Johnson and Johnson Limited vs The Commercial Tax Inspector, Manjeshwar

P.R. Ramachandra Menon, J.—The petitioner is a registered dealer on the rolls of the Assistant Commissioner, Special Circle, Dept. of Commercial Taxes, Mattancherry at Aluva. In connection with the business, the petitioner effected some interstate stock transfer, as borne by Exts.P2 and P3 Stock Transfer invoices. The petitioner is aggrieved of detention of the goods with the vehicle by the respondent/Commercial Tax Inspector, as per Ext.P4 dated 21.02.2014 issued u/s 47(2) of the KVAT Act suspecting evasion of tax and demanding Security deposit as specified therein. In Ext. P4, it is stated as follows:

As per documents accompanied with transport goods under transport is H.L. Medicine comes under III Schedule and declaration 8F of company authorities also confirm the same. But on physical verification of goods, it is seen that it is enzymatic detergent. As per products description it is for cleaning of endoscope re-processors, ultrasound cleaner. Since the detergent comes under 14.5%. Taxation, misclassification of goods is an attempt for evasion of tax. Hence SD demanded after estimating the value of the goods.

The case of the petitioner is that the goods were brought to the State by way of stock transfer, as borne by Exts.P2 and P3 and as such, there is no question of evasion of tax; and that the petitioner is actually selling the product at a higher rate of tax, as discernible from Ext.P5.

The learned Government Pleader submits that there is already misclassification of goods and that the items were brought by the petitioner by describing it as a medicinal product, which actually is a detergent. As such, there is chance for including the said item as a ''medicinal product'' in the relevant entry/Books of Accounts; hence the doubt expressed by the concerned authority is perfectly within the four walls of law. The learned Government Pleader adds that but for the detention, the lapse on the part of the petitioner would not have been brought to light and as such, the petitioner is not entitled for the benefit of the proviso to Section 47(2) of the KVAT Act.

After hearing both the sides, this Court finds that the correctness of the facts and circumstances can be brought out only by adjudication proceedings u/s 47(6) of the KVAT Act. However, for that reason, the goods and the vehicle need not be detained any further and that the same can be released to the petitioner on satisfaction of 25% of the security demanded, as per Ext.P4 and on furnishing ''simple bond'' for the balance amount. It is ordered accordingly. The adjudication proceedings shall be finalised by the competent authority, in accordance with law, as expeditiously as possible, at any rate, within three months from the date of receipt of a copy of the judgment. The petitioner shall produce a copy of the judgment along with a copy of the writ petition before the respondent/Commercial Tax Inspector for further steps.

The writ petition is disposed of.