Goods can be Released on Payment of Fine in lieu of Confiscation during process of Adjudication and Post-Adjudication: Kerala HC [Read Judgment]

Kerala High Court - Taxscan

The Kerala High Court has held that the goods can be released on payment of the fine in lieu of confiscation during the process of adjudication and post-adjudication.

A review petition against the interim order is preferred by the State Tax Officer in respect of the issue of whether section 130(2) of the Act contemplates the release of goods by payment of the fine in lieu of confiscation, even before orders of confiscation are issued.

The single bench of Justice Bechu Kurian Thomas held that the provisions of section 130 of the Act contemplate release of goods on payment of the fine in lieu of confiscation at two stages (i) during the process of adjudication, under section 130(2) and, (ii) post-adjudication under section 130(3) of the Act.

The court said that the words “be liable” in section 130(3) of the Act only conveys a possibility of attracting the obligation and not an imperative obligation, shorn of fair procedure. In view of the above deliberations, this Court is of the view that, when fine in lieu of confiscation is paid by a dealer under section 130(2) of the Act, the liability for payment of tax, penalty, and charges will fall upon the dealer, in addition to the fine and they need be paid only after adjudication. To obtain the release of the goods or conveyances, while the adjudication proceedings are continuing, the taxpayer needs to pay only the fine and not the tax, penalty, and charges thereon. The tax, penalty, and charges can be paid after adjudication.

“The words ‘be liable’ in the context in which it occurs in section 130(3) of the Act only imports a possibility of attracting liability. Merely because the owner of goods or conveyance opts to pay a fine in lieu of confiscation does not mean that the facts essential for incurring the liability to order confiscation automatically stands proved. That proof has to come out through the process of adjudication, as otherwise, there would be conferment of unbridled powers upon the Proper Officer to coerce every dealer to pay fine, tax, penalty, and other charges without even any adjudication. Such a procedure is against fairness and contrary to the principle of rule of law,” the court noted.

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