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2008 DIGILAW 750 (GAU)

Tushar Kanti Mazumdar v. State of Assam

2008-09-30

RANJAN GOGOI

body2008
JUDGMENT Ranjan Gogoi, J. 1. The petitioner who is the sole proprietor of M/s. Eastern Drugs and Chemicals has challenged the seizure of certain documents pertaining to his business effected under the provisions of section 44(3)of the Assam General Sales Tax Act, 1993 (hereinafter referred to as, "the Sales Tax Act"). The retention of the seized documents beyond the period prescribed by the proviso to section 44(3) of the Sales Tax Act as well as a notice dated November 8, 2001 issued by the Superintendent of Taxes, Unit A, Guwahati, requiring the petitioner to appear before the said authority and to produce all relevant books of accounts are the other aspects of the challenge made in the present writ petition. The facts on which the aforesaid challenge has been founded may briefly be noticed at the outset. 2. The firm in question, i.e., M/s. Eastern Drugs and Chemicals of which the petitioner claims to be the sole proprietor is a registered dealer under the Assam General Sales Tax Act as well as the Central Sales Tax Act. The said firm is engaged in the business of pharmaceutical products with its registered office situated within the city of Guwahati. According to the petitioner, at about 12.30 p.m. of June 31, 2001 a team of sales tax officials under the Deputy Commissioner of Taxes, Zone C, Guwahati, visited the business premises of the petitioner during his absence and issued a notice under section 44(1) of the Sales Tax Act requiring the employees present to produce the books of accounts of the firm for the years 1998-99 onwards for verification. Thereafter, according to the petitioner, the visiting team made a search of the business premises of the petitioner and effected seizure of certain documents which are specifically mentioned in the seizure list dated July 31, 2001 enclosed as annexure B to the writ petition. According to the petitioner, the aforesaid seizure was made on the ground that the petitioner, as the dealer, had been dealing in some taxable goods which are not covered by his registration certificate leading to evasion of taxes and additionally, the dealer could not explain some transactions recorded in loose sheets and exercise books which were detected and seized on the date in question, i.e., July 31, 2001. 3. 3. The petitioner has further stated that, thereafter, a notice dated November 8, 2001 issued by the jurisdictional Superintendent of Taxes was received by the petitioner wherein it has been mentioned that the preliminary verification report in respect of the seized documents indicates evasion of taxes to the extent of Rs. 31,43,454 by the petitioner. Accordingly, by the notice dated November 8, 2001, the petitioner was required to appear before the Superintendent of Taxes on November 16, 2001 and to produce all relevant books of accounts, etc., and explain the facts revealed by the seized documents. The petitioner has further averred that in reply to the notice dated November 8, 2001 he had sent a communication dated December 3, 2001 requesting release of the seized documents to enable him to prepare the final accounts and also on the ground that the seized documents are required by him in connection with his day to day business. Alternatively, the petitioner prayed for photostat copies of the seized documents. The said letter dated December 3, 2001 of the petitioner was followed by another letter dated December 5, 2001 requesting the jurisdictional Superintendent of Taxes to adjourn the case to another date on the ground of absence of the proprietor of the firm. A further request for release of the seized documents was made by the petitioner on December 12, 2001. No action having been forthcoming for release of the seized documents this writ petition was filed on 18th of January, 2002 wherein an interim order dated January 23, 2002 was passed by the court suspending further proceedings pursuant to the notice dated November 8, 2001 of the Superintendent of Taxes, Unit A, Guwahati. 4. In the writ petition filed the petitioner has contended that the seizure made under section 44(3) of the Sales Tax Act is not based upon the requisite satisfaction of the seizing authority as contemplated by the provisions of the Act. According to the petitioner, if a dealer is found to be engaged in business beyond those enumerated in the registration certificate, there are ample provisions in the Act for amendment of the registration certificate. Furthermore, according to the petitioner, the second ground in support of the seizure, as recorded in the seizure list dated July 31, 2001, is also not tenable as no loose sheets have been specifically mentioned in the seizure list prepared. Furthermore, according to the petitioner, the second ground in support of the seizure, as recorded in the seizure list dated July 31, 2001, is also not tenable as no loose sheets have been specifically mentioned in the seizure list prepared. The petitioner has further contended that the seized documents or photocopies thereof are required by the petitioner for the purpose of preparation of his books of accounts without which the petitioner is not in a position to produce such accounts before the concerned Sales Tax Officer. 