Kerala will hasten to ring the alarm bells on this new VAT-leakpoint for States at the next meeting of the Empowered Committee of State Finance Ministers on VAT, Isaac said. Since the neighbouring States like Tamil Nadu, Andhra Pradesh and Karnataka are yet to be worried about this new channel of inter-state smuggling, when Kerala initiates a crackdown on the annonymous parcels dropped at its stations, a prior-alerted offender can wait for the train to roll down to the next State to slip his parcel.

"If the Railways is willing, the Kerala government can come forward to open a dialogue for setting up State government check posts within railway station premises," the minister said. What irks the State is that, at several railway stations, the railway authorities are standing in the way of inspection by State tax authorities.

About six parcel companies have booked whole rail wagons passing through Kerala. "Since many parcels have labels with just a cell phone number, the only way the State can get the address details of the sender and receiver is only through the private parcel companies," commissioner of commercial taxes Paul Antony said.

Just half a day of tax-swoopdown by Kerala officials had revealed 3784 orphan parcels worth VAT about Rs 3.32 crore. This could work out to nearly Rs 3000 crore per year, says State government. When enforcement at the tax checkposts in the State was tightened recently, as much as 40% of the goods traffic to the State was diverted to rail route.

The minister alleged that the Railways has been violating court directives. The judgement by a division bench of the Kerala High Court on January 20, 2006 says that the full addresses of sender and receiver of the parcel should be noted in the railway receipt and forwarding note. Except in the goods labelled 'not for sale', the registration number of the trader has to be recorded.

"The Railways has been operating like a profit-mongering businessmen, unperturbed about backing the inter-state smuggling," the minister charged. "It would not challenge the trader's right to use the cheapest form of freight transport, but there is a legal way to do it," he added.