TMI Blog1983 (8) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... o cassette recorders (hereinafter referred to as T.Vs and VCRs). The petitioner has its sales offices at Bangalore, Bombay, Calcutta and Delhi. 3. The manufacturing places at Palghat, Avalahali and portions of the sales offices situated at Kengal Hanumanthaiah Road and M.G. Road, Bangalore are licensed premises under the Central Excises and Salt Act, 1944 (Central Act No. 1 of 1944) and the Rules made thereunder (hereinafter referred to as the Act and the Rules) and the petitioner as a manufacturer of excisable articles is eligible to excise duties under the Act. 4. On the basis of the material collected by him, the Assistant Director, Directorate of Revenue Intelligence Anti-evasion (Central Excise) Wing, Bangalore (hereinafter referred to as the Director) on 8-6-1983 reasonably believing that the petitioner was indulging in evasion of excise duty payable under the Act by adopting devious methods decided that a search of the various places detailed in his proceedings should be conducted by the authorised officers. In conformity with that decision, the Director issued authorisations or search warrants to a number of officers simultaneously to search the factories, office premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxes thereto to government (vide para 4 of the petition). 8. The petitioner has alleged that searches and seizures effected on all the days were almost in the nature of an `invasion campaign' and have been made without rhyme or reason, arbitrarily and vexatiously at its factories, offices, show rooms and residential premises of the senior officers with the sole object of immobilising its manufacturing and sale activities and ruin its reputation in a competitive market. In the original petition, the reply and the additional reply filed, the petitioner has elaborated this plea by furnishing various particulars. 9. In the additional reply, the petitioner has urged that it was entitled for the supply of the formation of the opinion of the Director and without making the same available, the searches and seizures effected were unauthorised and illegal. In the original petition, the searches and seizures had been challenged on a number of grounds. But, at the hearing, all those grounds were not urged and hence that were not urged; and not noticed. 10. In their common return, the respondents have urged that on relevant material, the Director has formed his opinion and issued the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department and others empowered by Central Government are empowered to search under Rule 201 of the Rules. Under Section 18 of the Act directs that searches and arrests under the Act shall be carried out in accordance with the provisions of the Code of Criminal Procedure. 15. Section 12 of the Act empowers Central Government to apply the provisions of the Customs Act, 1962 (Central Act No. 52 of 1962) (hereinafter referred to as the Customs Act) in respect of duties imposed by Section 3 of the Act. In exercise of that power, Central Government by various notifications has made applicable the provisions of the Customs Act relating to searches and seizures to the levy of excise duties under the Act. 16. Sections 105 and 110 of the Customs Act providing for searches and seizures that are material read thus : "105. Power to search premises. - (1) If the Assistant Collector of Customs, or in any area adjoining the land frontier or the frontier or the Govt. of India an officer of customs specially empowered by name in this behalf by the Board, has reason to believe that any goods liable to confiscation or any documents or things which in his opinion will be useful for or relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i S.G. Sundaraswami, learned Counsel for the petitioner, filed an additional reply for the first time contending that the petitioner was entitled for a copy of the opinion formed by the Director and its non-supply vitiates the searches and seizure based on the construction of Section 165(2), Cr. P.C. made applicable by Section 105 of the Customs Act. On this basis Sri Sundaraswamy sought leave to urge the same, which was opposed by Sri K. Shivashankar Bhat, learned Counsel for the respondents. 18. After hearing the Counsel on the point, I was satisfied that this plea urged by the petitioner which did not involve any investigation of facts was a pure question of law and, therefore, I permitted Sri Sundaraswamy to argue the same and permitted Sri Bhat also to address his arguments on the same. 19. Sri Sundaraswamy has urged that on a true construction of Section 105 of the Customs Act and Section 165 of the Cr. P.C. the petitioner was entitled for a copy of the opinion formed by the Director and its non-supply vitiated the searches and seizures. In support of his contention Sri Sundaraswamy has strongly relied on a Division Bench ruling of this Court in C. Venkatareddy and anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such subordinate officer, an order in writing, specifying the place to be searched and as far as possible the thing for which search is to made; and such subordinate officer may thereupon search for such thing in such place. (4) The provisions of this Code as to search warrants and the general provisions as to searches contained in Section 100 shall, so far as may be, apply to a search made under this section. (5) Copies of any record made under sub-section (1) or sub-section (3) shall forthwith be sent to the nearest Magistrate empowered to take cognizance of the offence, and the owner or occupier of the place searched shall, on application, be furnished free of cost with a copy of the same by the Magistrate." 22. Section 105(1) of the Customs Act confers power of search or direct a search to be made if the authorised officer has reason to believe or is satisfied with its necessity. Section 105(2) directs that the provisions of the Cr. P.C. relating to searches shall `so far as may be' apply to searches made under sub-section (1) of that section and for the word "Magistrate" occurring in Section 165 of the Cr. P.C., the words `the Collector of Customs' shall be read. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, read with Section 105(2) of the Act, he has to send forthwith to the Collector of Customs a copy of any record made by him. The Collector would certainly give necessary directions if the Assistant Collector went wrong, or if his act was guided by mala fides. But, the more effective control on him is found in Section 136(2) of the Act." As I apprehend, these observations of the Supreme Court, though not directly but indirectly negatives the contention urged for the petitioner. 