Karnataka High Court: Undervaluation Cannot Be A Ground For Seizure Of Goods In Transit By The Inspecting Authority

Karnataka High Court: Undervaluation Cannot Be A Ground For Seizure Of Goods In Transit By The Inspecting Authority

The bench of Justice Krishna S. Dixit and Justice Ramachandra D. Huddar upheld the single bench order stating that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority. It further quashed the obligation to pay tax and penalty coupled with a direction to release the vehicle.

As to the facts of the case, a conveyance bearing was intercepted by the CTO (Vig) in December 2021, at the Bommasandra industrial area, more than 20 km .away from the destination point, namely Bengaluru city. The statement of its driver was recorded, goods in transit having been inspected. Particulars of the documents tendered by the driver showed that the goods were moving from Maharashtra to several places in Bangalore city, and they do not mention anything about Bommasandra Industrial Area.

The CTO passed an order u/s 129(3) of the 2017 Act confirming the tax liability of Rs.3,25,423/- coupled with a penalty of Rs.21,41,239/- and directed the respondent to make the payment immediately. The respondent carried the matter in appeal at the departmental level and the same came to be negatived vide order dated 10.03.2022. The respondent-assessee carried the matter in appeal at the departmental level, and it was denied.

The assessee filed the writ petition, and the same was favoured by the single judge, and the bench quashed the tax and penalty coupled with a direction to release the vehicle.

The department challenged the order passed by the single judge.

The department (Appellants) contended that the carrier of the subject goods had furnished the movement particulars of the vehicle in advance in terms of lex mercatoria to the department. The goods carried in the conveyance originated from various consigners from Mumbai, the consignees being in several places within Bengaluru city limits. However, the conveyance was intersected by the CTO at Bommasandra Industrial Area, which is more than 20 km away from the outer limits of the city.

The Appellants who appeared for the department argued that the goods in conveyance moved in a different direction altogether than was impressed to the department, and it being not authorized by the transit documents in question, the authorities rightly treated the case as one of 'transportation of goods without documents beyond the place of destination and also diversion of the goods to a place other than the destination point'.

The AGA also stated that both the original authority and the appellate authority had looked into the matter, and therefore, the same did not merit a deeper examination at the hands of the single judge, the scope of writ jurisdiction being restrictive.

The Court noted “This case involves also the fundamental right to trade & business guaranteed u/a 19(1)(g) read with Article 301 of the Constitution. Therefore, it will have elements of right to movement, as well. It is open to a trader to take goods to the destination point in whichever route he opts, unless the law otherwise requires, destination point being intact. Such a right needs to be recognized as of necessity to trade or business.”

The Bench of Justices Krishna S Dixit and Ramachandra d. Huddar further added, “It can be said without the risk of contradiction that as the law now stands in Karnataka, a merchant or his convoy is free to choose the route for the movement of goods from the point of origin to the point of destination and that he has specified a particular route in the consignment documents, would not come in the way of that route being altered, although destination cannot be. In the absence of law, he cannot be faltered if he chooses a circuitous route in preference to linear one in variance with the impression given to the authorities in the said documents as long as travel time and destination point remain intact. If that be so, the impugned orders of authorities that were structured on a contra premise could not stand the test of law. The judgement of the learned Single Judge therefore is inexplicable, despite the said reason not animating it.”

The Court observed that the department could not locate any rule or ruling that regulates the movement of goods while choosing its route in the state.

The Court dismissed the appeal by concluding that, “We are told at the bar that even the requirement of furnishing travel and other particulars that were obtained in law earlier has now been done away with in the new legal regime. That being the position, the orders of liability and penalty of the authorities that are quashed by the learned single judge cannot be revived by setting aside his judgment.”