Compounding of transporter default did not bar confiscation where collusion in tax evasion was established under the VAT scheme.

Compounding of the transporter's default under Section 57(17) of the Madhya Pradesh Value Added Tax Act, 2002 did not extinguish the basis for confiscation under Section 57(9) where the facts showed collusion in tax evasion. The vehicle was detained after goods were found without the required declaration, and the transporter admitted the default and paid the compounded amount. The Court treated the statutory scheme as making the transporter responsible for document compliance during movement of goods, and held that the compounded payment did not validate the unlawful conduct or bar confiscatory proceedings. The challenge to the penalty and confiscation was therefore rejected on these facts.

---

---

Issues: Whether the confiscation of the vehicle and the levy of penalty under Section 57 of the Madhya Pradesh Value Added Tax Act, 2002 were sustainable after the transporter compounded the offence and paid the prescribed amount.

Analysis: The vehicle was owned by the appellant and was used by a transport company for carrying out goods through the State. On inspection, the goods were found to be insufficiently supported by the required declaration, leading to detention. The transporter, within the meaning of Section 57, admitted the default and opted for compounding by paying the amount contemplated by Section 57(17). The statutory scheme of Section 57 treats the transporter as responsible for carrying documents, producing them at check posts, and complying with the movement requirements of goods. Where the transporter is found to be in collusion with a dealer involved in tax avoidance or evasion, Section 57(9) authorises detention and confiscation of the vehicle, subject to hearing and approval. The Court held that payment of the compounded amount did not wipe out the basis for action under Section 57(9), because such payment itself established collusion and attracted confiscatory proceedings. The argument that compounding validated the illegality was rejected. The Court further held that the cited authorities on mens rea and penalty did not assist the appellant on these facts, since the transporter had admitted the default and exercised the statutory option under Section 57(17).

Conclusion: The confiscation and related penalty action were held to be valid, and the issue was decided against the appellant.

---