State tax dept reinforces authorities' power to seize undervalued goods

High court order had put spotlight on 'organised tax evasion' by the pan masala industry in Uttar Pradesh

- Brajendra K Parashar

LUCKNOW: The state tax department has issued a circular reinforcing tax officials' authority to seize goods transported with undervalued invoices, following a key judgment by the Allahabad high court.

The judgment also brings to the fore the rampant practice of pan masala/gutkha manufacturing units indulging in what the court said "organised tax evasion" in U.P.

On March 3, the court dismissed multiple writ petitions from traders dealing in pan masala and scented tobacco, upholding tax officials' right to detain goods under Section 129 of the GST Act if their declared value is found to be deliberately understated.

A major factor in the ruling was a case where 3.84 lakh pouches of pan masala were declared at just Rs 69,600—an amount the court deemed "grossly undervalued."

In the cases reviewed, the court found that traders had intentionally undervalued their goods to take advantage of Rule 138, which dispenses with the requirement of e-way bills for goods valued below Rs 50,000.