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2016 (8) TMI 301 - DELHI HIGH COURT

2016 (8) TMI 301 - DELHI HIGH COURT - [2016] 95 VST 434 (Del) - Business of transportation of goods of dealers survey sealing of premises - seizure production of documents application for de-sealing of premises re-sealing - writ-petition. - It was pointed out that the Petitioner is a transporter and not a dealer. The Petitioner stated that the goods lying at its premises are value added tax (VAT) paid goods and traceable to bona fide dealers registered under the DVAT Act. - Regardi .....

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t a valid reason for re-sealing the premises. In any event, the reasons for re- sealing, consistent with the requirements of Section 60 (2) of the DVAT Act, had to be found in the form of a note in the file by the Commissioner or his authorised delegate. There is no such note. Hence, the re-sealing was illegal. - There has been a wilful violation of the statutory provisions by the officers concerned. They have acted not only in ignorance of the law but in violation of the statutory requireme .....

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ate with Mr. Vivek Paul Oriel, Advocate ORDER Dr. S. Muralidhar, J. 1. The Petitioner, a partnership firm, carries on the business of transportation goods of dealers registered under the Delhi Value Added Tax Act, 2004 ( DVAT Act ) as well as registered dealers of other States. The Petitioner, whose registered office appears to be in Kanpur Uttar Pradesh, has one of its godowns at Gali No. 8, Swaroop Nagar, Delhi - 110042. 2. The case of the Petitioner is that at around 12 midnight on 2nd /3rd J .....

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ed tax ( VAT ) paid goods and traceable to bona fide dealers registered under the DVAT Act. 3. The Petitioner states that on 11th July 2016, the premises was de-sealed for a few hours. The statement of the Branch Manager of the Petitioner was recorded. The original invoices and other relevant documents relating to the stocks in the premises were seized. The original documents lying in the premises were taken into custody by the AC. On the same day, a notice under Section 59 of the DVAT Act was i .....

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ing de- sealing of the premises. An application was filed on 19th July 2016 for de- sealing of the premises. When no action was taken, the present petition was filed on 29th July 2016. 5. When the petition was listed first for hearing on 1st August 2016, notice was issued and the VATO concerned was asked to remain in Court along with records on the following date. On 2nd August 2016, the following order was passed: 1. Mr. Yogesh Pal Singh, Assistant. Commissioner (AC)/ VATO, Ward- 208 is present .....

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ence of a Chartered Accountant representing A.H. Products Ltd., one of the dealers whose goods have been detained in the godown of the Petitioner. The order notes that the said person did not have a POA but had submitted the purchase register up to July, 2016. The case is then adjourned to 11am on 20th July, 2016. 3. The file contains a copy of a letter received on 19th July, 2016 from Mr. Rajiv Tripathi of the Petitioner seeking one week s time to produce the necessary documents. Significantly, .....

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of accounts of the firm before 3.30 p.m. on that very date failing which the action under Section 60 of the DVAT Act for sealing of the business premises will be taken "in the interest of government revenue". The file contains a copy of an order dated 2nd July, 2016 signed by Mr. P.R. Meena, Spl. Commissioner, Enforcement Branch, authorizing a team of four officials, led by Mr. Mr Ajay Arora, SDM, Mayur Vihar, and including Mr. Yogesh Pal Singh, AC, to enter and search the premises of .....

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Authority signatory of the said Firm was present at the time of visit of the team who was directed to produce the books of accounts of the firm. However, he has failed to produce the books of account till p.m. inspite of issue of notice u/s 59 of DVAT Act, 2004.... . When the Court inquired from Mr. Yogesh Pal Singh about the notice under Section 59 of the DVAT Act referred to in the above notice under Section 60 of the DVAT Act, he was candid enough to state that no such notice was issued prior .....

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ms of the said notice in the midnight of 2nd July 2016 was plainly illegal, arbitrary and without the authority of law. 7. For a second time, consequent, upon the same illegal order dated 2nd July, 2016 of Mr. Meena, the same team proceeded to again seal the premises of the Petitioner on 11th July, 2016. A copy of the sealing notice has been placed on record. The only reason stated therein is that the Petitioner has failed to produce its books of accounts despite notice under Section 59 of the D .....

