Seizure on bare suspicion fails where transport documents exist and undervaluation lacks supporting material.

Seizure of goods and vehicle, and the resulting tax and penalty demand, cannot rest on bare suspicion of undervaluation when the consignment is supported by transport documents and declarations. The Patna HC noted that the statutory power to verify transit goods applies only on reasonable grounds based on material showing that the declaration is incomplete or incorrect. Here, the officer enhanced the declared value without cogent reason or supporting evidence, and the record disclosed no basis for inferring deliberate undervaluation. In the absence of material showing contravention, the seizure and consequential demand were held unsustainable.

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Issues: Whether seizure of goods and vehicle, and the consequential tax and penalty demand, could be sustained on the basis of mere suspicion of undervaluation despite production of transport documents and supporting records.

Analysis: The goods were accompanied by the bill, transport challan and Form D-IX declaration. The statutory scheme permitted seizure of goods and vehicle for verification where there were reasonable grounds to suspect that the declaration was incomplete or incorrect. However, the power could not be exercised on ipse dixit or on a mere subjective impression. The officer had enhanced the declared value of the timber without any cogent reason or supporting material, and the record disclosed no basis to infer deliberate undervaluation. In the absence of material showing contravention, the seizure and the consequential assessment of tax and penalty were unsustainable.

Conclusion: The seizure and demand were invalid and the relief sought by the assessee succeeded.

Ratio Decidendi: Statutory power to seize goods in transit and impose penalty can be exercised only on reasonable grounds supported by material, and not on bare suspicion or arbitrary enhancement of value.

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