IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C).No. 24643 of 2008(H)
1. ARUN, S/O.JOHN ALIAS YOHANNAN,
... Petitioner
Vs
1. THE CIRCLE INSPECTOR OF POLICE,
... Respondent
2. THE INSPECTING ASSISTANT COMMISSIONER
3. THE INTELLIGENCE OFFICER, COMMERCIAL
For Petitioner :SRI.V.P.SUKUMAR
For Respondent : No Appearance
The Hon'ble MR. Justice K.M.JOSEPH
Dated :19/12/2008
O R D E R
K. M. JOSEPH, J.
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W.P.C. NO. 24643 OF 2008 H
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.