2016 (8) TMI 573 - HC - VAT and Sales Tax

Court dismisses challenge to penalty under KVAT Act, 2003. Consignee notice valid. Right to appeal granted. Bank guarantee conditions.

The court dismissed the writ petition challenging the penalty imposed under Section 47(6) of the KVAT Act, 2003. It found that notice was issued to the ... Release of goods - KVAT - detention of the goods at the check post under Section 47(2) of the Act - petitioner being consignor continued to be the owner of goods - as per contract the goods were to be delivered to consignee within the stipulated time - bank guarantee for release of goods - Section 47(6) states adjudication proceedings has to proceed after notice to the owner of the goods. Such notice not given to petitioner causing undue hardship - principles of natural justice - ownership certificate produced by consignee - appeal in terms of Section 55 of the Act - Held that: - The right of the petitioner to file appeal before the appellate authority is hereby reserved. The petitioner shall file appeal within a period of two weeks from the date of receipt of a copy of this judgment. The payment of amount covered by the bank guarantee shall be kept in abeyance by the 2nd respondent for a further period of four weeks to enable the petitioner to get appropriate orders from the appellate authority. If no such order is produced before the Bank within the aforesaid period, it shall be open for the Bank to remit the amount as per the request made in Ext.P9 - appeal disposed off - decided in favor of appellant. Issues:Challenge to penalty imposed under Section 47(6) of the KVAT Act, 2003 due to lack of notice in adjudication proceedings, Ownership of goods and bank guarantee invoked, Allegation of violation of principles of natural justice.Analysis:Issue 1: Challenge to Penalty ImposedThe petitioner challenged the penalty imposed under Section 47(6) of the KVAT Act, 2003, through Ext.P10 order. The petitioner contended that no notice was issued during adjudication proceedings, depriving them of the opportunity to contest the matter. The petitioner argued that as the consignor, they had a contract with the consignee to deliver goods, and ownership remained with the consignor when goods were detained. The petitioner claimed a violation of principles of natural justice due to non-compliance with the statutory provision requiring notice to the owner of the goods before adjudication. The Intelligence Officer directed the bank guarantee, given by the petitioner, to be invoked towards the penalty imposed.Issue 2: Ownership of Goods and Bank GuaranteeThe respondent, through the learned Government Pleader, asserted that the goods were released to the consignee, who provided documents showing ownership. As per Section 47(6) of the Act, notice must be issued to the owner of the goods. Since documents indicated ownership with the consignor, notice was sent to the consignee, and subsequent orders were issued. The Intelligence Officer had called upon the bank to remit the amount covered by the bank guarantee, leading to concerns of substantial hardship for the petitioner.Issue 3: Allegation of Violation of Principles of Natural JusticeThe petitioner contended that the failure to issue notice to the consignor, as required by Section 47(6), constituted a violation of principles of natural justice. However, the court found that notice was indeed issued to the consignee, M/s.Peevees Projects Pvt. Ltd., and that they had produced an ownership certificate. The court opined that there was no apparent violation of natural justice, especially with the avenue for appeal available under Section 55 of the Act. Consequently, the court declined to interfere with the Ext.P10 order at that stage.In conclusion, the court disposed of the writ petition by reserving the petitioner's right to file an appeal within two weeks. The payment covered by the bank guarantee was to be kept in abeyance for an additional four weeks to allow the petitioner to seek appropriate orders from the appellate authority. If no such order was produced within the specified period, the bank was permitted to remit the amount as per the request in Ext.P9.