2008 (7) TMI 858 - HC - VAT and Sales Tax

Whether on the facts and circumstances of the case the opposite parties are justified in retaining the books of account seized from the petitioner on October 19 1995 till date without following the procedure contained in section 16(3) of the OST Act read with rule 46 of the OST Rules on the ground that they form part of the assessment record? Held that - In the case at hand the Revenue fails to satisfy that the conditions stipulated in section 16(3) read with rule 46 have been complied with. Nothing regarding retention of books of account has been communicated to the petitioner till date even though books of account have been retained from December 29 1997. Admittedly the books of account of the petitioner were seized by the STO Vigilance on October 19 1995 but those books of account have not so far been returned to it even though more than 12 years have passed. The Revenue also could not satisfy the court that the books of account seized on October 19 1995 have been retained by them following the due procedure of law. In the circumstances the books of account seized from the petitioner s premises on October 19 1995 shall be returned to the petitioner within a period of 30 days from the date of production of certified copy of this order by the petitioner. If the sales tax authorities think that the books of account or any portions thereof are relevant for their purpose they are entitled to take photocopy of such documents or portions of such books of account and return them thereafter.

Summary

Issues:
1. Seizure and retention of books of account by sales tax authorities.
2. Compliance with provisions of the Orissa Sales Tax Act and Rules regarding retention of seized documents.
3. Communication of reasons for retention of seized documents to concerned parties.
4. Legal implications of extended retention of seized documents.

Analysis:
1. The petitioner challenged the order passed by the Assistant Commissioner, Sales Tax regarding the refusal to return seized books of account. The petitioner maintained regular books of account for business purposes and requested the return of seized documents, which were not returned. The main contention was that the retention of documents without following due procedure was in violation of the Orissa Sales Tax Act and Rules.

2. The court examined the provisions of section 16(3) of the OST Act, rule 46, and rule 35 of the OST Rules. Section 16(3) allows seizure of documents by the Commissioner for examination or prosecution, with a requirement to record reasons. Rule 46 sets a time limit for retention of seized documents and mandates recording reasons for extended retention. Rule 35 specifies the preservation of assessment case records for 12 years. The court emphasized that these rules must be followed by sales tax authorities.

3. Referring to relevant legal precedents, the court highlighted the necessity of communicating reasons for extended retention of seized documents to concerned parties. Failure to comply with this requirement renders the retention unlawful, and the affected party has the right to demand the return of seized documents. The court stressed the importance of transparency in the process to prevent prejudice to the party whose documents are seized.

4. The court concluded that the sales tax authorities failed to satisfy the conditions stipulated in the OST Act and Rules regarding the retention of seized documents. As the conditions for extended retention were not met, the court ordered the return of the seized books of account to the petitioner within 30 days. The authorities were allowed to take photocopies if necessary for their purposes. The judgment emphasized the need for adherence to legal procedures to safeguard the rights of individuals in such cases.

Conclusion:
The judgment by the Orissa High Court addressed the issues of seizure and retention of documents by sales tax authorities, emphasizing compliance with legal provisions and the communication of reasons for extended retention. The court's decision to order the return of seized books of account highlighted the importance of following due process and protecting the rights of individuals in such matters.