TMI Blog1967 (8) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ax regularly. On 19-9-66, a party of officers numbering about 30, consisting of respondent No. 3, Shri Surendra Sharma, Special Officer, Anti-Evasion, Commercial Taxes Department, Jaipur and others came to his shop at about 4.00 p. m. According to the petitioner, this party had a pre-planned policy of collecting Government revenue by fair or foul means, and in pursuance thereof first of all these officers enquired from him whether he was paying sales-tax on Saris embroidered with 'Gota'. 'Salma' and 'Sitara', but when the petitioner replied that these goods were exempt from sales tax by virtue of Government Notification No. F(99) F and T/60 dt. 26-3-62 the respondents refused to accept this reply and demanded from him ₹ 2,000 as composition money for the offence of evasion of Tax. The petitioner, however, did not accede to this demand and, therefore, the party of the Government Officers asked the customers at the shop to go away and they put a guard around the shop and the entire record of the petitioner consisting of account books and other papers was ordered to be seized. Accordingly, the party of officers seized the record of the petitioner. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Act. As regards the not mentioning of reasons in writing, it is submitted by the respondents that whatever was mentioned in the earlier part of the notice should be taken to be the statement of reasons for the seizure as well. In the alternative it was contended that not recording of reasons in writing will not invalidate the seizure as according to the respondent, the statement of the petitioner was recorded before the seizure. A copy of that statement has been produced as Ex A/1 on the record and on its basis it is submitted that this statement furnished a sufficient basis for respondent. No. 3 to take action against the petitioner under Section 22(3) of the Act by seizing the account books, as well as the goods. Besides this it is submitted by the respondents that the petitioner has suppressed three material facts in his writ petition. In the first instance, the petitioner made no mention of the fact that his statement had been recorded by respondent No. 3, and secondly, he had omitted to say that a notice of enquiry in accordance with Rule 51-A of the Rajasthan Sales Tax Rules had been given to him. As regards the use of the word confiscation in Ex. P/6 it was po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the affidavit of the officer-in-charge of the case who has drawn the reply on behalf of the Government for showing that the statement was recorded before the respondent No. 3 had issued notice Ex. P/5. It is, however, noteworthy that the Officer-in-Charge of the case has no personal knowledge of the facts about which he had filed the affidavit. The verification thereon shows that he was swearing the fact on the basis of the official record. We therefore, asked the learned Deputy Government Advocate to point out if there was anything on the record on the basis of which the affidavit has been filed to show that the statement Ex. A/1 was, in fact, recorded before the respondent No. 3 proceeded to seize the goods, or he had drawn up notice Ex. P/5. He, however, could not place anything on the record before us as would go to show that the statement was in fact, recorded before the seizure of the account books or the goods. In these circumstances we do not attach any importance to the omission of the petitioner in making any reference to that statement. The learned Deputy Government Advocate then submitted that the petitioner was intimated by notice Ex A/2 that in the notice Ex. P/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts: and to furnish any other information relating to his business. (2) All accounts, registers and other documents pertaining to the business of a dealer, the goods in his possession and his office, shop, godown, factory, vessel or vehicle or any other place in which business is done or accounts are kept shall be open to inspection and examination of any such authority or person at all reasonable times. (3) If any such authority or person has reason to suspect that any dealer is attempting to evade payment of any tax or other dues under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealer as he may consider, necessary, and shall give the dealer a receipt for the same. The accounts, registers and documents so seized shall be retained by such officer only for so long as may be necessary for their examination or for any enquiry or proceedings under this Act or for a prosecution. (4) For the purpose of Sub-section (2) of Sub-section (3), any such authority or person, shall have power to enter and search at all reasonable times, any office, shop, godown, vessel, vehicle or any other place of business or any bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of buying, selling, supplying or distributing goods Sub-section (i) of Section 2 defines turnover which means the aggregate of the amount of sale prices received or receivable by a dealer in respect of the sale or supply of goods in the carrying out of any contract (omitting the portions which are not material for our present purpose) Section 4 provides that no tax shall be payable under this Act on the sale of any of the exempted goods if certain conditions are satisfied. This section also empowers the State Government to exempt any goods or class of goods or any person or class of persons on such conditions as it may think fit by a notification in the official gazette, Section 6 requires that every dealer liable to pay tax under this Act shall get himself registered in the prescribed manner. Section 7 provides that every registered dealer shall furnish in the prescribed form the returns for the prescribed periods in respect of his turnover. Section 3, which is the charging section, provides that subject to the provisions of this Act every dealer whose turnover in the previous year in respect of sales or supplies of goods exceeds a certain limit shall be liable to pay tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation of offences. It