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Judgment
C.K. Abdul Rehim, J.—Challenge in this writ petition is against Ext.P1 notice issued u/s 47(2) of the Kerala Value Added Tax Act (for short the KVAT Act). Goods, which are described as "Glased Cement Paver Blocks", were transported on the basis of a tax invoice, which revealed collection of tax at 4%. The reason for detention mentioned in Ext.P1 is that for "Glased Cement Paver Tiles" the rate of tax applicable is 12.5% and the value declared by the petitioner is very low when compared with the prevailing market rate. Hence on the basis of valuation arrived at by the 2nd respondent, security deposit was demanded.
The petitioner submitted Ext.P2, contending that the rate of tax at 12.5% is applicable only with respect to ''Floor & Wall Tiles'' and the correct entry with respect to goods in question is one coming under Item 18(5A) of IIIrd Schedule to KVAT Act, which is taxable only at 4%, being "Cement Paver Blocks".
It is noticed that on receipt of Ext.P2 reply the Intelligence Officer had issued Ext.P3 letter stating that if the legislative intention was to include all varieties of cement blocks, it should have mentioned clearly. Since the goods under transport is a different item than the goods mentioned in entry 18(5A) of IIIrd Schedule, the goods should be reckoned as an "unclassified item" coming within entry 103, taxable at 12.5%.
Learned Counsel for the petitioner vehemently contended that the reason for detention as well as the reasoning mentioned in Ext.P3 letter are totally beyond the powers of the authority, since the dispute is not at all a matter which is coming within the purview of Section 47(2). It is submitted that even if there exists any dispute regarding interpretation of the entry concerned or regarding the rate of tax applicable, the same could not be taken as a reason for invoking powers u/s 47(2). On the other hand, the learned Government Pleader contended that there is a misclassification of the goods and there is purposeful undervaluation which evoke reasonable suspicion regarding evasion of tax.
Whether the transport was genuine and as to whether there was any attempt in evasion of tax, are matters which need be decided on finalization of the enquiry contemplated u/s 47. Therefore, I am not entering upon any finding regarding the dispute. However, I am of the opinion that, pending finalization of the enquiry, the goods need not be detained. It is brought to my notice that the petitioner is a registered dealer.
In the result, the writ petition is disposed of directing the respondents to release the goods along with vehicle detained under Ext.P1 notice, on the petitioner furnishing Security Bond, as provided under the KVAT Rules, without sureties, for the value mentioned in Ext.P1.
At the time of release, the detaining authority may keep custody of one sample of the bricks which is under transport, for the purpose of verification at the time of enquiry.
The competent Enquiry Officer will finalize the enquiry at the earliest possible, at any rate within a period of six weeks from the date of release of the goods.