IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH FRIDAY, THE 19TH DECEMBER 2008 / 28TH AGRAHAYANA 1930 WP(C).No. 24643 of 2008(H) ----------------------------------------------- PETITIONER(S): --------------------- ARUN, S/O.JOHN ALIAS YOHANNAN, VADAKKEDATH HOUSE, CUMBUMMEETTU.P.O, KARUNAPURAM VILLAGE, IDUKKI DISTRICT. BY ADV. SRI.V.P.SUKUMAR SRI.JAIRAM.V.MENON RESPONDENT(S): ------------------------- 1. THE CIRCLE INSPECTOR OF POLICE, NEDUMKANDAM, IDUKKI DISTRICT. 2. THE INSPECTING ASSISTANT COMMISSIONER (INTELLIGENECE) COMMERCIAL TAXES, IDUKKI AT NEDUMKANDAM. 3. THE INTELLIGENCE OFFICER, COMMERCIAL TAXES, IDUKKI AT KATTAPPANA. BY GOVERNMENT PLEADER SHRI C.K. GOVINDAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15.10.2008, THE COURT ON 19/12/2008 DELIVERED THE FOLLOWING: APPENDIX IN W.P.(C). NO.24643 OF 2008 H PETITIONER'S EXHIBITS: EXT.P1TRUE COPY OF THE LETTER DATED 13.06.2008 SENT BY THE 1ST RESPONDENT TO THE SECOND RESPONDENT. EXT.P2TRUE COPY OF THE SPOT MAHAZAR DATED 13.06.2008 STATED TO HAVE BEEN PREPARED BY THE THIRD RESPONDENT. EXT.P3TRUE COPY OF THE JUDGMENT DATED 24.06.2008 IN W.P.(C).NO.17961 OF 2008 PASSED BY THIS HONOURABLE COURT. EXT.P4TRUE COPY OF THE JUDGMENT DATED 4.7.2008 IN W.P.(C).NO.19406 OF 2008. EXT.P5TRUE COPY OF THE ORDER DATED 19.07.2008 PASSED BY THE 2ND RESPONDENT. EXT.P6TRUE COPY OF THE ORDER DATED 01.09.2008 IN KVATA NO.986 & 991 OF 2008 PASSED BY THE DEPUTY COMMISSIONER (APPEALS). RESPONDENTS' EXHIBITS: NIL. // True Copy // PS to Judge K. M. JOSEPH, J. -------------------------------------- W.P.C. NO. 24643 OF 2008 H -------------------------------------- Dated this the 19th December, 2008 JUDGMENT Petitioner seeks to quash Ext.P5 order passed by the second respondent and a direction is sought to respondents 2 and 3 to release the goods detained as per Ext.P2 mahazar on his remitting redemption fee as provided in the second proviso to Section 49(3) of the KVAT Act. 2. Briefly put, the case of the petitioner is as follows: Petitioner is an agent in hill produce business. His main principal is one Shri Manu Mathew. The first respondent, Circle Inspector of Police, during his patrol duty on 13.6.2008 got information that dry pepper was being transported through Cumbummettu for smuggling into Tamilnadu. On the basis of the said information, the first respondent reached a place called “8 Acre” near Cumbummettu. The first respondent though signalled the vehicle to stop, it sped away without stopping. Thereafter, the first respondent proceeded to the boundary and WPC.24643/08H 2 found 84 Bags of dry pepper packed ion jute bags stored on the road side. Petitioner was also there as the person-in-charge of the goods. There were headload workers near the spot and the petitioner was there. On being questioned, they allegedly stated that the goods belonged to one Shri M. Kareem. Tax evasion being suspected, the first respondent seized the goods and entrusted to the second respondent vide Ext.P1. The third respondent prepared Ext.P2 spot mahazar. It is stated that the actual owner Shri Manu Mathew filed Writ Petition which was resisted by the Revenue on the ground that the goods belonged to Shri M. Kareem. By Ext.P3 Judgment, the Writ Petition was dismissed. It is the further case of the petitioner that the petitioner was present and he filed Writ Petition, W.P.(C). No.19406/08 which was disposed of by Ext.P4 Judgment directing the second respondent herein to consider the question of releasing the goods in accordance with law. By Ext.P5, the request of the petitioner was rejected. 3. A Counter Affidavit is filed on behalf of the WPC.24643/08H 3 respondents, reiterating the contentions as noted in Ext.P5. Petitioner has also filed an application seeking production of Ext.P6 which is the appellate order passed by the Deputy Commissioner (Appeals) by which the Appeals filed by Shri M. Kareem came to be allowed and the assessing authority was directed to refund the amounts remitted by the appellant, Shri M. Kareem as a condition for grant of stay. The said order is produced by the petitioner, apparently on the ground that one of the main grounds referred to in the impugned order is that the goods in question actually belonged to Shri M. Kareem, and that there were proceedings taken against Shri Kareem, and it was in such circumstances that Shri Kareem had put up the petitioner as a front to claim goods to avoid the huge penalty. 