Detained goods must be released on payment or security, while the underlying tax dispute remains open for challenge.

Goods detained in transit under the Tamil Nadu Value Added Tax Act were ordered to be released because the statutory scheme permits release on payment of tax or furnishing security. The court interfered with the detention notice only to secure release, accepting the appellant's offer to furnish a bank guarantee for the tax component, while leaving the challenge to the tax and penalty demand open before the appropriate authority. The underlying dispute as to local sale was not finally adjudicated at this stage.

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Issues: Whether the detention notice and consequential demand for tax and penalty could be interfered with and the detained goods ordered to be released on furnishing security.

Analysis: The appellant's goods were intercepted in transit and a detention notice was issued demanding tax and penalty on the footing of a local sale. The Court noted that the statutory scheme under Section 67(4) of the Tamil Nadu Value Added Tax Act, 2006 permits release of detained goods if tax is paid or security is furnished. The respondent did not dispute that release could be made upon security. The appellant expressed willingness to furnish a bank guarantee for the tax component without prejudice to its right to challenge the demand before the appropriate authority.

Conclusion: The detention notice was set aside and the goods were directed to be released on the appellant furnishing a bank guarantee equivalent to the tax demanded. The appellant was left free to pursue its challenge to the tax and penalty before the appropriate authority.

Ratio Decidendi: Where goods are detained in transit, the statutory authority must release them upon payment of tax or furnishing of security, and the detention order can be interfered with to secure such release without adjudicating the underlying tax dispute.

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