Check-post detention power upheld, but disputed compounding fee demand required fresh merits-based reconsideration.

The check-post officer was treated as competent to detain and verify goods where movement into the State was suspected to involve a taxable transaction and supporting records needed scrutiny, and the availability of an alternate statutory remedy did not negate that power. By contrast, a compounding fee demand under the Tamil Nadu Value Added Tax Act could not be finally sustained where the validity of registration and the alleged evasion remained disputed on facts; such matters required determination by the competent authority after hearing the assessee. The detention and check-post action were left intact, while the fee demand was set aside and remitted for fresh consideration on merits.

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Issues: (i) Whether the first respondent was competent to detain the goods and proceed under the check-post powers for alleged evasion of tax; (ii) Whether the impugned demand of compounding fee under Section 72 of the Tamil Nadu Value Added Tax Act, 2006 could be sustained in the presence of disputed factual issues.

Issue (i): Whether the first respondent was competent to detain the goods and proceed under the check-post powers for alleged evasion of tax.

Analysis: The statutory scheme treated the officer in charge of the check post as the prescribed authority for detention and verification of goods moving into the State. The Court accepted that, where goods were suspected to have been transported in connection with a taxable transaction and the records required verification, the first respondent could examine the documents and proceed at the check post. The existence of an alternate statutory remedy was also noted in relation to such action.

Conclusion: The competence of the first respondent to detain the goods and take action at the check post was upheld.

Issue (ii): Whether the impugned demand of compounding fee under Section 72 of the Tamil Nadu Value Added Tax Act, 2006 could be sustained in the presence of disputed factual issues.

Analysis: The validity of the petitioner's registration and the factual basis for treating the transactions as evasive remained disputed. Since those factual matters required determination on merits by the proper authority, the compounding demand could not be finally sustained at that stage. The matter was therefore required to be reconsidered by the competent authority after giving opportunity to the petitioner.

Conclusion: The demand for compounding fee was set aside and the matter was remitted for fresh consideration.

Final Conclusion: The detention and check-post action were left undisturbed, but the compounding fee demand was interfered with and sent back for fresh decision on merits.

Ratio Decidendi: Where the check-post authority is empowered as the prescribed authority to detain and verify goods, that power may be exercised; however, a compounding demand based on disputed factual questions must be reconsidered by the competent authority rather than finally sustained without adjudication on merits.

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