is in this scheme of things that the Legislature has enacted Section 22. The opening words of Sub-section (1) clearly lay down that an Assessing Authority or any person authorised by the Commissioner in this behalf may require any dealer to reproduce before him the accounts, registers and other documents and to furnish any other information relating to his business for the purposes of the Act. What is noteworthy is that Sub-section (1) lays down that the competent authority or person authorised can require the accounts, registers and other documents for the purposes of this Act. In other words, it is for fulfilling the object of gathering the legitimate tax under the Act that Section 22 has been enacted. Now prevention of evasion of tax is inextricably connected with the purpose of collecting the legitimate tax dues of the State. Sub-section (2) provides that for the purpose of getting at necessary accounts, registers and other documents pertaining to the business of a dealer the various places such as, office, shop, godown factory, vessel or vehicle or any other place in which business is done or accounts are kept shall be open to inspection and examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due on such goods as may be determined by such authority or person. In the very nature of things a dealer concerned can exercise the choice only after the tax had bean determined by such authority and when it also determines as to what multiple of that, not exceeding four times is to be paid by the dealer in order to avoid the action of the confiscation of the goods. In other words, the act of actual confiscation of goods can come only when the authority concerned had done two things; (i) determination of the tax; and (ii) indicating as to how much the dealer is required to pay and that has not to exceed four times the tax. It is not necessary that the penalty should be four times the tax but it is only a maximum prescribed by the statute and the authority is required to determine how much penalty is to be paid. 9. Now, in order to see whether the provisions of Sub-sections (3), (4) and (6) of Section 22 of the Act infringe Article 19 of the Constitution or not, we have to consider whether these provisions impose reasonable restrictions on the exercise of the fundamental rights guaranteed under Article 19 of the Constitution to a citizen. The provisions have been enacted to ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etention of the account books, this provision is unreasonable, as thereby the dealer is subjected to a great deal of hardship It is true no time limit is prescribed by the statute for the retention of the account books, but in our view, in the very nature of things a particular period could not have been laid down as the necessity of one case may be quite different from that of another. But when the Legislature has clearly laid down that the account books or the documents could be retained only so long as they were required for certain specified purposes it cannot be said that the provision is, in any way, unduly harsh. In other words, we do not think the restriction contained in Sub-section (3) is disproportionate to the evil sought to be eliminated. Then Sub-section (3) in our view, provides for two other safeguards: in the first instance, it enjoins that if it is only when such competent authority or person has reason to suspect that any dealer is attempting to evade any tax or other dues that he can proceed under this provision. The second requirement is that the authority has to record his reasons in writing before he proceeds to seize the accounts. The necessity of recordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the evasion of tax at the hands of the dealer. Then the two provisos lay down as to what has to be done by the authority or officer thereafter. The mode of inquiry has been prescribed in Rule 51-A of the Rules and the first proviso lays down that the person affected shall be given an opportunity of being heard Then according to the second proviso when the tax is determined the authority has to say as to how much the dealer is required to pay and then a choice is to be given to the dealer to pay such amount not exceeding four times the tax in lieu of confiscation. When the authority would be acting under this sub-section it is expected to follow the principles of natural justice and will be arriving at a decision quasi judicially. We are, therefore, unable to hold that the restrictions imposed by Sub-section (6) are, in the circumstances, unreasonable and violate Article 19(1)(f) or (R) of the Constitution. We may in this connection refer to a case of the Supreme Court reported as M. P. Sharma v. Satiah Chandra, 1954 SCR 1077 : (AIR 1954 SC 300V In that case the provisions relating to the issuing of a search warrant under Section 96 (1) of the Code of Criminal Procedure came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys 100). 14. In MANU/TN/0329/1965 the vires of Section 41 (4) of the Madras General Sales Tax Act, 1959, was challenged on two grounds firstly, that the provisions were beyond the legislative competence of the State and secondly on the around that the power of seizure and confiscation of goods were violative of Article 19(1)(f) and (g), an these powers were drastic and serious In the opinion of the learned Judges, exigencies of tax collection did not justify such a general, unrestricted and direct investiture of the power of search on even the minor officials of the various departments, not confined to the tax authorities alone, without a fairly higher official above them, having to examine in each case whether the interests of the State demand or the circumstances of tax collection require that the power of search should be exercised in particular and specific cases. In that case there were certain general directions issued for seizure. In the Rajas-than Act Section 22 on the other hand, provides that the power under this section can be exercised only by an assessing authority or any person authorised by the Commissioner in this behalf. Therefore, it cannot be said that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fundamental right yet such a restriction cannot be regarded as unreasonable, as according to the learned Chief Justice, the deprivation of the assessee of their account books, if at all, was only temporary. In our view, the observations of the learned Chief Justice accord with what their Lordships of the Supreme Court observed in M. P. Sharma's case, 1954 SCR 1077: (AIR 1954 SC 300) This case too is not of much help to the learned counsel for the petitioner. 