Tripura High Court
M/S North East Carrying Corporation ... vs The State Of Tripura Represented By The ... on 25 November, 2025
Page 1 of 14
HIGH COURT OF TRIPURA
AGARTALA
WP(C) No.36 of 2025
M/s North East Carrying Corporation Ltd. (NECC), TRN No.16010004,
having its registered office at B.K. Road, North Banamalipur, Agartala, West
Tripura, being represented by its authorized representative: Sri Suman Prakash
(Branch Manager of Agartala)
.........Petitioner(s);
Versus
1. The State of Tripura represented by the Secretary of Finance, New
Secretariat Complex, PO- Secretariat Office Rd, 79 Tilla, Agartala, West
Tripura-799010
2. The Commissioner of Taxes, Govt. of Tripura, 3rd Floor, Khadya Bhavan,
P.N. Complex, Gurkhabasti, Agartala, West Tripura
3. The Superintendent of Taxes, Charge-I, Govt. of Tripura, Kar Bhavan,
Palace Compound, Agartala, West Tripura
.........Respondent(s)
along with
M/s North East Carrying Corporation Ltd. (NECC), TRN No.16010004,
having its registered office at B.K. Road, North Banamalipur, Agartala, West
Tripura, being represented by its authorized representative: Sri Suman Prakash
(Branch Manager of Agartala)
.........Petitioner(s);
Versus
1. The State of Tripura represented by the Secretary of Finance, New
Secretariat Complex, PO- Secretariat Office Rd, 79 Tilla, Agartala, West
Tripura-799010
2. The Commissioner of Taxes, Govt. of Tripura, 3rd Floor, Khadya Bhavan,
P.N. Complex, Gurkhabasti, Agartala, West Tripura
3. The Superintendent of Taxes, Charge-I, Govt. of Tripura, Kar Bhavan,
Palace Compound, Agartala, West Tripura
.........Respondent(s)
For Petitioner(s) : Mr. Bibhal Nandi Majumder, Sr. Advocate,
Mr. Dhruba Jyoti Saha, Advocate,
Mr. Samrat Sarkar, Advocate.
For Respondent(s) : Mr. Pradyumna Gautam, Sr. G.A.
HON'BLE THE CHIEF JUSTICE MR. M.S. RAMACHANDRA RAO
HON'BLE MR. JUSTICE S. DATTA PURKAYASTHA
Date of hearing : 29.10.2025
Date of Judgment & Order : 25.11.2025
Whether Fit for Reporting : YES
JUDGMENT & ORDER
(M.S. Ramachandra Rao, C.J.)
The background facts
1) The Petitioner is a Company registered under the Companies Act,
1956 having its registered office at Agartala.
2) On 23.07.2013, when the Tripura Value Added Tax Act, 2004
[for short 'the TVAT Act'] was in operation, petitioner was registered (Vide
Annexure 1 in W.P.(C) No.37 of 2025) under the said statute as a taxable
transport agent (hereinafter referred to as 'transporter') under Section 22 of
the TVAT Act, and also the Tripura Value Added Tax Rules, 2005 [TVAT
Rules, 2005] made thereunder.
3) To secure such registration, the petitioner had deposited on
12.7.2013 an amount of Rs.12,00,000/- as security deposit with respondent
No.3 in view of sub-section (4) of Section 22 of the TVAT Act, 2004 (vide
Annexure 1 in W.P.(C) No.37 of 2025).
4) The TVAT Act was repealed when the Tripura State Goods and
Services Tax Act, 2017 [TSGST Act, 2017] was enacted with effect from
01.07.2017 as per notification dt. 29.06.2017 issued by the Government of
Tripura, Finance Department (Taxes & Excise).
5) Under Section 174 of the TSGST Act, 2017, except in respect of
goods included in the Entry 54 of List II of Seventh Schedule to the
Constitution, the TVAT Act, 2004 was repealed w.e.f. 01.07.2017. The said
entry deals with only five petroleum products and alcohol for human
consumption.
6) Believing that after the coming into force of the TSGST Act,
2017 w.e.f. 01.07.2017, the provisions of the TVAT Act, 2004 are no longer
applicable and the security deposit is not necessary to be given to the GST
authorities and so it cannot be retained by the respondents, petitioner filed an
application dt. 05.04.2023 (Annexure 2 in W.P.(C) No.37 of 2025) before the
Superintendent of Taxes, Charge-I, Tripura, Agartala (respondent No.3)
seeking refund of the said amount.