28. In Venkatareddy's case that dealt with a case of search and seizure under Section 132 of the Income Tax Act of 1961 (hereinafter referred to as the I.T. Act), as it stood then, the respondents produced a copy of the order before Court and supplied a copy of the same to he petitioner without claiming privilege for furnishing a copy of the latter (vide para 3 page 244). But, the question itself did not arise for determination and no opinion was expressed on the point and, therefore, the same does not assist Sri Sundaraswamy. 29. In New Kashmir and Oriental Transport Company's case, a search and seizure had been effected of the business and residential premises under Section 132 of the I.T. Act as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial and to withhold its inspection. But that is not the case of the department in the instant case. Wholesale refusal to grant copies or allow inspection is not justified by law." With great respect to the Lordships, these observations in so far as they relate to a copy of the opinion formed to make a search are very wide and have been made without a full examination of the nature of the proceedings the necessity to maintain absolute secrecy, public safety, the injury that will be caused by such disclosure and the ultimate ineffectiveness of the power and all other relevant factors. In my view, the very wide observations, made by their Lordships, for from advancing the object of the enactment and its proper enforcement, will stifle the very administration of the Act and public revenues. For these reasons, I cannot persuade myself to subscribe to the view expressed on this point by their Lordships in New Kashmir and Oriental Transport Company's case. 30. In Devarajan's case, there was a search and seizure under Section 132 of the I.T. Act substantially amended in 1965, the validity of which was challenged before the High Court of Madras. In rejecting the claim of the petitioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs for reopening the assessment already completed, was not considered to be relevant. It is enough if we are satisfied, about the existence of the reasonable belief." In my view, these observations made by the Madras High Court on the scope and ambit of Section 132 of the I.T. Act which are sound and correct also govern a proceeding under Section 105 of the Customs Act. With respect, I am in complete agreement with these views. 31. On the foregoing discussion, I hold that there is no merit in this contention of Sri Sundaraswamy and I reject the same. RE : POINT NO. II : 32. Sri Sundaraswamy has urged that the opinion formed by the Director to search based on no material or on irrelevant material, without complying with the conditions precedent for directing a search was illegal and invalid. In support of his contention, Sri Sundaraswamy has relied on a large number of rulings of the Supreme Court, this Court and various other High Courts. 33. Sri Bhat has urged that the opinion formed based on relevant material was valid. In support of his contention Sri Bhat has also relied on a large number of rulings of the Supreme Court, this Court and other High Courts. 34. The mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the Officer issuing the authorisation, or of the designated officer is challenged the Officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search premises for books of account an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure are also incorporated therein." These principles equally apply to proceedings under Section 105 of the Customs Act. 37. In A. Govindarajan v. Superintendent of Central Excise and another [(1974) (1) Karnataka Law Journal 455], Jagannatha Shetty, J. examining a search and seizure under the Customs Act referring to all the earlier rulings of the Supreme Court and several High Courts, observed thus :- "The condition precedent either for a search under Section 106 or for seizure under Section 110 is that the proper officer must have `reason to believe' that a vehicle is being used in the smuggling of any goods or the goods he may seize are liable to confiscation under the Act. The expression `reason to believe', occurs in several statutes. Reference may be made to Section 34 of the Income Tax Act, 1922; Section 132 of the Income tax Act, 1961, Section 178A of the Sea Customs Act, 1878, Section 66 of the Gold Control Act, 1968; etc.) ***** In my opinion, the said expression whether it occurs in one Act or the other, has settled meaning and its several features may conveniently be set out as follows : It is not just an abstract concept so that it could be fitted into pick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of that very report, the Director on 8-6-1983 has formed his opinion to authorise a simultaneous search and seizure. In pursuance of that opinion, the Director issued search warrants to various officers broadly indicating the nature of documents to be seized. 42. I have carefully examined the report of the Director and the opinion formed by him on 8-6-1983 bearing the above and other relevant principles enunciated by the Supreme Court and this Court. On such an examination, I am of the opinion, that the material on which the Director acted was relevant and that the opinion formed by him was honest and definite and satisfies the requirements of Section 105 of the Customs Act. From this, it follows that the decision reached by the Director on 8-6-1983 cannot be interfered with by this Court under Article 226 of the Constitution. 43. Before considering the next point, it is useful to deal with a few allied questions that are intimately connected with point No. II itself which I now propose to do. 44. Sri Sundaraswamy has urged that the `Account Books' were not `documents' within the meaning of that term occurring in Section 105 of the Customs Act and, therefore, it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts so far as they are necessary for this case were these. Gurucharan Singh was prosecuted for committing an offence of theft of account books under Section 292 of the IPC that had been earlier seized from his business premises by an official of the Central Excise Department. In accepting the plea of the accused that account books were not documents and, therefore, there was no theft of them. Mathur, J. has expressed thus :- "My attention has not been drawn to any provision under which the officers of the department can seize the account books maintained by the manufacturer. When the Central Excise Officers are not empowered to seize the books of account not maintained in accordance with the Rules, they cannot take such registers in their possession either during the course of inspection or during search, though they can demand such registers from the manufacturer. In addition the Central Excise Officers can take extracts therefrom or make any minute therein to enable them to take further action in accordance with the law." In reaching this conclusion Mathur, J. has overlooked the definition of the term `document' in the General Clauses Act as also its plain meaning. In an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia legis for Government. In other words, the petitioner is prevented from using them or selling them to its customers. 