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) to (f) of the DVAT Act. 9. The Court has on numerous occasions in the past dealt with the misuse by the officers of the Department of Trade and Taxes of the powers under Section 59 of the DVAT Act (for inspection of records) and Section 60 of the DVAT Act to enter premises and seize the goods. In its order dated 27.01.2016, in WP(C) No. 714/2016 (Shree Ashtvinayak Gems & Stone Pvt. Ltd. v Commissioner, Trade and Taxes, Delhi) the Court observed as under: 5. Section 60 of the Act sets out t .....

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ry 2016, the date of the sealing, sets out only one the ground, in a pre-printed form, that the dealer failed to produce the books of accounts till 7:30 PM in spite of issue of notice under Section 59 of the DVAT Act 2004 . This obviously does not satisfy the statutory requirement under Section 60(2)(f) of the Act. 6. The facts as set out in the petition that the decision reveal that the decision to invoke the powers under Section 60(2)(f) of the Act was taken in undue haste virtually in continu .....

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the Court directed the immediate de-sealing of business premises of that Petitioner. In Larsen & Toubro Ltd. v. Govt. (NCT of Delhi) (2016) SCC OnLine Del. 664, a detailed order was passed by the Court in similar circumstances. In paras 13 to 15 of the said order, it was noted as under: 13. As far as the present case is concerned, there is nothing in the file which shows what reasons weighed with the Commissioner to order a survey under Section 59 of the DVAT Act and subsequently order seali .....

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esh deployment order being issued is unexplained. 14. Further, there is no indication as to what prompted the extreme step of sealing of the three premises. The order in that behalf has been passed not by the Commissioner but by the VATO. There is nothing to indicate that the VATO was authorised to do so by an order issued in Form DVAT 50 as on 15th March 2013. 15. With the sealing order bristling with so many illegalities, there can be no manner of doubt that the sealing action was undertaken m .....

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id Petitioner which had been wrongfully sealed without following the mandate of the law. Again in Capri Bathaid Private Limited v. Commissioner of Trade & Taxes (2016) 155 DRJ 526 (DB) the Court reiterated the legal position regarding the powers of survey under Section 59 of the DVAT Act and search and seizure under Section 60 of the DVAT Act., the Court noted that there is a basic misconception that the VAT Authorities are to mechanically exercise the power of survey under Section 59 of the .....

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and casually states that it would be open to the raiding party to take action under Section 60 of the DVAT Act, 2004, as may be necessary . 13. The above actions of sealing of the business premises of the Petitioner have been undertaken in ignorance of the law and contrary to the judgments pronounced by the Court time and again. The sealing of the Petitioner s premises is hereby declared to be illegal. 14. The Court directs immediate de-sealing of the Petitioner s premises at Gali No.8, Swaroop .....

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le of the Respondent. 15. The Court requires Mr. P.R. Meena, Spl. Commissioner, Enforcement Branch, who issued the order dated 2nd July, 2016 to remain personally present in court on 4th August, 2016 at 10.30 a.m. Mr. P.R. Meena will bring to court the set of circulars that have been issued on the question of the powers under Section 59 and 60 of the DVAT Act following the orders passed by this court in the matters referred above. 16. Mr. Yogesh Pal Singh, Asstt. Commissioner shall also remain p .....

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ourt. On enquiry by the Court, Mr Akarsh Garg, learned counsel for the Petitioner confirmed that pursuant to the order dated 2nd August 2016 the premises has been de-sealed at 5 pm on that date itself as directed by the Court. However, he pointed out that the originals of the documents that had been seized during the sealing had not yet been returned to the Petitioner. The Court then kept the matter at 2.15 pm and requested the Commissioner, VAT to remain present. 7. At 2.15 pm when the matter w .....

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ken in the present case and which according to him satisfied the requirement of law under Section 60(2) of the DVAT Act. 9. The file produced today was perused by the Court. It contains a note prepared on 2nd July 2016 which talks of a complaint received in the office of the Chief Minister through the PGMS portal stating that pan masala, bidi, cigarettes, plastic goods, hardware, medical goods etc. are being supplied through Rajasthan to Delhi without tax invoices by certain transporters . The n .....

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ting survey u/s 60 of DVAT Act, 2004 by the teams headed by SDMs who have been appointed as Value Added Tax Authorities vide notification dated 6.11.2015 . The note seeks permission to survey the premises of the transporters. 10. The note sets out in a tabular form the team number, the name of the officers, the ward/branch and the contact numbers of the officers. It proposes that survey of the godowns should be conducted under the supervision of Sub-Divisional Magistrate and the whole survey to .....