7) The respondent No.3 issued 7 show cause notices under Section
77 of the repealed TVAT Act, 2004 on 04.07.2023, 14.07.2023 and
18.07.2023 proposing to impose penalty for the period of September, 2013 to
March, 2014. It was alleged in these notices that the petitioner had given
delivery of taxable consignments against consignment notes in those financial
years against which no valid delivery permits were found from the
consignee(s), and petitioner should show cause why penalty under Section 77
of the TVAT Act, 2004 be not imposed on it.
8) Petitioner appeared before the respondent No.3 and filed replies
dt. 20.07.2023 and 07.08.2023 (Annexure-4 in W.P.(C) No.37 of 2025) stating
inter alia that as per Section 33 of the TVAT Act, 2004, no assessment can be
made after expiry of 5 years; as per Rule 21(8) of the TVAT Rules, 2005, a
dealer is required to keep documents in regard to a particular year for a
maximum period of five years from that particular year only to which they
relate; and a transporter cannot be expected to keep documents for an
indefinite period. Petitioner requested for withdrawal of the notices and refund
of the security deposit at the earliest.
9) On 08.01.2024 (Annexure-5 in W.P.(C) No.37 of 2025) another
notice was issued by respondent No.3 stating that Section 33 of the TVAT
Act, 2004 was not applicable to petitioner, and petitioner should appear with
documents before the respondent No.3.
10) Petitioner appeared and reiterated the same stand taken by it
earlier.
11) On 18.03.2024, the respondent No.3 passed 7 impugned orders
(Annexure-6 in W.P.(C) No.37 of 2025) under Section 77 of the TVAT Act,
2004 imposing tax and also a penalty of 150% for the months of September,
2013 to March, 2014. The details of period, tax and penalty imposed on
petitioner in these orders is as under:
PERIOD TAX LEVIED PENALTY LEVIED
SEPTEMBER, 2013 Rs.29,823/- Rs.44,735/-
Rs.3568/- Rs.5351/-
OCTOBER, 2013 Rs.1,51,070/- Rs.2,26,605/-
NOVEMBER, 2013 Rs.58,031/- Rs.87,046/-
Rs.26,103/- Rs.39,155/-
DECEMBER, 2013 Rs.23,409/- Rs.35,114/-
Rs.3,627/- Rs.5,440/-
JANUARY, 2014 Rs.70,355/- Rs.1,05,533/-
Rs.77,826/- Rs.1,16,739/-
FEBRUARY, 2014 Rs.887/- Rs.1331/-
Rs.54,390/- Rs.81,585/-
MARCH, 2014 Rs.24,243/- Rs.36,365/-
Rs.2424/- Rs.3636/-
12) The petitioner then filed rectification petitions (Annexure-7 in
W.P.(C) No.37 of 2025) on 14.05.2024 under Section 74 of the TVAT Act
against all the impugned orders imposing tax and penalty contending that
assessment is barred beyond 5 years from the corresponding assessment year
under Section 33 of the said Act placing reliance on a Division bench decision
of this Court in T.R. Freight Movers v. State of Tripura and others1.
13) On 01.08.2024 (Annexure-8 in W.P.(C) No.37 of 2025) the
respondent No.3 rejected the said applications for rectification stating that
under Section 69 of the TVAT Act, 2004 (Rule 22 of the TVAT Rules, 2005)
and under Section 70(2) of the TVAT Act, 2004 (rule 24 of the TVAT Rules,
2005), there is no power vested upon the said respondent to rectify any order
issued or quash any order under Section 77 of the TVAT Act, 2004.
14) All the show cause notices and the order dt. 18.03.2024 and order
dt. 01.08.2024 were challenged by petitioner in W.P.(C) No.37 of 2025.
15) Thereafter, the respondent No.3 got served on the petitioner show
cause notices dt. 02.08.2024 proposing to impose penalty under Section 77 of
the repealed TVAT Act, 2004 on petitioner for the financial years 2014-15,
2015-16, 2016-17 and 2017-18 respectively (Annexure-3 in W.P.(C) No.36 of
2025).
