VAT: publication of cancellation and strict limits on stop delivery orders

Tax credit under the Gujarat VAT Act could not be denied for purchases made before publication of the selling dealer's cancellation under section 27(11), because disallowance under section 11(5)(mmmm) is tied to publication rather than the retrospective effective date of cancellation. Section 67(6) also did not authorise a stop delivery order detaining goods in a godown, as that power is limited to stopping and inspecting vehicles, vessels, or goods in transit or in the custody of a carrier, bailee, or transport recipient where tax evasion is suspected. The impugned detention was therefore held unlawful.

---

---

Issues: (i) Whether tax credit could be denied for purchases made before publication of the cancellation of the selling dealer's registration under the Gujarat Value Added Tax Act, 2003. (ii) Whether the authority had power under section 67(6) of the Gujarat Value Added Tax Act, 2003 to pass a stop delivery order detaining the petitioner's goods.

Issue (i): Whether tax credit could be denied for purchases made before publication of the cancellation of the selling dealer's registration under the Gujarat Value Added Tax Act, 2003.

Analysis: Tax credit under section 11(1) is subject to the exclusions in section 11(5). Clause (a) applies to purchases from a person other than a registered dealer, while clause (mmmm) specifically disallows credit for purchases made after the name of the dealer has been published under section 27(11). The cancellation order was passed before publication, and the statutory language links disallowance to publication, not merely to the retrospective date from which cancellation is made effective.

Conclusion: The petitioner was entitled to tax credit for purchases made before publication under section 27(11); denial of credit on that basis was not sustainable.

Issue (ii): Whether the authority had power under section 67(6) of the Gujarat Value Added Tax Act, 2003 to pass a stop delivery order detaining the petitioner's goods.

Analysis: Section 67(6) authorises stopping a vehicle or vessel, entering and searching the vehicle, vessel or place, and inspecting goods where goods are kept by a carrier, bailee, or transport recipient and there is reason to believe tax evasion is likely. The facts did not satisfy those conditions, and the provision did not authorise a stop delivery order against goods lying in a godown. Section 45 was also not invoked.

Conclusion: The stop delivery order was beyond jurisdiction and unlawful.

Final Conclusion: The impugned action was quashed and the petitioner was permitted to move the goods without interference.

Ratio Decidendi: Under the VAT Act, denial of tax credit for purchases from a dealer whose registration is cancelled depends on publication of the dealer's name under section 27(11), and section 67(6) does not authorise detention of goods by a stop delivery order unless its specific conditions are satisfied.

---