Transit goods detention cannot replace assessment where classification and tax-rate disputes are bona fide and documents are complete.

Goods in transit cannot be detained under section 129 merely because the intercepting officer disputes classification or the applicable tax rate, where the consignor has produced supporting documents and the declared tax treatment matches its invoices and returns. A bona fide dispute on short payment arising from rate or classification issues is one for assessment and adjudication on merits, not detention as a substitute for assessment. On those facts, the detention was found arbitrary and unsustainable, and release of the goods was directed.

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Issues: Whether goods in transit could be detained under section 129 on the ground of alleged misclassification and short payment of tax, when the consignor had produced supporting documents and had declared the same tax treatment in its returns.

Analysis: The detention notice rested on a prima facie view that the product attracted a higher rate of tax, but the documents accompanying the consignment were consistent with the invoices and recent returns already filed by the assessee. The dispute was therefore not one of absence of documents or a clear contravention, but one of classification and rate of tax. In such a situation, the Court held that the proper course was for the assessing authority to decide the classification issue in appropriate proceedings, and not for the intercepting officer to detain the goods merely because he differed on the applicable tax rate. The Court applied the principles that bona fide disputes on tax liability do not justify detention as a substitute for assessment, and that detention powers cannot be used where the issue is essentially one for adjudication on merits.

Conclusion: The detention was held arbitrary and unsustainable, and the goods were directed to be released forthwith.

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