16) It was alleged in these notices that the petitioner had given
delivery of taxable consignments in those financial years without any valid
delivery permits found from the consignees. It was asked to appear on
W.P.(C) No. 42 of 2005 dt. 30.03.2011 (Agartala Bench of Gauhati High Court ) (DB)
02.09.2024 to show cause why penal action shall not be taken under Section
77 of the Act.
17) In W.P.(C) No.36 of 2025, petitioner has sought for quashing of
the show cause notices issued under Section 77 of the TVAT Act, 2004 for the
years 2014-15, 2015-16, 2016-17 and 2017-18 issued by the respondent No.3,
and sought for refund of the security deposit of Rs.12,00,000/- deposited with
the respondents in July, 2013.
Consideration by the Court
18) Section 77 of the TVAT Act, 2004 invoked by the respondents
against the petitioner states:
"77. Penalty payable by the transporters :
(1) If the Commissioner is satisfied that any transporter
has delivered taxable goods to any person without
obtaining from the dealer, copy of the valid permit or has
concealed the actual particulars of the consignment
transported by him, the Commissioner may direct that
such transporter shall pay, in addition to tax, by way of
penalty, a sum which may extend to one hundred and fifty
percent of the tax involved.
(2) No order under sub-section (1) shall be made unless
the transporter 73 has been heard or has been given
reasonable opportunity of being heard."
(emphasis supplied)
19) The petitioner's counsel relied on the decision of a Division
Bench of the Gauhati High Court, Agartala Bench in T.R. Freight Movers (1
supra).
T.R. Freight Movers ( 1 supra).
20) In that case, the Division Bench of the Gauhati High Court had
held that under Section 77, a transporter has been made liable to pay, on non-
fulfilment of obligations, 'in addition to tax', by way of penalty, a sum, which
may extend to 150% of the tax involved.
21) The Bench held that a transporter had been held liable to pay
'tax', i.e., 'tax payable', which means that there must be an assessment of tax
at the hands of the dealer, because the transporter does not fall within the
definition of dealer as embodied in the TVAT Act, 2004; that there is no
mechanism provided in the said Act for assessment of tax, which a transporter
helps to evade; so the liability to pay tax imposed on a transporter by Section
77 of the Act is constitutionally impermissible.
22) It held that the TVAT Act, 2004 was enacted under Entry 54 of
List II of Seventh Schedule to the Constitution, that tax under the Act can only
be levied on 'taxable turnover of the goods'; and in exercise of such powers,
'tax' cannot be imposed on the transporter, which the dealer is, otherwise
required to pay.
23) It declared that, in the absence of a deeming provision that if a
transporter delivers to any dealer or any person goods without obtaining from
him a copy of the valid permit or if the transporter conceals the actual
particulars of the consignment transported by him, the goods in question, so
transported by the transporter, shall be deemed to have been sold by the
transporter within the State of Tripura, Section 77 providing for the realization
of 'tax' from the transporters, is beyond legislative competence of the State
legislature.
24) It however held that Section 77 of the TVAT Act, 2004 in so far
as it permits imposition of penalty, is intra vires Entry 54 of List II of Seventh
Schedule to the Constitution because it operates in aid to the main charging
section. To check evasion of tax, it had been made. The penalty provision has
an intimate nexus with evasion of tax by the dealers, whose goods are carried
by the transporter and for whose failure to procure the road permits and
furnish correct information, evasion of tax takes place.
25) However, it laid down guidelines for levying penalty under
Section 77 of the Act can be imposed on a transporter.
26) The Bench clarified that imposition of penalty is different than
that of determination of the liability to pay tax under the charging section. The
interpretation applied to charging section cannot, thus be applied
mechanically, while interpreting a 'penalty' provision. Both the provisions
i.e., penalty and charging have different objects to achieve and consequences
to follow.
27) It declared that as per the decision of the Supreme Court in
Hindustan steels Ltd vs. State of Orissa2, ordinarily, penalty will not be
imposed unless the party obliged either acted deliberately in defiance of law or
was guilty of conduct contumacious or dishonest or acted in conscious
disregard of its obligation; that imposition of penalty is not mandatory or
compulsory; and it is only on the satisfaction arrived at by the Commissioner
that the transporter had acted deliberately in defiance of law or was guilty of
conduct contumacious or dishonest, or acted in conscious disregard of its
obligation that penalty can be imposed. It held that discretion has been given
(1970) 25 STC 211 (SC)
under Section 77 of the Act to impose or not to impose penalty, by use of the
word 'may' in Section 77.