5. According to the petitioner, under the proviso to section 44(3) of the Sales Tax Act, retention of seized documents can be for a maximum period of 120 days whereafter the reasons for such retention has to be recorded and approved by the Commissioner of Taxes. In the present case, neither any such reasons have been recorded nor approval of the Commissioner has been obtained. That apart, according to the petitioner, the documents seized followed a search operation which, however, was not carried out in accordance with the provisions contained in the Code of Criminal Procedure, it is on the aforesaid broad basis that the petitioner seeks to challenge the seizure made; the retention of the seized documents beyond the period of 120 days and further the notice dated November 8, 2001 requiring the petitioner to produce the books of accounts before the sales tax authority. 6. The respondents have filed an affidavit in the case wherein it is stated that on July 31, 2001 at about 12.30 pm. an inspection was carried out in the petitioner's business premises under the provisions of section 44(1) of the Sales Tax Act. In the course of such inspection some incriminating documents were found, which, not being reasonably explained by the employees of the petitioner, were seized in exercise of power under section 44(3) of the Act. According to the respondents, the seizure followed an inspection under section 44(1) of the Sales Tax Act and was not pursuant to any search operation so as to require compliance with the provisions of the Code of Criminal Procedure. The respondents have further submitted that approval of the Commissioner for retention of the seized documents beyond 120 days was accorded by order dated 11th of February, 2002, a copy of which has been enclosed to the counter-affidavit of the respondents. The respondents have further submitted that approval of the Commissioner for retention of the seized documents beyond 120 days was accorded by order dated 11th of February, 2002, a copy of which has been enclosed to the counter-affidavit of the respondents. Insofar as the notice dated November 8, 2001 is concerned, according to the respondents, the books of accounts which the petitioner was required to produce before the authority were required to be prepared by the petitioner much before the date of seizure of the documents, i.e., July 31, 2001 and, therefore, it was not reasonable on the part of the petitioner to require return of the seized documents for preparation of such books of accounts. It is the further contention of the respondents that if the seized documents are to be returned as insisted upon by the petitioner, the same would enable the petitioner to rectify the anomalies detected by suitably preparing the books of accounts. 7. Having noticed the pleaded case of the parties before the court the arguments advanced by the learned counsels for the respective parties may now be taken note of. 8. Sri O.P. Bhati, learned counsel for the petitioner, in the oral arguments made, has confined his challenge to the question of the legality of the retention of the seized books/documents of the petitioner beyond the period of 120 days. Pointing out the proviso to section 44(3) of the Sales Tax Act, Sri Bhati has urged that the maximum period of retention of the seized documents is contemplated by the Act to be 120 days and any further retention has to be justified by recording of reasons which also has to be approved by the Commissioner of Taxes. In the present case, according to Sri Bhati, the order of approval dated February 11, 2002, passed by the Commissioner would go to show that such approval was sought by the Deputy Commissioner of Taxes, Zone C, Guwahati, only on January 28, 2002, i.e., after the expiry of 120 days. Consequently, the approval granted on February 11, 2002, by the Commissioner is also beyond the statutory period. Sri Bhati has specifically pointed out that the approval for retention beyond 120 days was sought for and accorded after the present writ petition was filed. Consequently, the approval granted on February 11, 2002, by the Commissioner is also beyond the statutory period. Sri Bhati has specifically pointed out that the approval for retention beyond 120 days was sought for and accorded after the present writ petition was filed. According to Sri Bhati, on a reasonable reading of the proviso to section 44(3) of the Sales Tax Act it is clear that such approval should have been sought for and granted before the expiry of 120 days. As the provisions of the Sales Tax Act was not complied with, the retention of the seized documents, according to Sri Bhati, is wholly illegal thereby entitling the petitioner to forthwith receive the seized documents. In this regard reliance has been placed by Sri Bhati on a judgment of the apex court in Commissioner of Income-tax v. Oriental Rubber Works reported in [1984] 145 ITR 477 (SC). A judgment of the Punjab and Haryana High Court in Spring Dale Educational Society v. Union of India reported in [2001] 247 ITR 409 (P&H) has also been relied upon. 9. The arguments offered by Sri Bhati, learned counsel for the petitioner, have met with stiff resistance offered by Sri R. Dubey, learned counsel appearing for the respondents. Sri Dubey has pointed out that the decision of the apex court in Commissioner of Income-tax v. Oriental Rubber Works [1984] 145 ITR 477 (SC) and of