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TMI Blog1967 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 1321 of 1964 in order to understand the questions that fall to be decided in the present appeals. On August 19, 1964, at about 5.00 p.m., the officers of the Commercial Tax Department (hereinafter referred to as the Department) raided the premises of Zenith Lamps and Electricals Ltd. (hereinafter referred to as the Company). It is said that the premises were searched and a suit-case was seized and forcibly removed by the officers who made the raid, in spite of the fact that they were informed that the box did not contain any papers or documents belonging to the company and its contents consisted merely of personal effects of one of the managing directors, namely, Shri Ramkishan Shrikishan Jhaver. The raid and search were made by the authorities concerned on information that Shri Goenka, one of the directors of the company, had removed a box containing secret accounts relating to it. The main contention of the petitioner in support of his prayer that the articles seized should be returned to him was under three heads. It was first contended that on a proper construction of section 41 of the Madras General Sales Tax Act (No. 1 of 1959) (hereinafter referred to as the Act), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidential house by the Magistrate disclosed that the Magistrate had not applied his mind at all to the necessity of the search of the residential house, for columns in the printed search warrant which should have been struck out, were not so struck out. Further the gaps in the printed form which should have been filled in before the warrant was issued had not been filled in. From these two circumstances the High Court concluded that the search warrant for the residential house had been issued without the application of mind by the Magistrate to the necessity of the search of the residential house. The High Court further found that section 41(4) was not complied with strictly before confiscation was ordered and no proper opportunity was given to the dealer to show that the goods seized and confiscated were not accounted for in his accounts. In the result, therefore, the High Court allowed all the petitions and directed that the documents, things and goods covered by the petitions should be returned to the petitioners along with photographs, negatives, translations and notes made by the department from the accounts, etc. The State of Madras then applied for and obtained certificates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential accommodation (not being a place of business-cum-residence) shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction over the area, and all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure, 1898 (Central Act 5 of 1898). (3) If any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under this Act he may, for reasons to be recorded in writing, seize such accounts, registers, records or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers, records and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under this Act: Provided that such accounts, registers, records and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority. (4) Any such officer shall have power to seize and confiscate any goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power under sub-section (1) can only be exercised to require a dealer to produce accounts, etc., relating to his business and not that of anybody else. The main dispute centres round the interpretation of sub-section (2) of section 41. The contention on behalf of the respondents is that the provisions did not authorise search of premises but merely provided for inspection thereof at all reasonable times by the empowered officer. We shall first deal with the main part of sub-section (2) to see what it provides without reference to the proviso. Clearly sub-section (2) provides for three things, namely---- (i) all accounts, registers, records and other documents maintained by a dealer in the course of his business shall be open to inspection at all reasonable times, (ii) the goods in the possession of the dealer shall also be open to inspection, and (iii) the dealer's offices, shops, godowns, vessels or vehicles shall also be open to inspection. There is no doubt that there are no specific words in sub-section (2) giving power of search. But if we read the three powers conferred by sub-section (2) it should not be difficult to hold that search is included therein. It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of inspection as the officer concerned would only do so for the purpose of finding out all accounts, etc., maintained by the dealer and if necessary to inspect them for the purposes of the Act. We cannot therefore agree with the High Court that there is no power of search whatsoever in sub-section (2) because the sub-section in terms does not provide for search. Similarly, the officer has been given the power to inspect the goods in the possession of the dealer. He has also the power to enter the dealer's offices, etc., for the purpose of such inspection. Combining these two powers together it follows on the same reasoning that the officer has the power to search for the goods also and to inspect them if found in the offices of the dealer. We have therefore no hesitation in coming to the conclusion that the power of search is implicit in sub-section (2) with reference both to the accounts, etc., maintained by the dealer and the goods in the possession of the dealer. It also seems to us that this power in sub-section (2) is confined to offices, shops, godowns, vessels and vehicles of the dealer and does not go beyond them. It is urged on behalf of the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection refer to Rhondda Urban District Council v. Taff Vale Railway Co., where section 51 of the Act there under consideration was framed as a proviso to preceding sections. The Lord Chancellor however pointed out that "though section 51 was framed as a proviso upon preceding sections, but it is true that the latter half of it though in form a proviso, is in substance a fresh enactment, adding to and not merely qualifying that which goes before. " Again in Commissioner of Income-tax v. Nandlal Bhandari & Sons, it was observed that " though ordinarily a proviso restricts rather than enlarges the meaning of the provision to which it is appended, at times the legislature embodies a substantive provision in a proviso. The question