Transit detention for suspected tax evasion upheld, but goods must be released on adequate security pending adjudication.

Goods intercepted in transit on a bona fide suspicion of tax evasion may be detained where the consignment is supported only by an invoice and the required Form 16 is not produced at interception. However, continued detention until completion of adjudication is unnecessary if the department's interest can be protected by adequate security. Release of the goods on furnishing a bank guarantee or sufficient immovable property security is the appropriate course, while adjudication and any recovery proceedings remain open to be decided independently in accordance with law.

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Issues: Whether the detention of goods intercepted in transit under Section 47(2) of the Kerala Value Added Tax Act, 2003 was justified and, if so, whether the goods were liable to be released pending adjudication.

Analysis: The goods were intercepted at the check post on suspicion of tax evasion. The only document accompanying the consignment was the invoice, and Form 16 was not produced at the time of interception. In the circumstances, the detention could not be said to be arbitrary or illegal. At the same time, continued detention of the goods till completion of adjudication was found unnecessary. The appropriate course was to secure the department's interest by insisting on a bank guarantee or sufficient immovable property security while permitting release of the goods.

Conclusion: The detention was upheld, but the goods were ordered to be released forthwith on furnishing security, leaving the adjudication proceedings open to be decided independently in accordance with law.

Final Conclusion: The petitioner obtained release of the detained goods on security, while the department's right to proceed with adjudication and recover any amount found due was preserved.

Ratio Decidendi: Goods intercepted on a bona fide suspicion of tax evasion may be detained for security, but they need not remain under detention until adjudication is completed if adequate security is furnished.

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