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July 2016, setting out the action taken/status in respect of special drive initiated against the transporters on 2nd July 2016. In tabular columns the name of the Zonal In- Charge, Team No., name of the Officers/AC and the action/status have been set out. In the last column, where the sealing operation on a particular transporter/travel agent did not succeed, the name is mentioned. In respect of all others it is simply stated: Godown Sealed . It appears that twenty six godowns were sealed and fo .....

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place there was no authorisation for the 'sealing' of any of the premises. What had been permitted to be undertaken on 2nd July 2016 was only a 'survey' under Section 60 of the DVAT Act. There is a substantive difference between a 'survey' operation undertaken under Section 59 of the DVAT Act, an inspection under Section 60 (1) of the DVAT Act and a 'sealing' operation under Section 60 (2) of the DVAT Act. 14. Below the note dated 4th July 2016, a superior office .....

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uot;prepare the inventory and de-seal and assess the cases." This note was approved by the Commissioner, VAT on the same day i.e. 5th July 2016. 15. Each of the above officers appear to have overlooked the fact that there was no authorisation in the first place for the 'sealing' of the premises of the transporters. The last note in the file produced today is dated 29th July 2016 and it states inter alia that: survey of 24 godowns were conducted out of which 23 godowns have been de-s .....

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nder Section 60 (2) of the DVAT Act of recording the Commissioner s reasonable grounds to believe that any person or dealer is attempting to avoid or evade tax or is concealing his tax liability in any manner . 17. The Court repeatedly asked Mr. Ramji Srinivasan, whether there was such a note in any of the files satisfying the requirement of the law for sealing the Petitioner's premises in terms of Section 60(2) of the DVAT Act, 2004. Apart from referring to the above two notes dated 2nd and .....

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o the Court that sealing which took place of the Petitioner's godown in Swaroop Nagar on 2nd July 2016, with the AC issuing a sealing order on that date, which was extracted in full in para 5 of this Court's order dated 2nd August 2016, was wholly without the authority of law. This Court's order dated 2nd August 2016 records the further reasons for concluding that the sealing action on 2nd July was illegal. The re-sealing of the Petitioner's godown on 11th July 2016 was also not .....

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ade at this stage to Section 60 of the DVAT Act which reads thus: "60. Power to enter premises and seize records and goods (1) All goods kept at any business premises by a dealer, transporter or operator of a warehouse shall at all reasonable times be open to inspection by the Commissioner. (2) Where the Commissioner, upon information in his possession or otherwise has reasonable grounds to believe that any person or dealer is attempting to avoid or evade tax or is concealing his tax liabil .....

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on any records, books of account, registers and other documents or make or cause to be made extracts or copies thereof without charge; (e) make a note or any inventory of any such money or goods found as a result of such search or place marks of identification on such goods; and (f) seal the premises including the office, shop, godown, box, locker, safe, almirah or other receptacle. (3) Where it is not feasible to remove any records, books of account, registers, other documents or goods, the Com .....

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, box, locker, safe, almirah or other receptacle, permit the de-sealing or release thereof, as the case may be, on such terms and conditions including furnishing of security for such sum in such form and manners as may be prescribed. (5) The Commissioner may requisition the services of any police officer or any public servant, or of both, to assist him for all or any of the purposes specified in subsection (2) of this section. (6) Save as otherwise provided in this section, every search or seizu .....

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155 DRJ 526 (DB) and Larsen & Toubro Ltd. v. Govt. NCT of Delhi (2016) SCC OnLine Del. 664 discussed in some detail the legal position as regards the powers of survey and search and seizure under Sections 59 and 60 of the DVAT Act. These have been adverted to in the order dated 2nd August 2016 extracted in full hereinbefore and therefore need not be repeated. 22. Section 60 (2) of the DVAT Act presupposes that when it is proposed to seal the premises of a particular transporter, there must b .....

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ealed. 23. The legislature has made a conscious distinction between an 'inspection' under Section 60 (1) of the DVAT Act, which could be of the any premises or warehouse of any dealer, transporter or operator and Section 60(2) of the DVAT Act only talks of evasion or avoidance of tax or concealment of tax liability by any person or dealer . Therefore, qua the person whose premises is sought to be sealed under Section 60 (2) (f) or any of the steps contemplated under Section 60 (2) (a) to .....