54. As a pure proposition of law, it cannot be said that what is not seized on an earlier occasion, cannot be seized on second occasion. But, still Court will be justified in insisting that there should be compelling or very good reasons for making a second search and seizure on a second occasion; that too; within a week as in the present case. If that much is not insisted, searches and seizures causing serious inconvenience and anxiety if not anything also to citizens will almost become a child's play. 55. In this opinion dated 16-6-1983 the Director does not even say that Jadav had committed any impropriety and had failed to perform his duty as was expected from him. When that was so, there was hardly any ground to order for a search of the very place on the second occasion; that too; within a week. 56. Even the sole reason given by Director that the place was being used for manufacturing VCRs without a licence under the Act, and therefore liable for confiscation appears to have been given by him in somewhat a casual manner without a full and proper examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member that the proceedings are still to be completed by the authorities and this Court does not sit as a Court of appeal and examine the validity of every document seized by the authority. 63. On the mere number of documents, account books seized, it is not possible for this Court to hold that there has been excesses in the searches and seizures. Even the possibility of some marginal excesses likely to occur in cases of searches and seizures is not a good ground for this Court to hold that there has been excesses. From this it follows that there is no merit in this contention of Sri Sundaraswamy and I reject the same. RE : POINT NO. IV : 64. Sri Sundaraswamy has urged that there was no search and seizure on 10th and 15th June, 1983 of the M.G. Road Office of the petitioner and the documents seized on those days from that office are liable to be returned to the petitioner. 65. Sri Bhat has urged that the documents voluntarily delivered cannot be ordered to be returned to the petitioner. 66. While the petitioner has asserted that there was searches and seizures of the M.G. Road Office on 10th and 15th June, 1983, the respondents dispute the same and have asserted that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account books, protocols, VCRs and testing machines on such conditions as are necessary to safeguard the interests of revenue and other legal proceedings to be initiated against it. 72. Sri Bhat has vehemently opposed the return of any documents or articles before the proceedings are completed by the authorities under the Act. 73. The petitioner is a public limited company and its financial year has ended on the 30th June, 1983 is not disputed by the respondents. For complying with the requirements of the Companies Act like circulation of Director's report with the audited statement of accounts and for various other requirements, the petitioner immediately requires the account books. As it is more than a month has elapsed after their seizure, which I have earlier held to be valid. But, still it does not necessarily mean that they should be retained indefinitely and in any event for the maximum period by law, thus, needlessly paralysing the smooth functioning of the company. 74. Sri Bhat, however, suggested that it is open to the petitioner or its officers and auditors to appear in the office of respondent No. 1, inspect and take out extracts whenever necessary with permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified sealed and are allowed to be retained by the petitioner. But for the interim orders made on 17-6-1983 and 21-6-1983 they would have been searched and seized, the validity of which I have upheld. In this view, it is necessary to direct the petitioner to deliver the sealed boxes of documents to respondent No. 1. 79. As regards to various other documents seized, in the very nature of things, this Court will not be justified in directing their return to the petitioner and the same is, therefore, rejected. RE : POINT NO. VI : 80. Sri Sundaraswamy has urged that the notice dated 16-6-1983 issued by the Director is unwarranted and illegal. 81. The notice dated 16-6-1983 (Annexure-A) is issued by the Director under Section 14 of the Act, the validity of which is not challenged by the petitioner. Section 14 of the Act empowers the Director to summon any person to give evidence and produce documents in inquiries under the Act. The notice issued is within the power of the Director and is for purpose of the Act and cannot be interfered by this Court on any ground. 82. At the hearing Sri Bhat very rightly assured the Court that the officers will complete the investigation and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a criminal Court whenever necessary for any legal proceeding. (ii) I direct respondent No. 1 to return 67 account books to petitioner No. 1 after making all such inventories as he considers necessary on petitioner No. 1 filing as undertaking to produce all or any of them before him whenever called upon to do so for the completion of the proceedings under the Act or before a criminal Court, as the case may be, with all such expedition as is possible in the circumstances of the case and in any event, within 10 days from the date petitioner No. 1 files its undertaking before him. (iii) I direct respondent No. 1 to retain such number of protocols or history sheets not exceeding 200 out of 4200 seized as he may decide to choose and return the remaining protocols history sheets to petitioner No. 1 after making all such inventories as he considers necessary in that behalf on petitioner No. 1 filing an undertaking not to tamper any of the entries in any of them and produce all or any of them, when called upon by him for completion of the proceedings under the Act or any legal proceedings before a criminal Court with all such expedition as is possible in the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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