IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 16TH OCTOBER 2009 / 24TH ASWINA 1931 WP(C).No. 28943 of 2009(K) -------------------------- PETITIONER: --------------- HONEYWELL AUTOMATION INDIA LTD., DOOR NO.28/3825C,SAHODARAN AYYAPPAN ROAD, ELAMKULAM,KADAVANTHRA P.O.,COCHIN-20, REP.BY ITS SITE IN CHARGE,SHAMIAM, BY ADV. SRI.R.MURALEEDHARAN (AROOR) RESPONDENT(S): --------------- 1. THE COMMERCIAL TAX OFFICER (WORKS CONTRACT & LT),DEPARTMENT OF COMMERCIAL TAXES,ERNAKULAM. 2. THE COMMERCIAL TAX INSPECTOR, COMMERCIAL TAX CHECK POST, BANGARA MANJESWAR. 3. THE BHARAT PETROLEUM CORPORATION LTD., KOCHI REFINERY,AMBALAMUGAL,KOCHI. R1 & R2 BY GOVT. PLEADER SRI. C.K. GOVINDAN R3 BY ADV. SRI. N.N. SUGUNAPALAN, SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: shg/ C.K. ABDUL REHIM, J - - - - - - - - - - - - - - - - - - - - - - - W.P.(C)No. 28943 of 2009 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 16th day of October, 2009 J U D G M E N T 1. Petitioner is a public limited company and is a the registered dealer under the provisions of the Kerala Value Added Tax Act, 2003 (KVAT Act). The petitioner had entered into a contract with the 3rd respondent for supply of “Distributed Control System” on 'FOR' (Free on Road) basis and also undertaken assembling, erection and commissioning of the said machinery at site, as per terms of Ext.P2 purchase order. Grievance of the petitioner is that machineries and equipments dispatched by the petitioner in two truck loads addressed to the 3rd respondent was intercepted by the 2nd respondent and Ext.P5 notice was issued under the provisions of 47 (2) of the KVAT Act. According to the petitioner the consignment was accompanied by Invoice cum Delivery Chellan and Consignment Note of the Transporter. W.P.(C)No. 28943 of 2009 -2- 2. The alleged reason for detention is that on verification of the documents it is revealed that the transport is effected on the strength of Form 16 Declaration issued by the 3rd respondent and at the same time from the invoice it is revealed that the transport is effected pursuant to inter state sale, on collecting 2% CST. Since the documents are contradictory with respect to the nature of transport, the authority had suspected evasion at payment of tax. 3. Subsequent to detention, Ext.P2 purchase order was placed for consideration of the 2nd respondent and after perusal of the purchase order the 2nd respondent arrived at a conclusion that the entire deal is coming within the purview of the 'works contract' defined under the KVAT Act, and the whole amount payable by the 3rd respondent to the petitioner is liable to be taxed under Section 15 (2) of the KVAT Act. It is also alleged that on verification it is understood that the petitioner, eventhough is a registered dealer, is now remaining defunct and that they are not filing W.P.(C)No. 28943 of 2009 -3- any return and had renewed the registration. Therefore attempt at evasion of payment of tax was suspected and security deposit was demanded based on the value involved in the transaction. 4. According to the petitioner the allegation that the petitioner is remaining defunct is not true and correct. They are regularly filing returns and paying tax is the contention. In support, the petitioner had produced Ext.P6 to P10 documents . It is the further contention that the deal entered into with the 3rd respondent is not a works contract, but it is a divisible contract where sale of machinery along with its erection is undertaken. It is further submitted that the Form 16 declaration happened to be accompanied along with the transport only due to a bonafide mistake and the transport in question was actually in pursuance of an inter state sale, effected against C Form levying 2% CST. Therefore the suspicion regarding evasion at payment of tax is totally baseless and the petitioner is seeking direction for release of the goods. W.P.(C)No. 28943 of 2009 -4- 5. Heard learned counsel appearing for the petitioner, Government Pleader for the respondents 1 & 2, and standing counsel appearing for the 3rd respondent. The learned Government Pleader contented that the amount involved in the deal, which is basically in the nature of works contract, is very huge and the petitioner eventhough claims as a registered dealer is not having any regular transaction within the State. Since huge amounts of tax is involved, release of the goods can be ordered only if the petitioner is making deposit of the entire amount demanded under Ext.P5 or on furnishing Bank Guarantee for the entire amount, is the contention. 6. Having considered rival contentions and facts and circumstances of the case, I am of the opinion that whether there was any attempt at evasion of payment of tax involved in the consignment is a matter which need be decided on finalisation of the adjudication proceedings contemplated under Section 47 of the Act. Since the W.P.(C)No. 28943 of 2009 -5- security deposit demanded is double the amount calculated at 12.5% of the entire value of the deal, deducting labour element, it is unworkable for the petitioner to comply with the condition for deposit for the entire amount as insisted. It is evident that the machinery/equipments is consigned to the 3rd respondent by virtue of sale or by virtue of a contract for installation of the same. A charge can be created on the amount due from the 3rd respondent to the petitioner on fulfillment of the deal, against penalty if any found ultimately liable to be imposed. Therefore I am of the opinion that, the goods can be released pending finalisation of the adjudication proceedings incorporating a charge on the bill amount due to the petitioner from the 3rd respondent, to the extent of the security deposit demanded. 7. In the result, the Writ Petition is disposed of directing the 3rd respondent to restrain from disbursing the amounts due to the petitioner pursuant to erection of the machineries under transport, covered under Ext.P3 invoice, to the extent of Rs.2,58,16,482/- until the competent W.P.(C)No. 28943 of 2009 -6- authority finalise the adjudication proceedings under Section 47 of the KVAT Act and until clearance is produced by the petitioner from such authority. 8. The 2nd respondent is directed to release the goods detained under Ext.P5 along with vehicles on the petitioner furnishing a Security Bond without sureties in the form provided under the KVAT Rules for the value of security deposit demanded under Ext.P5. 9. The competent authority under Section 47 (5) & 6 is directed to expedite the adjudication proceedings and to finalise the same after affording opportunity of hearing to the petitioner, as early as possible at any rate within one month from the date of release of the goods. C.K. ABDUL REHIM JUDGE shg/