the Punjab and Haryana High Court in Spring Dale Educational Society reported in [2001] 247 ITR 409 (P&H) were rendered in the context of the provisions of section 132(8) of the Income-tax Act which provisions are not similar to those contained in section 44(3) of the Sales Tax Act. Sri Dubey has further pointed out that in Commissioner of Income-tax v. Oriental Rubber Works [1984] 145 ITR 477 (SC) interference with the retention of the seized documents beyond the statutory period was made on the ground of non-communication of the same to the assessee. According to Sri Dubey, such non-communication had an adverse effect on the right of the assessee to object to such action before the Central Board of Direct Taxes as provided by sub-sections (10) and (12) of section 132 of the Income-tax Act. No such provisions are to be found in the Sales Tax Act, according to Sri Dubey. 10. According to Sri Dubey, such non-communication had an adverse effect on the right of the assessee to object to such action before the Central Board of Direct Taxes as provided by sub-sections (10) and (12) of section 132 of the Income-tax Act. No such provisions are to be found in the Sales Tax Act, according to Sri Dubey. 10. Pointing out the language appearing in the proviso to section 44(3) of the Sales Tax Act and section 132(8) of the Income-tax Act Sri Dubey has urged that the negative covenant contained in section 132(8) of the Income-tax Act and the absence thereof in the proviso to section 44(3) of the Sales Tax Act would be suggestive of the fact that retention of the seized documents beyond 120 days would not, per se, be illegal under section 44(3) of the Sales Tax Act. In this regard, Sri Dubey has also referred to the proviso to section 74(3)(b) of the Assam Value Added Tax Act 2003 to contend that in the said Act retention of seized documents beyond 120 days requires the prior approval of the Commissioner. Absence of any such requirement in the proviso to section 44(3) of the Sales Tax Act, according to Sri Dubey, makes the legislative intent very clear which is to the effect that retention beyond 120 days, per se, would not make the same invalid. In this regard, Sri Dubey has also cited a judgment of the apex court in Life Insurance Corporation of India v. Escorts Ltd. reported in [1986] 59 Comp Cas 548 (SC); [1986] 1 SCC 264, to contend that the approval contemplated by the proviso to section 44(3) of the Sales Tax Act can very well be subsequent approval. Another decision of the apex court in U.P. Avas Evam Vikas Parishad v. Friends Coop. Housing Society Ltd. reported in [1995] Supp 3 SCC 456, has been relied upon to contend that the approval of the Commissioner once accorded, would relate back to the initial date and would validate the retention of the seized documents beyond 120 days though such approval may have been accorded after the expiry of the aforesaid 120 days. 11. Housing Society Ltd. reported in [1995] Supp 3 SCC 456, has been relied upon to contend that the approval of the Commissioner once accorded, would relate back to the initial date and would validate the retention of the seized documents beyond 120 days though such approval may have been accorded after the expiry of the aforesaid 120 days. 11. Before embarking upon a consideration of the rival projections made by the learned counsels, it may be necessary to notice the provisions contained in section 44(3) of the Sales Tax Act and section 132(8) and (10) of the Income-tax Act. 44. (3) If any authority appointed under sub-section (1) of section 3 has reason to suspect that any dealer is to evade the payment of any tax or any clearing or forwarding agent or a person transporting goods or any owner of a warehouse or a godown is keeping or has kept his account in such a manner as is likely to cause evasion of tax payable under this Act, such authority may for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer or the clearing or forwarding agent or the person transporting goods or the owner of a warehouse or godown as may be, necessary and shall grant a receipt for the same, such seized accounts, registers or documents shall be retained for so long as may be reasonably necessary for examination thereof or for a prosecution for any offence punishable under this Act and shall thereafter be returned to the person concerned in the prescribed manner: Provided that if the seized accounts, registers or documents are retained by any authority other than the Commissioner for more than one hundred twenty days, the reasons for so doing shall be recorded in writing and the approval of the Commissioner shall be obtained by the authority so retaining them. S. 132. S. 132. (8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (C) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the Chief Commissioner, Commissioner, Director-General or Director for such retention is obtained: Provided that the Chief Commissioner, Commissioner, Director-General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. .... (10) If a person legally entitled to the books of account or other documents seized under sub-section (1) (or sub-section (1A)) objects for any reason to the approval given by the Chief Commissioner, Commissioner, Director-General or Director under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents and the Board may after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. 