4. I heard Shri V.P. Sukumar, learned counsel for the petitioner and the learned Government Pleader. Learned counsel for petitioner would contend that having regard to the fact that the petitioner was noted as the person-in-charge, there was no basis for not releasing the goods to the petitioner. He WPC.24643/08H 4 would further rely on Ext.P6 order which I have already adverted to, to contend that it would show that the proceedings alleged against Shri Kareem itself has ended in his favour. He would further contend that on a perusal of Section 49 of the KVAT Act, the respondents were duty bound to release the goods to the petitioner. Per contra, learned Government Pleader would contend that the petitioner was not entitled to the release of the goods. Learned Government Pleader relied on the language of Section 47(2) and pointed out that the language employed would show that it is only discretionary to give back the goods on furnishing of security. Shri V.P. Sukumar would submit that the mere fact that the goods are released to the petitioner would not stand in the way of the Department proceeding against Shri Kareem. He would also refer to the circumstances which are, of course, more elaborately considered in Ext.P5 order. In Ext.P5, the Officer has, inter alia, found that the 84 bags of dry pepper detained at 5/45 PM at the State border at 8 Acre near Cumbummettu belonged to Shri M. WPC.24643/08H 5 Kareem. It is further found that the petitioner who was present on the spot, stated before the Police Officials that the goods belonged to Shri M. Kareem, and that Shri Manu Mathew is the best friend of Shri M. Kareem and the petitioner is acting as pilot of Shri M. Kareem and he is his employee. Two reasons are given to deny the ownership by Shri M. Kareem. It is stated that no seizure was effected from the Building No.13/11 as claimed by Shri Manu Mathew and the petitioner, and that the petitioner has failed to produce any documents to show that the goods seized were in his possession. It is noted that when the Police handed over the goods with Report at 8/45 PM or thereafter till 11/10 PM on 13.6.2008, the petitioner has not appeared before the Intelligence Officer. The petitioner claimed possession of the goods as purchasing agent of Shri Manu Mathew and the petitioner has no records or documents with him to substantiate his claim, it is noted. The owner of the goods seized has already been ascertained by the Police as well as the Commercial Tax Department. Shri M. Kareem is WPC.24643/08H 6 identified as the owner, it is found. 5. In order to appreciate the issues, it is necessary to refer to Section 49(3) and (4) which read as follows: “49. Confiscation by Authorised Officers in certain cases.- (3) Where the authorised Officer is satisfied that the driver or other person in charge of the vehicle or vessel or other conveyance is smuggling notified goods, the Officer shall have the power to seize and detain the goods along with the vehicle or vessel: Provided that before taking action to seize and detain the goods and the vehicle or vessel under this Section, the Officer shall give the person in charge of the goods and the owner, if ascertainable, and to the owner of the vehicle or the person in charge of the vehicle a notice in writing informing him the reason for the seizure and detention of the goods and vehicle or vessel and an opportunity of being heard: Provided further that the authorised Officer may release the goods and the vehicle or vessel seized and detained if the owner or the person in charge of the notified goods or the owner or WPC.24643/08H 7 person in charge of the vehicle or vessel files an option to pay in lieu of seizure and detention, a redemption fee equal to thrice the amount of tax due at the rate applicable to the goods liable to seizure and detention and twice the tax due or an amount of Rs.50,000/= whichever is higher for the release of the vehicle or vessel in lieu of detention: Provided further that if the owner of the vehicle produces the documents specified in sub- section (3) of Section 46 and the owner of t4he goods proves the bonafides of the transport of goods within seven days of the seizure and detention the Officer shall release the goods and the vehicle. (4) Notwithstanding anything contained in the foregoing provisions, if the owner or person in charge of the notified goods or the owner or person in charge of the vehicle fails to prove the genuineness of the transport of the notified goods or to remit the redemption fee as specified in second proviso to sub-section (3), within thirty days from the seizure and detention of goods and WPC.24643/08H 8 the authorized Officer has reason to believe that the owner or the person in charge of the vehicle or the driver has transported the notified goods to evade payment of tax with the knowledge or connivance of the owner of the goods, the Officer may confiscate the vehicle or vessel along with the goods. Provided that the authorized Officer shall serve notice to the owner of the vehicle or the person in charge of the vehicle or the owner of the notified goods, if ascertainable, intimating the reason for the confiscation of the vehicle or vessel affording him and an opportunity of being heard. The Officer shall also afford an opportunity to any of such persons to pay a penalty equal to thrice the amount of tax attempted to be evaded in lieu of confiscation of the notified goods and an amount equal to thrice the amount of such tax or rupees one lakh whichever is higher in lieu of confiscation of the vehicle or vessel.” Undoubtedly, this Court has rejected the claim of Shri Manu Mathew on the ground that he had failed to establish that the goods belonged to him. This Court also found that Shri Manu WPC.24643/08H 9 Mathew has not been able to establish that the goods were seized from the shop. It is thereafter that by Ext.P4 Judgment this Court directed the claim of the petitioner for release of the goods under the second proviso to Section 49(3) to be considered. 