whether a proviso is by way of an exception or a condition to the substantive provision, or whether it is in itself a substantive provision, must be determined on the substance of the proviso and not its form." Finally, in State of Rajasthan v. Leela Jain, the question arose whether the proviso in the Act under consideration there was a limiting provision to the main provision or was a substantive provision in itself. This court observed that "so far as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) does not provide for search of the business premises of a dealer, in the shape of offices, etc. Then we come to sub-section (3). That provides for the seizure of accounts, etc., if the empowered officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under the Act. If he has such reason he may for reasons to be recorded in writing, seize such accounts, etc. Now if sub-section (2) gives power of search, sub-section (3) merely provides further power to seize the accounts, etc., found on such search. We have already held that sub-section (2) gives the power of search and in that case sub-section (3) is merely complementary to sub-section (2) and gives the empowered officer the power to seize the accounts found in certain circumstances. If anything, sub-section (3) also bears out that sub-section (2) must include the power of search, for a seizure under sub-section (3) is not possible unless there is a search. Reading therefore sub-section (2), its proviso and sub-section (3) together we are of opinion that they provide for search and seizure without warrant except that if the place searched is purel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der that evasion may be checked. It is further urged on behalf of the appellant that confiscation of goods which are not entered in the accounts is merely a provision of ancillary nature to check evasion of tax by making it unprofitable for dealers to secrete goods in which they are dealing. Reliance in this connection is placed on K. S. Papanna v. Deputy Commercial Tax Officer, Guntakal, where the Andhra Pradesh High Court upheld an analogous provision in the Andhra Pradesh General Sales Tax Act (No. 6 of 1957), in section 28(6). We do not propose in the present case to decide the general question whether a power to confiscate goods which are found on search and which are not entered in the account books of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. Assuming that is so, we have still to see whether sub-section (4) of section 41 of the Act can be upheld read along with the second proviso thereof. It may be added that there is no such provision as the second proviso in section 28 of the Andhra Pradesh General Sales Tax Act. We do not therefore propose to express any opinion as to the correctness of the above decision of the Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that clause (a) of the second proviso is not severable. We have already indicated that originally the second proviso was not there in the Act. It was brought in by the amendment of 1961 and it compels the officer to give the option, and thus compels recovery of tax even in those cases where the tax is recoverable only at the first point of sale in the State which naturally has not occurred in cases of goods from the dealer himself. Considering the fact that the legislature added this cornpulsory proviso later, it is clear that the legislature intended that the main part of the section and the second proviso should go together. It is difficult to hold therefore that after the introduction of the second proviso in 1961, the legislature could have intended that the main part of sub-section (4) should stand by itself. We are therefore of opinion that sub-section (4) with the two provisos must fall on this narrow ground. We therefore agree with the High Court and strike down sub-section (4) but for reasons different from those which commended themselves to the High Court. Then we come to the question whether sub-sections (2) and (3) of section 41 of the Act which have been struck down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure. Therefore, the provisions of the Code of Criminal Procedure, so far as may be, apply to all searches made under sub-section (2). It appears that in the High Court, the parties as well as the court assumed that section 165 of the Code of Criminal Procedure would not apply to searches under sub-section (2). We cannot see any warrant for this assumption. The proviso clearly lays down that all searches made under this sub-section, so far as may be, shall be made in accordance with the provisions of the Code of Criminal Procedure. Thus, all the provisions contained in the Code of Criminal Procedure relating to searches would be applicable to searches under sub-section (2), so far as may be. Some of these provisions are contained in Chapter VII but one such provision is contained in section 165. It is true that that section specifically refers to an officer-in-charge of a police station or a police officer making an investigation. But when the proviso applies the provisions of the Code of Criminal Procedure to all searches made under this sub-section, as far as may be possible, we see no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held to be a reasonable restriction. We may add that the proviso to sub-section (3) has fixed the period for which the officer seizing accounts can keep them, namely, 30 days at a time, and if he wants to keep them for more than 30 days he has to take the permission of the next higher officer. This is an additional safeguard entitling the dealer concerned to get back the accounts after every 30 days, unless a higher officer has permitted the retention of accounts for a period longer than 30 days. We cannot therefore agree with the High Court that sub-sections (2) and (3) of section 41 of the Act are unreasonable restrictions on the right to hold property or carry on trade for reasons indicated. We are of opinion that they are reasonable restrictions which are protected by clauses (5) and (6) of article 19 of the Constitution. We now proceed to consider what order should be passed in the appeals in the view we have taken about the interpretation and validity of sub-sections (2) and (3) of section 41 of the Act. We have already indicated that the High Court held that the warrant issued by the Magistrate for search of the residential accommodation was bad because it showed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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