12. The striking difference in the language appearing in the relevant provisions of the two enactments brought about by the presence of a negative covenant in section 132(8) of the Income-tax Act and the absence thereof in section 44(3) of the Sales Tax Act, has already been noticed. In Commissioner of Income-tax v. Oriental Rubber Works [1984] 145 ITR 477 (SC), it was held that "two conditions must be fulfilled before such extended retention becomes permissible in law: (a) reasons in writing must be recorded by the authorized officer or the concerned ITO seeking the Commissioner's approval, and (b) obtaining of the Commissioner's approval for such extended retention' and if either of these conditions is not fulfilled such extended retention will become unlawful and the concerned person, (i.e., the person from whose custody such books or documents have been seized or the person to whom those belong) acquires a right to the return of the same forthwith. However, the above view expressed must be understood to be in the context of the provisions of section 132(8) of the Income-tax Act. That apart, in the said case, the apex court also noticed the provisions of sub-sections (10) and (12) of section 132 of the Income-tax Act, as then in force, by virtue of which the person legally entitled to receive the seized books and documents was vested with the right to object to the approval given by the specified authority under sub-section (8). No such provisions are to be found in the Sales Tax Act with which Act the court would be primarily concerned in the present case. 13. Under section 44(3) of the Sales Tax Act, the seized accounts, registers and documents can be retained as long as such retention is necessary for examination thereof or for a prosecution under the Act and only, thereafter, the seized documents are to be returned to the concerned person. However, the proviso to section 44(3) contemplates that if the seized books of account, registers and documents are retained for more than 120 days, the reasons for doing so shall be recorded in writing and the approval of the Commissioner shall be obtained by the authority retaining the same. 14. On a plain reading of the proviso to section 44(3), retention beyond 120 days would appear to be permissible but with the approval of the Commissioner if the officer retaining the seized documents is any authority other than the Commissioner. In contrast, the provisions of section132(8) of the Income-tax Act contemplates that the seized books of account and documents shall not be retrained for a period extending 180 days, unless the approval of the authority mentioned in sub-section (8) for such retention is obtained. Section 132(8) of the Income-tax Act imposes a bar on retention of the seized documents beyond 180 days which bar gets lifted once approval is obtained for any extended retention. In view of the bar imposed, which can only be overcome by grant of approval, such approval necessarily has to be prior approval, i.e., granted prior to expiry of the period of 180 days. However, the proviso to section 44(3) does not impose any such bar inasmuch as if the seized documents are retained (emphasis is mine) beyond 120 days, approval of the Commissioner is required to be obtained. However, the proviso to section 44(3) does not impose any such bar inasmuch as if the seized documents are retained (emphasis is mine) beyond 120 days, approval of the Commissioner is required to be obtained. The manner in which the proviso to section 44(3) has been couched leans against an understanding that the approval contemplated by the proviso is prior approval. In this connection, the following observations of the apex court in life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548 (SC); [1986] 1 SCC 264 may be usefully noticed: 61. From what has been narrated above, one of the principal questions to be considered is seen to be whether the Reserve Bank of India had the power or authority to give ex post facto permission under section 29(1)(b) of the Foreign Exchange Regulation Act for the purchase of shares in India by a company not incorporated in India or whether such permission had necessarily to be 'previous' permission. 62. We do not propose to refer to any dictionary to find out the meaning of the word 'permission', whether the word is comprehensive enough to include subsequent permission. We will only refer to what Sir Shah Sulaiman, Actg. C.J. said in Shakir Husain v. Chandoo Lal AIR 1931 All 567; [1931] ALJ 865: Ordinarily, the difference between approval and permission is that in the first, the act holds good until disapproved, while in the other case, it does not become effective until permission is obtained. But permission subsequently obtained may all the same validate the previous act. 63. We have already extracted section 29(1) and we notice that the expression used is 'general or special permission of the Reserve Bank of India' and that the expression is not qualified by the word 'previous' or 'prior'. While we are conscious that the word 'prior' or 'previous' may be implied if the contextual situation or the object and design of the legislation demands it, we find no such compelling circumstances justifying reading any such implication into section 29(1). On the other hand, the indications are all to the contrary. We find, on