6. The case set up by the petitioner is that, having regard to the mahazar the petitioner has a legal right for release of the goods on payment of the amount mentioned in the second proviso, on the ground that he was identified as the person-in- charge of the goods. 7. Learned Government Pleader would point out that the second proviso to Section 49(2) only vests a discretion with the Officer to release the goods, as the word used is “may”. He supported Ext.P5. He would further contend that the Officer has identified Shri Kareem as the owner of the goods and in such circumstances, the stage is over when the petitioner, at any rate, could have insisted for the release of the goods. Shri V.P. Sukumar would also refer me to sub-section (4) of Section 49 WPC.24643/08H 10 and would contend that it may not be open to the interpretation that if a person-in-charge requests for the release of the goods and offers to pay the amount, the authority could make any further progress as provided in sub-section (4) and in the other subsequent provisions. This result, he would persuade me to accept by pointing out that as declared in Section 49(4), it is only if the owner or person-in-charge of the notified goods fails to remit the redemption fee as specified in the second proviso to sub-section (3) within thirty days of the seizure and detention of the goods and the authorised Officer has the reason to believe that the said person or the person-in-charge of the vehicle or driver has transported the goods to evade payment of tax with the knowledge or connivance of the owner, confiscation is permissible. He would further contend that the word “may” in sub-section (3), in this context, must be read as “shall”. 8. The first question to be considered is whether, if a person as the owner or in charge of the notified goods files an option to pay the amount, the Officer is bound to release the WPC.24643/08H 11 goods ? One way of looking at it would be is that the word “may” implies not a duty, but a discretionary power to release the goods. The goods would have to be released on payment of thrice the amount of tax. Cases can fall in two broad categories. In the first category would be cases where the release is sought by the owner or person-in-charge of the goods in respect of proceedings launched against him for the first time. The second category would be cases where the proceedings may be taken in relation to a person for the second time or more than on two occasions. In the second category, one would be dealing with persons who could be characterised as persons who are unrelenting in the matter of breaching the law. Could it be said that irrespective of the circumstances, the second proviso mandates a duty to release the goods on mere payment of the amount three times of the tax ? Some indication as to the nature of the duty can be gleaned from the terms of the proviso to sub- section (4) which I have already extracted. Undoubtedly, this is a provision which contemplates service of notice when a WPC.24643/08H 12 decision is taken to confiscate. It provides that the Officer has to provide an opportunity to the owner of a notified goods among others, to pay a penalty equal to thrice the amount of tax in lieu of the confiscation of the notified goods. The word used in the said proviso is “shall”. No doubt, notice is not contemplated as per the said proviso to be issued to the person- in-charge of the goods. Further more, sub-section (4), as already noticed, empowers the authorised Officer if he has reason to believe that the owner or person-in-charge of the vehicle or the driver has transported the notified goods to evade payment of tax with the knowledge or connivance with the owner of the goods, provided that the owner or person-in-charge of the notified goods, either fail to prove the genuineness of the transport or to remit the redemption fee as per the second proviso to sub-section(3) within thirty days of the seizure, to confiscate the goods. Further proceedings after the seizure and detention of the goods are to be done by the Officer as contemplated in sub-section (4). An Appeal is provided before WPC.24643/08H 