28) It has been pointed out to us that the State of Tripura had filed
appeals (C.A No.1212 of 2018) under Art.136 of the Constitution of India in
the Supreme Court of India which is pending in that Court, but no stay was
obtained by them of the judgment in T.R. Freight Movers (1 supra).
29) The said decision was also followed by another Division Bench
of the Tripura High Court in M/s. M.S. Freight Carriers (India) Private
Limited v. State of Tripura and others3.
30) Thus the respondents are bound by the said decision in T.R.
Freight Movers (1 supra) and M/s. M.S. Freight Carriers (India) Private
Limited (3 supra) as its operation has not been stayed by the Supreme Court
till date and they cannot deviate from it.
31) A reading of the orders dt. 18.03.2024 passed by respondent No.3
shows that the decision in T.R. Freight Movers (1 supra) has been violated by
the said official in the following manner:
(a) tax has been imposed on the petitioner for the period from
September, 2013 to March 2014 which is impermissible as per the said
judgment; and
(b) penalty of 150% was imposed mechanically without
determining, whether in the facts and circumstances of the case, petitioner's
conduct warrants such imposition of 150% of penalty i.e., whether petitioner
had acted deliberately in defiance of law or was guilty of conduct
contumacious or dishonest, or acted in conscious disregard of its obligation.
Common Judgment dt.23.6.2014 in W.P.(C) No.2,6 and 10 of 2007 (DB)
32) For the period September, 2013 - March, 2014, the show cause
notices had been issued on 04.07.2023, 14.07.2023 and 18.07.2023 i.e., with
delay of more than 9 years from the dates of alleged violation by petitioner.
33) For the period 2014-18, the show cause notices were issued on
02.08.2024 i.e., with 9-6 years delay from the dates of alleged violation by
petitioner.
34) All the above show cause notices had been admittedly issued
only after the petitioner had sought refund of the security deposit from the
respondent No.3 by its application dt. 05.04.2023.
35) Section 33 of the TVAT Act, 2004 states:
"Section 33. No assessment after five years :-
(1) No assessment under section 31 and 32 shall be made
after the expiry of five years from the end of the tax period
to which the assessment relates;
Provided that in case of offence under this Act for
which proceeding for prosecution has been initiated, the
limitation as specified in this sub section shall not apply.
(2) Any assessment made or penalty imposed under this
Chapter shall be without prejudice to prosecution for any
offence under this Act."
36) Rule 21 of the TVAT Rules, 2005 states:
"Rule 21.
(1) to (7)......
(8) Period of preservation of accounts, books of accounts,
registers by dealers :
(a) The accounts, books of accounts, registers, documents
of the dealer including computerized or electronic accounts
maintained on any computer or electronic media, counter
foils of all statutory forms obtained and used by the dealer,
documents, invoices, cash memos in respect of purchases,
sales, delivery of goods by a dealer, or vouchers in respect of
any year or part thereof shall be preserved by him for a
period of not less then five years after the expiry of the year
to which they relate, or till such period as these may be
required for final disposal of any appeal, review, revision or
reference under the Act or for final disposal of any case
pending before any Court or Tribunal in respect of such year
or part thereof, whichever is later."
( emphasis supplied)
37) It is true that no period of limitation is prescribed in the TVAT
Act, 2004 for issuing show cause notices proposing to impose penalty under
Section 77 of the said Act. So such power has to be exercised within a
reasonable time.
38) In SEBI v. Sunil Krishna Khaitan4, while interpreting the
powers of the Securities Exchange Board of India under Sections 15-H and
15-I of the Securities Exchange Board of India Act, 1992 and regulation 44
and 45 of SEBI (Substantial acquisition of Shares and Takeovers)
Regulations, 1997 where there was a delay of 5 years in initiating proceedings
for levy of penalty, the Supreme Court held that proceedings have to be
initiated within a reasonable time. It declared:
"93. .... In the absence of any period of time and limitation
prescribed by the enactment, every authority is to exercise
power within a reasonable period. What would be the
reasonable period would depend upon facts of each case,
such as whether the violation was hidden and camouflaged
and thereby the Board or the authorities did not have any
knowledge. Though, no hard and fast rules can be laid
(2023) 2 SCC 643, at page 696
down in this regard as determination of the question will
depend on the facts of each case, the nature of the statute,
the rights and liabilities thereunder and other
consequences, including prejudice caused and whether
third party rights have been created are relevant factors.