a perusal of the several, different sections of the very Act, that the Parliament has not been unmindful of the need to clearly express its intention by using the expression 'previous permission' whenever it was thought that 'previous permission' was necessary... On the other hand, the indications are all to the contrary. We find, on a perusal of the several, different sections of the very Act, that the Parliament has not been unmindful of the need to clearly express its intention by using the expression 'previous permission' whenever it was thought that 'previous permission' was necessary... The distinction made by Parliament between permission simpliciter and previous permission in the several provisions of the same Act cannot be ignored or strained to be explained away by us. That is not the way to interpret statutes. The proper way is to give due weight to the use as well as the omission to use the qualifying words in different provisions of the Act. The significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded. In our view, the Parliament deliberately avoided the qualifying word 'previous' in section 29(1) so as to invest the Reserve Bank of India with a certain degree of elasticity in the matter of granting permission to non-resident companies to purchase shares in Indian companies. .... ...The Foreign Exchange Regulation Act is, therefore, clearly a statute enacted in the national economic interest. When construing statutes enacted in the national interest, we have necessarily to take the broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory interpretation must yield to broader notions of the national interest. If the legislation is viewed and construed from that perspective, as indeed it is imperative that we do, we find no difficulty in interpreting 'permission' to mean 'permission', previous or subsequent, and we find no justification whatsoever for limiting the expression 'permission' to 'previous permission' only. In our view, what is necessary is that the permission of the Reserve Bank of India should be obtained at some stage for the purchase of shares by non-resident companies. 15. In the present case, the court is concerned with the interpretation of a taxing statute. Without dilating, as the principles are well known, it will suffice to say that the interpretation of the court must be strict and without addition of words unless such addition is imperative to give a rational meaning to the provisions of the statute. 15. In the present case, the court is concerned with the interpretation of a taxing statute. Without dilating, as the principles are well known, it will suffice to say that the interpretation of the court must be strict and without addition of words unless such addition is imperative to give a rational meaning to the provisions of the statute. When the Legislature has used the word "approval" in section 44(3)and the words "prior approval" finds mention in other provisions of the Sales Tax Act, i.e., section 28, it will not be correct on the part of the court to understand the approval contemplated by section44(3) to be "prior approval". The use of the expression "prior approval" of the Commissioner for retention of the seized books of accounts documents, etc., in the proviso to section 74(3)(b) of the Assam Value Added Tax Act, 2003, is a further pointer to the legislative intent. In view of the above, it cannot be held that the approval granted by the Commissioner by his order dated February 11, 2003, though after expiry of 120 days, is invalid in law to make the retention of the seized documents by the respondent illegal. 16. In so far as challenge to the notice dated November 8, 2002 is concerned, there is hardly any basis for the court to hold that the said notice as well as the proceedings contemplated are in any way contrary to the provisions of the Sales Tax Act. The preliminary verification report as regards the extent of evasion of tax by the petitioner is really on the basis of the seized books of account of the petitioner, It is a report prepared on the basis of the documents seized from the petitioner. If the seized documents have been retained by the authority legally and lawfully, as has been already held by the court, the position emanating from such seized documents need not have been furnished to the petitioner along with the notice dated November 8, 2002. Any such action demanded by the petitioner would be to virtually nullify the seizure and retention of the documents belonging to the petitioner. The petitioner would be entitled to the said verification report as well as the seized documents only once he produced the books of accounts, as required to do by the notice dated November 8, 2002. Any such action demanded by the petitioner would be to virtually nullify the seizure and retention of the documents belonging to the petitioner. The petitioner would be entitled to the said verification report as well as the seized documents only once he produced the books of accounts, as required to do by the notice dated November 8, 2002. For the aforesaid reasons, the court is inclined to take the view that this writ petition is wholly without merit and substance. It is, accordingly, dismissed. However, in the facts and circumstances of the case, parties are left to bear their own costs. Interim order dated January 23, 2002 is hereby vacated.