Undervaluation Can't Lead To Seizure Of Goods In Transit By Inspecting Authority: Karnataka High Court

The Karnataka High Court has held that 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 in which the obligation to pay tax and penalty has been quashed coupled with a direction to release the vehicle.

The conveyance bearing Registration No. AP21-TY-3126 was intercepted by the CTO (Vig) on December 2, 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 confirming the tax liability of Rs. 3,25,423 coupled with a penalty of Rs. 21,41,239 and directed the respondent or assessee to make the payment immediately.

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 favored by the single judge, and the bench quashed the tax and penalty coupled with a direction to release the vehicle.

The department has challenged the order passed by the single judge.

The department 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. Thus, the goods conveyance having 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'. He also says 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 that the right to movement, whether by foot, cart, boat, aircraft, or on a horseback, is constitutionally guaranteed to the citizens as a fundamental right under Article 19(1)(d) and ordinarily avails to the merchants too when they carry goods for trade. Production of goods without distribution would not serve the interests of the community, is the underlying principle of Article 301 of the Constitution.

The court stated that it is open to a trader to take goods to the destination point in whichever route he opts, unless the law otherwise requires the destination point to be intact. Such a right needs to be recognized as a necessity for trade or business.

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

“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,” the court, while dismissing the appeal, said.

Counsel For Appellant: Aditya Vikram Bhat

Counsel For Respondent: K J Kamath

Citation: 2024 LiveLaw (Kar) 296

Case Title: The Joint Commissioner Of Commercial Taxes (Appeals)-3 Versus Transways India Transport

Case No.: Writ Appeal No. 854 Of 2022 (T-Res)

Click Here To Read The Order