Whenever a question with regard to inordinate delay in
issuance of a show-cause notice is made, it is open to the
noticee to contend that the show-cause notice is bad on the
ground of delay and it is the duty of the authority/officer to
consider the question objectively, fairly and in a rational
manner. There is public interest involved in not taking up
and spending time on stale matters and, therefore, exercise
of power, even when no time is specified, should be done
within reasonable time5. This prevents miscarriage of
justice, misuse and abuse of the power as well as ensures
that the violation of the provisions are checked and
penalised without delay, thereby effectuating the purpose
behind the enactment."
(emphasis supplied)
39) When the TVAT Rules, 2005 require a 'dealer' to preserve
records and documents in Rule 21(8) only for a period of 5 years after expiry
of the year to which they relate, and also bars under Section 33 of the TVAT
Act, 2004, any assessment of tax on a 'dealer' beyond 5 years from the end of
the tax period to which the assessment relates, a transporter, who is not a
dealer, and who merely helps in transport of goods sold by a dealer, cannot be
put in a worse position than a dealer. So the respondents cannot propose
imposition of penalty under Section 77 long after the said period of 5 years
expired on a transporter like the petitioner. Such an exercise of power is
contrary to the intention of the legislature and cannot be countenanced.
(2007) 11 SCC 363, 1995 Supp 3 SCC 249 para 16, (1989) 3 SCC 483 para 6, (1984) 1 SCC 125 and (1969)
2 SCC 187
40) In the instant case, on the pretext that no period of limitation is
indicated in Section 77 of the Act, the power under the said provision could
not have been invoked after a long passage of time, in 2023 as in this case,
(long after the alleged delivery of goods between 2013-18), that too only after
petitioner sought refund of the security deposit given by it in April, 2023.
There cannot be hung over a citizen/assessee a perpetual sword of penalty
invocable at the whim and caprice of the respondents without reference to the
nature of transactions being undertaken by it. Thus the action of the
respondent No.3 is malafide.
41) We also see no merit in reliance by respondents on Section 43 of
the TVAT Act, 2004 and Rule 35 of the TVAT Rules, 2005 laying down
certain conditions for seeking refund of tax to deny the claim of petitioner for
refund of security deposit.
42) This is because, both these provisions relate to refund of 'tax',
and not to refund of 'security deposit', and the period of limitation if any
prescribed in either of them for seeking refund of 'tax', cannot be made
applicable to the instant case which relates to refund of 'security deposit'.
43) Admittedly, for securing registration under the TSGST Act, 2017,
no security deposit is required for a 'transporter' to be given to the
respondents. No such provision has been brought to our notice. So the
petitioner cannot be compelled to leave the security deposit with the
respondents when they have no power to retain it under the GST regime. They
are therefore bound to refund it to petitioner.
44) For the aforesaid reasons, we hold that the action of the
respondents in issuing show cause notices in 2023 from September, 2013 to
2018 and passing orders on 18.03.2024 adverse to petitioner for period
September, 2013 to March, 2014 is arbitrary, illegal, without jurisdiction,
malafide and also violative of Art.14, 265 of the Constitution of India.
45) Accordingly, both the Writ Petitions are allowed; show-cause
notices issued by the respondent No.3 under Section 77 of the TVAT Act,
2004 for the years 2014-15 to 2017-18 are all quashed; the orders dt.
18.03.2024 passed by the respondent No.3 for the period September, 2013 to
March, 2014 are also quashed for the same reason. The respondents are
directed to refund Rs.12,00,000/- (rupees twelve lakhs only) deposited by the
petitioner as security deposit for registration as a transporter under the TVAT
Act, 2004 with interest @ 7% per annum from 05.04.2023 till the date of
payment. The respondent No.3 shall also pay costs of Rs.20,000/- (Rupees
Twenty thousand only) to the petitioner within eight weeks.
46) All pending applications shall stand disposed of.
(S. DATTA PURKAYASTHA, J) (M.S. RAMACHANDRA RAO, CJ)
Pijush/
PULAK BANIK Digitally signed by PULAK BANIK
Date: 2025.11.25 16:36:17 +05'30'
