Provisional release of detained goods allowed despite suspected tax evasion, pending proper adjudication under VAT law.

Goods detained in transit under the Kerala Value Added Tax Act were held not to require continued detention merely because tax evasion was suspected and adjudication was pending. The court noted that whether the transaction involved a works contract element or any actual evasion had to be decided in appropriate proceedings, but that question did not justify withholding release in the meantime. Provisional release was directed on payment of one-third of the demanded security deposit, either in cash or by bank guarantee, with a simple bond without sureties for the balance, while adjudication was to proceed expeditiously.

---

---

Issues: Whether goods detained in transit under Section 47(2) of the Kerala Value Added Tax Act, 2003 were liable to continued detention on the basis of suspected tax evasion, and whether they were to be released pending adjudication.

Analysis: The detention notice was issued on the premise that the transaction involved a works contract element and possible evasion of tax. The Court noted that the question whether there was any actual element of tax evasion required determination in appropriate adjudication proceedings. At the same time, the goods did not require further detention merely because such adjudication was pending. The Court therefore directed provisional release on payment of one-third of the security deposit demanded, either in cash or by bank guarantee, and on execution of a simple bond without sureties for the balance amount, while preserving the respondents' right to proceed with adjudication expeditiously.

Conclusion: The goods were ordered to be released provisionally, and continued detention was declined.

---