Goods detention under TNVAT cannot rest on suspicion where valid transport documents exist, Madras High Court says.

Goods detained during transport with valid invoices and transport documents were held not liable to detention where the officers acted on suspicion without adequate grounds. The Madras High Court interpreted Circular No. 33/2014 and Rule 15 of the TNVAT Rules to conclude that roving squad or checkpost officers could not justify detention or proceed mechanically to compounding under Section 72 without proper statutory basis. The court set aside the detention notices and directed immediate release of the goods on production of the order copy.

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Issues: Whether goods detained during vehicular check could be released when they were accompanied by valid transport documents, and whether composition proceedings under the Tamil Nadu Value Added Tax Act could be invoked on the facts.

Analysis: The goods in both matters were covered by invoices and delivery documents. A departmental circular clarified that movement of goods accompanied by a valid invoice satisfies Section 68 of the Tamil Nadu Value Added Tax Act, 2006, and that no offence under Section 71(5)(a) arises on that basis. The circular also stated that composition under Section 72(1)(a) is confined to cases of failure to pay or evasion of tax and is not to be invoked for lapses unrelated to the movement of goods. Rule 15 of the Tamil Nadu Value Added Tax Rules, 2007 similarly confines the check-post function to the statutory provisions governing vehicular movement and detention, and requires service of detention orders with the specified tax or security for release.

Conclusion: The detention notices were unsustainable. The goods were ordered to be released forthwith, and the writ petitions were allowed.

Ratio Decidendi: Where goods are accompanied by valid transport documents, detention cannot be sustained on mere suspicion, and composition provisions cannot be invoked for an alleged offence not relatable to the movement of the goods.

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