Bank guarantee demand on released goods was unwarranted where tax liability still required merits-based adjudication.

Where detained goods had already been released and the tax dispute still required factual adjudication, coercive insistence on a bank guarantee for twice the tax payable was unwarranted. The court treated the failure to obtain local registration as a procedural infraction, while the substantive question of concessional tax treatment had to be decided on the petitioner's reply and any further response. The authority was therefore directed to consider the matter on merits and decide the tax demand afresh, without continuing the excessive bank guarantee requirement.

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Issues: Whether the petitioner could be compelled to furnish bank guarantee for twice the tax payable in relation to the detained goods, and whether the matter should be examined on merits in light of the petitioner's reply and claim to concessional tax treatment.

Analysis: The goods had already been released, and the dispute had narrowed to the demand for bank guarantee under the Tamil Nadu VAT framework. The petitioner was not registered in the State, but the dispute still concerned collection of only the appropriate tax and not an enhanced levy merely because the sale was effected directly from Tamil Nadu. The failure to obtain registration was treated as a procedural infraction, while the substantive liability required adjudication on the petitioner's reply. In these circumstances, insisting on a bank guarantee for an amount far in excess of the tax, after release of the goods, was found to serve no useful purpose.

Conclusion: The petitioner was not required to undergo further coercive insistence on bank guarantee, and the respondent was directed to decide the matter on merits after considering the reply and any additional response.

Final Conclusion: The writ petition was disposed of by leaving the tax dispute for fresh consideration on the petitioner's reply, without granting a final substantive determination on tax liability in the writ proceeding.

Ratio Decidendi: Where detained goods have already been released and the dispute requires factual adjudication on the correctness of the tax demand, coercive insistence on a bank guarantee in excess of the tax payable is unwarranted and the authority must decide the issue on merits.

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