13 the Deputy Commissioner and a Revision is provided before the Commissioner. No doubt, sub-section (9) provides that the order of confiscation will not prevent the infliction of any punishment for which the person is liable under the Act. It should be noticed that in the third proviso to sub-section (3), in contra distinction from the use of the word “may”, in a case where the owner of the vehicle produces the documents specified in sub-section (3) of Section 46 and the owner proves the bonafides of the transport within seven days, the Officer is bound to release the goods and the vehicle. The word used in the said proviso as “shall”. If, therefore, it is found that the power to confiscate cannot be exercised in a case where the owner of the goods or the person-in-charge of the notified goods, pays the redemption fee within thirty days of the seizure and detention of the goods, it would advance the case of the petitioner that he has a right for release of the goods on filing the option under the second proviso to sub-section (3) of Section 49. Contemplate a situation where the authorised WPC.24643/08H 14 Officer accepts the option by the owner or person-in-charge of the notified goods and release the goods and he effects the payment under the second proviso within thirty days. It would be then become impermissible for the authorised Officer under sub-section (4) to proceed to confiscate the goods. 9. Then the further question would be whether it could be contended that the meaning of the words “if the owner or person fails to remit the redemption fee” should be limited to a case where, in the exercise of the discretion, the authorised Officer permits him to pay the amount under the second proviso to sub- section (3). In other words, could it be said that there must be a decision taken in the exercise of his discretion to release the goods when the owner or person-in-charge of the goods files an option and payment is made within thirty days in order to deprive the authorised Officer of the power to proceed to decide that he may confiscate the goods along with the vehicle. I cannot also overlook the fact that the owner appears to have a legal right to have the goods released from the confiscatory WPC.24643/08H 15 process under the proviso to sub-section (4) upon payment of thrice the amount of tax attempted to be evaded. No doubt, the word used in the second proviso to sub-section (4) is “thrice the amount of tax due”. Thus, if a person is the owner of the goods, it would be a reasonable interpretation of the second proviso to hold that he has a right to have the goods released by filing the option mentioned in the second proviso and paying the amount within thirty days. There can be no further steps under the Act, in such a situation. 10. The petitioner is admittedly is not the owner of the goods. He indeed claims in the Writ Petition and before the authority as agent of Shri Manu Mathew. Shri Manu Mathew was found to be not the owner of the goods by this Court in Ext.P3. The finding of the authority is that it is not Shri Manu Mathew, but Shri Kareem who is the owner of the goods. In this context, various factors have been gone into by the statutory authority to hold that Shri Kareem is the owner of the goods. Obviously, the goods does not come under the third proviso to WPC.24643/08H 16 sub-section(3). in that, neither the owner of the goods, nor the person-in-charge of the notified goods, has succeeded in proving the genuineness of the transport within the meaning of the said proviso. A person who is in charge of the notified goods should be presumed to be acting on behalf of the owner. Here, the Officer has found that the owner is Shri Kareem. 11. Going by the version of the petitioner, he is clearly claiming as person-in-charge on behalf of Shri Manu Mathew, which means that if release of the goods is ordered to him, he will have to account the goods to Shri Manu Mathew, as the owner. Thus, if the petitioner is to be given the goods, it will tantamount to passing an order to release the goods to Shri Manu Mathew. As already noticed, it was found by the respondent that Shri Kareem is the owner of the goods and notice also is issued. Under the proviso to sub-section (4) of Section 49, no notice is contemplated to the person-in-charge of the goods and notice need be issued only to the owner of the goods. It is not as if Shri Manu Mathew has been able to WPC.24643/08H 17 establish his right within the meaning of the 3rd proviso to sub- section (3) of Section 49, either. Whatever may have been the position at an early stage, having regard to the position obtaining, I would think that I need not exercise the discretion under Article 226 of the Constitution of India in favour of the petitioner. In such circumstances, I decline jurisdiction and dismiss the Writ Petition. Sd/= K. M. JOSEPH, JUDGE kbk.