HC asks TS, AP to make proforma bonds

 To address the issue of evasion of tax by certain traders, a division bench of the Hyderabad High Court has directed both AP and Telangana governments to prepare a ‘proforma bond

Published: 17th December 2017 01:27 AM  |   Last Updated: 17th December 2017 07:57 AM   |  A+A-

By Express News Service

HYDERABAD: To address the issue of evasion of tax by certain traders, a division bench of the Hyderabad High Court has directed both AP and Telangana governments to prepare a ‘proforma bond’ to be executed by the custodian of the goods at the time of their interception in either of the state to the effect that in the event of determination of tax liability they would pay the tax and penalty, if any. The bench made it clear that if the custodian was not the dealer, then the latter would be vicariously liable for the bond executed by the former.

The bench granted this interim relief recently when the standing counsels for commercial taxes of both the states apprehended that there was likelihood of tax evasion by certain traders if proper check was not administered. The bench was dealing with batch petitions by Kaveri enterprises and other companies challenging the detention notice issued by the respective commercial tax department on the ground that the goods under transport were not covered by e-way bill as per the GOs issued by both the state governments. They sought the court to issue directions to the department for release of the goods detained.

The controversy arose in the backdrop of enactment of the Integrated Goods and Services Tax Act, 2017 (IGST Act), governing the inter-state movement of the goods. As Rule 138 of the CGST Rules has not been made effective so far, in order to ensure that the tax receivable by the respective recipient states is not evaded, both the States have issued the respective GOs prescribing generation of e-way bill by the recipient dealer of the respective states. 

After hearing the case, the bench, prima facie, was of the opinion that when the Constitution has conferred exclusive legislative power on the Parliament in respect of supply of goods or of services or both in the course of inter-state trade or commerce, the state governments were denuded of the jurisdiction to prescribe any Rules governing such transactions. With regard to the relief sought by the petitioners, the bench held that the detention of goods along with vehicles by both the states only on the ground of non-generation of e-waybill by the traders concerned receiving the goods, was not permissible.

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