Tripura High Court Orders Refund of Security Deposit to North East Carrying Corporation Ltd.

Security deposit under the repealed TVAT Act must be refunded with interest; penalty imposition deemed arbitrary and illegal.

Agartala, November 25, 2025: In a significant ruling, the Tripura High Court has directed the State of Tripura to refund Rs. 12,00,000 to M/s. North East Carrying Corporation Ltd., a transporter company, along with interest and costs. The court found that the security deposit retained under the Tripura Value Added Tax Act, 2004 (TVAT Act) cannot be held by authorities under the Tripura State Goods and Services Tax Act, 2017 (TSGST Act), as the latter does not necessitate such a deposit. 

The bench, consisting of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha, determined that the respondents' actions in retaining the security deposit and imposing penalties were arbitrary, illegal, and beyond their jurisdiction. The petitioner had initially deposited the security amount in 2013 under the TVAT Act to secure registration as a transporter. However, with the introduction of the TSGST Act in 2017, the requirement for a security deposit ceased to exist.

The court highlighted that imposing penalties under the repealed TVAT Act for periods long past was unjust and violated principles of natural justice. Show-cause notices issued in 2023 for transactions between 2013-2018 were deemed arbitrary and violative of Articles 14 and 265 of the Indian Constitution. The judgment underlined that any penalty imposition must be based on a transporter’s deliberate or dishonest conduct, which was not established in this case.

Additionally, the court quashed all show-cause notices and orders passed against the petitioner for the periods 2013-2018, emphasizing the absence of legislative competence to impose tax liabilities on transporters under the TVAT Act.

The court also awarded costs of Rs. 20,000 to the petitioner, directing the refund of the security deposit with interest at 7% per annum from April 2023 until payment is made. This decision reaffirms the necessity of adhering to legal provisions and respecting the rights of taxpayers under transitional tax regimes.

Bottom Line:

Refund of security deposit - Security deposit required under the Tripura Value Added Tax Act, 2004 for registration as a transporter cannot be retained by the authorities under the Tripura State Goods and Services Tax Act, 2017, which does not mandate such deposit. Refund ordered with interest and costs.

Statutory provision(s): Tripura Value Added Tax Act, 2004 Sections 33, 77; Tripura State Goods and Services Tax Act, 2017 Section 174; Articles 14, 265 of the Constitution of India.

M/s. North East Carrying Corporation Ltd. v. State of Tripura, (Tripura)(DB) : Law Finder Doc Id # 2813154