The Dharwad bench of the Karnataka High Court has said that it is not permissible for the tax authorities to take the view that the grade and quality of arecanuts has also to be declared when the statutory notification prescribes a particular rate of tax for arecanuts.
Justice N S Sanjay Gowda observed this while granting relief to an arecanut seller from Birur in Chikkamagaluru district.
Seven trucks belonging to the petitioner company were detained in September 2021 and later confiscated on the ground of defective documents/ invoices as well as for evasion of tax. The tax authorities alleged that the grade of the arecanuts being carried was having a higher value in the market and its non-disclosure amounted to undervaluation under Central Goods and Service Tax (CGST) rules. The company moved the High Court after the appellate authority upheld the seizure and confiscation orders.
“In a proceeding under the Act (CGST), the market value of the goods is not relevant unless in certain specified circumstances. For all normal purposes, the value would have to be determined as per Section 15 of the Act which would be the price actually paid or payable. It is to be borne in mind that there is no law which demands that the supply of goods should be made only at a market value. In fact, in business, the rate at which the goods are supplied could vary depending on the various factors and could not be determined uniformly,” the court said.
Justice Sanjay Gowda said that the entire basis that there was undervaluation was completely incorrect and the consequential conclusion that there was undervaluation with an intent to evade payment of tax, cannot also be accepted. Since it was informed that the confiscated goods were sold in a public auction, the court directed the authorities to pay the petitioners the sale proceeds of the auction after deducting the penalty prescribed under Section 129 (1) (a) of the Act.