Transit pass evidence is not conclusive; circumstantial discrepancies can support penalties for attempted diversion and tax evasion.

A transit pass evidences declared movement of goods but does not conclusively establish completion of genuine interstate transit. Penalty proceedings for transit contraventions may rest on discrepancies in transport documents, shortages in goods, missing supporting records, vehicle movement, and other cumulative circumstances indicating attempted diversion or tax evasion; direct proof of intrastate unloading or sale is not indispensable. Revisional scrutiny may correct an appellate order that treats surrender of transit passes as determinative while overlooking material discrepancies. Where findings of intent to evade are supported by relevant circumstantial material and are not perverse, arbitrary, or legally infirm, restoration of penalty may be sustained.

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Issues: (i) Whether surrender of a transit pass precludes penalty proceedings for contravention during transit; (ii) Whether direct proof of unloading or sale within the State is necessary before initiating proceedings based on suspected diversion of goods; (iii) Whether revisional jurisdiction could be exercised to reverse the appellate order that had annulled the penalty; (iv) Whether the restoration of penalty was legally sustainable on the facts.

Issue (i): Whether surrender of a transit pass precludes penalty proceedings for contravention during transit.

Analysis: A transit pass evidences the declared movement of goods through the State but is not conclusive evidence that goods reached their declared destination. Discrepancies in transport records, shortages in goods, and surrounding circumstances capable of supporting an inference of attempted evasion remain relevant despite surrender of the pass.

Conclusion: Surrender of a transit pass does not bar penalty proceedings where material indicates attempted tax evasion. The issue is decided against the assessee.

Issue (ii): Whether direct proof of unloading or sale within the State is necessary before initiating proceedings based on suspected diversion of goods.

Analysis: Contravention may be established from verification of goods in transit, accompanying records, and attendant circumstances. Documentary discrepancies, missing supporting records, and circumstances indicating possible diversion permit appropriate inferences; direct evidence of actual unloading within the State is not indispensable.

Conclusion: Direct proof of intrastate unloading or sale is not a condition precedent to proceedings for contravention. The issue is decided against the assessee.

Issue (iii): Whether revisional jurisdiction could be exercised to reverse the appellate order that had annulled the penalty.

Analysis: The appellate order treated surrender of transit passes as sufficient to negate evasion while overlooking discrepancies in documents, shortages in goods, and the vehicle's movement towards Bengaluru after surrender. Those omissions constituted infirmities justifying revisional scrutiny of the legality and propriety of that order.

Conclusion: Exercise of revisional jurisdiction to reverse the appellate order was lawful. The issue is decided against the assessee.

Issue (iv): Whether the restoration of penalty was legally sustainable on the facts.

Analysis: The finding of intent to evade tax rested on cumulative factual circumstances and the explanation for the vehicle's return was found not credible. Such factual findings, supported by relevant material and free from perversity, arbitrariness, or legal infirmity, did not warrant appellate interference.

Conclusion: Restoration of the penalty was legally sustainable. The issue is decided against the assessee.

Final Conclusion: The penalty for the transit-related contravention remains enforceable, and the revisional correction of the appellate order stands on a valid legal and factual basis.

Ratio Decidendi: A transit pass is evidentiary but not conclusive of genuine interstate transit; penalty proceedings and revisional intervention may be sustained on cumulative circumstantial material demonstrating attempted diversion and tax evasion.

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