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sportation of goods from Rajasthan to Delhi with a view to evading taxes is insufficient to take the extreme step of sealing the premises of any and every transporter merely on suspicion without anything more. The 'sealing' of a premises from which business is conducted has serious consequences and should not be lightly undertaken. The file should contain the decision of the Commissioner or his delegate which reflects an application of mind and the recording of the reasonable grounds to .....

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y to or on behalf of any person, on being required by the Commissioner so to do, fails (a) to furnish any information in his possession in respect of the goods; or (b) fails to permit inspection thereof; then without prejudice to any other action which may be taken against such person, a presumption may be raised that the goods in respect of which he has failed to furnish information or permit inspection, are owned by him and are held by him for sale in Delhi and the provisions of this Act shall .....

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suming that the Petitioner was a transporter who fell within the description of Section 3(9) of the DVAT Act, and should be deemed to be a person liable to pay tax, simply did not arise on 2nd July 2016, when the first sealing took place. 26. In any event, the notes dated 2nd and 4th July 2016 make no reference to Section 3(9) of the DVAT Act. The notes do not describe the Petitioner as a person who should be taken to be a deemed evader of tax in terms of Section 3 (9) of the DVAT Act. They do n .....

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ite of issuance of notice under Section 59 of DVAT Act, 2004/nobody responded o the date of sealing i.e. 02.07.2016." This was an untenable ground for sealing the premises as explained in Capri Bathaid Private Limited v. Commissioner of Trade & Taxes (supra). In other words the mere non-production of documents or books of accounts cannot justify the sealing of the premises under Section 60 (2) of the DVAT Act. Further the action under Section 60 (2) of the DVAT cannot be seen as a conti .....

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y was posed as to why the seized goods could not have been released on superdari to the Petitioner and why it was decided to re-seal the premises, Mr Srinivasan volunteered that the officials were apprehensive of the security of the goods and further that the Petitioner had himself agreed to the release of the goods on the following day. The Court finds this explanation unconvincing. 30. The sealing order dated 11th July 2016 is again in a pre-printed form. It states that the Petitioner's Di .....

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te why despite this, it was decided to re-seal the premises on 11th July 2016. 31. Mr Srinivasan referred to a statement in writing given by Mr Rajiv Tripathi Branch Manager of the Petitioner undertaking to produce the relevant documents to the AC on 12th July 2016 "for assessment and release of the goods." The Court fails to understand how this could be a reason for re-sealing the premises. The goods and 47 documents had already been seized by this time. How would the re-sealing of th .....

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elegate. There is no such note. 32. The Court is therefore satisfied that the re-sealing that took place of the Petitioner's premises at Swaroop Nagar on 11th July 2016 was also illegal. It is clarified, however, that it will be open to the Respondent DT&T to proceed in accordance with law as far the goods and documents seized by its officials from the Petitioner's premises. 33. The Court enquired from Mr. Srinivasan, how Mr P R Meena, the Special Commissioner could have issued a bla .....

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the same breath it authorises the team to seize any records, goods etc. , and take action under Section 60 of the DVAT Act . 34. It is plain to the Court that Mr. P. R Meena, Spl. Commissioner, who issued the above order did not understand or was not aware of the legal requirement. This despite several judgments of this Court emphasising that the action under Section 59 of the DVAT for a survey of the premises and for seeking information, records etc. could not automatically permit the coercive .....

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liability in any manner." Further, as underscored by Section 60 (6) of the DVAT Act, "every search or seizure made under this section shall as far as possible be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to searches or seizures made under that Code." These provisions have more often than not been observed in the breach. 35. The Court is of the considered view that there has been a wilful violation of the statutory provisions by .....

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g a responsible position like Mr. P. R. Meena, Spl. Commissioner, Enforcement Branch is continuing to issue orders in mechanical and irresponsible manner authorising officers to take any action which they may like under Section 60 of the DVAT Act. It is disconcerting to note that Mr. Meena did not make a distinction between an inspection under Section 60(1) of the DVAT Act and a 'sealing' Section 60 (2) (f) of the DVAT Act. 37. The Court, therefore, directs Mr S.S. Yadav the Commissioner .....

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