16. Lastly, we may refer to the Mysore case, (1967) 1M 284 sLJ : (AIR 1968 Mys 100). The validity of Section 28 of the Mysore Sales Tax Act was challenged before the High Court. The learned Judges observed that the provisions relating to the confiscation were unconstitutional because there was total lack of control over the action of the confiscation officer. In the opinion of the learned Judges mere suspicion of the officer was too slender a basis for exercise of so drastic a power. This learned Judges emphasised that there was an infirmity in Sub-section (4) of Section 28 as there was lack of control over the action of the confiscation officer. Section 28 of the Mysore Sales Tax Act has been reproduced in the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statute. 19. In the Kerala case (AIR 1966 Ker 143) : 1966-17 TC 543, also the provisions relating to search and seizure came to be examined The learned Judges referred to the Supreme Court case, AIR 1952 SC 196 and pointed out that several factors, as pointed out in that case, have to be kept in view before arriving at a judicial verdict about the validity or invalidity of a statute under examination. After examining the provisions of the General Sales Tax Act of Kerala, the learned Judges held that the provisions relating to the imposition of penalties were not unreasonable. The Madras case (1965) 16 STC 708 (Mad) was also noticed and the learned Judges had distinguished it on the ground that there was no question of the minor officers of various departments other than the Taxes department being empowered to undertake searches or to make seizures. 20. We are, therefore, satisfied that the provisions of Section 22 (3), (4) (6) do not violate Article 19(1)(f) or (g) of the Constitution. 21. We may now deal with the question whether these provisions are hit by Article 14 of the Constitution. Now the opening words of Section 22 lay down that the assessing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able times. The inspection contemplated therein is obviously when the documents still continue to be in the possession of the dealer. Sub-section (3) of Section 22 contemplates their seizure only for certain specified purposes namely, for the proper examination of such documents for any enquiry or proceeding under the Act or for a prosecution. As we have already pointed out, two safeguards or conditions have been provided in this Sub-section (1) that the authority or person going to proceed under this sub-section should have reason to suspect that any dealer is attempting to evade payment of any tax or dues under this Act; and (2) for seizure reasons have to be recorded in writing. This Court had occasion to explain the connotation of the farm reason to believe occurring in Section 12 of the Act in National Clinic v. Assistant Commercial Taxes Officer, Sri Ganganagar, 1966 Raj LW 257, to which one of us was a party and pointed out that the existence of a reason that is required to be there shows that it should not be just a suspicion based on mere gossip or rumour as it were. It was also pointed out that reason is the justification of an act or belief and for this Chamber' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department JAIPUR 26. The opening words of the notice do indicate that the officer had some information in his possession that the dealer was attempting to evade sales-tax Then the averments of the petitioner himself in para. 3 of the writ petition show that respondent No. 3 enquired from him if he was paving sales-tax on saris , but the petitioner claimed exemption thereon It further appears that the petitioner cited a notification, hut that position was not accepted and the officer said that the petitioner was evading tax and, therefore, he should pay ₹ 2,000 as composition money. Thus, in our view, the preliminary condition that the officer had reason to suspect that the dealer was attempting to evade sales-tax was satisfied, but, to our mind, the notice does not fulfil the second condition viz., of recording of reasons. The reasons have to be for the purposes of seizure. In other words, it should be indicated whether seizure was necessitated for the purposes of examination or for any enquiry or proceeding under the Act or for a prosecution. Learned Deputy Government Advocate has tried to impress on us that the fact that the officer had put down in writi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate has said that the term confiscation was used by mistake and it was sought to be rectified by substituting the term ''seizure for it. We have already pointed out that this makes the notice all the more unintelligible. Indeed seizure has already taken place and there was no question for giving a notice for seizure. Notice Ex. P/6 was followed by notice Ex. P/7, which was attain issued on the same day As we have pointed above, the officer had not indicated what tax was payable and, therefore, there was no warrant for calling upon the dealer to pay four times of that amount, This notice runs as under:-- 29. It curiously recites that the dealer was asked several times to pay the amount and as he was not prepared to do that, the officer was proceeding under Section 22 (6) of the Act against the dealer. The tenor of this notice leaves no doubt in our mind that the whole thing was being done in hot haste and the officers did not really care to ascertain what the extent of the evasion was, but they tried to make a show of complying with the provisions of law and in this attempt they had miserably failed All these three notices have, therefore, to be quashed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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