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2015 DIGILAW 142 (CAL)

M. R. Nirman Pvt. Ltd. v. Union of India

2015-02-19

HARISH TANDON

body2015
JUDGMENT Harish Tandon, J. The assessee who allegedly evaded the service tax has taken shelter under the writ jurisdiction of this Court in assailing the order of search and seizure to be in excess of the power prescribed under Section 82 of the Finance Act. It is undisputed that after the incorporation, the petitioner took the registration under Finance (No.II) Act, 1994 under the head "Construction Services" and subsequently amended the same by including the "Works Contract Services" with effect from January 20, 2004. An intimation as to the service tax audit is issued upon the petitioner and the relevant records and documents pertaining to the period for which the tax audit is undertaken is furnished from time to time. Senior Intelligence Officer attached to the Directorate General of Central Excise Intelligence conducted search at the office of the petitioner and seized certain documents upon issuing the summons on the spot on 7th June, 2013. It further appears that two cheques for Rs. 1,00,00,000/- each was handed over to the authorities by the authorised representative of the petitioner towards the service tax liability. 2. By a subsequent letter dated 27th June, 2013, the petitioner requested the Central Excise Officer to release the seized records as the non-availability of the same is creating a tremendous difficulties in operating day to day business activities which includes one pen drive. Immediately thereafter, the writ petition came to be filed before this Court challenging the summons issued on 7th June, 2013 with further direction to hand over all the documents including the pen drive seized at the time of search and seizure. At the time of admission of the writ petition, an objection came from the respondent authorities that the document pertaining to the seizure annexed to this writ petition have been tempered with by incorporating one pen drive which was never seized by the authorities. For such reason, the petitioner was directed to produce the original seizure list handed over at the time search and seizure to ascertain whether there has been any tempering and/or interpolation in the said document. 3. The matter appeared on 12th August, 2013 when the petitioner candidly admits that the pen drive was never seized. For such reason, the petitioner was directed to produce the original seizure list handed over at the time search and seizure to ascertain whether there has been any tempering and/or interpolation in the said document. 3. The matter appeared on 12th August, 2013 when the petitioner candidly admits that the pen drive was never seized. An explanation was sought to be offered that the Charter Accountant for the purpose of convenience recorded the word "one pen drive" in the original seizure list having no intention to blame the respondent authorities. The advocate-on-record while annexing the documents inadvertently photo copied the same without any intention to gain out of it. 4. The learned Advocate for the petitioner further submitted that they would not press the prayer for return of the pen drive. However, the petitioner raises the plea that two cheques covering Rs.1,00,00,000/- each was forcibly taken from the officer of the petitioner-company which is beyond the authority and the power enshrined under the statute. The respondent replied that the aforesaid cheques were handed over voluntarily upon admitting the service tax liabilities and, therefore, the allegation as to using of force in collecting the said two cheques are false and have no semblance of truth in it. 5. Recording the aforesaid submissions, this Court passed an interim order on 12th August, 2013 permitting the respondents to exchange the affidavits and further directed the petitioner to deposit a further sum of Rs. 1,00,00,000/- out of Rs. 2,00,00,000/- as Rs.1,00,00,000/- had already been deposited with the respondent authorities through RTGS. Till the time extended by this Court for deposit of an amount of Rs. 1,00,00,000/, the authorities were restrained from taking any coercive steps for realisation of the tax liability and if the compliance is made, the authorities were restrained in similar fashion till the disposal of the writ petition. The Court also recorded the default clause and permitted the authorities to proceed in accordance with law if the default occurs. The said order was challenged in an intra court appeal before the Division Bench and got affirmed upon dismissal thereof. The Court also recorded the default clause and permitted the authorities to proceed in accordance with law if the default occurs. The said order was challenged in an intra court appeal before the Division Bench and got affirmed upon dismissal thereof. The respondent files the opposition in terms of the direction passed by this Court and have categorically stated that two cheques were handed over out of own volition by the officer of the petitioner-company admitting the service tax liability and, therefore, the allegation as to forcible taking of the two cheques is specifically denied. 6. At the time of argument, the petitioner drifted from his stand taken in the writ petition and attacked the search and seizure dated 7th June, 2013 on the ground that there was no reason to believe for conducting the said search which is one of the requirement of law. An extensive argument is advanced on the said plea upon relying various judgments of the High Courts and the Supreme Court which shall be dealt with seriatim in details hereinafter. 7. The learned Advocate for the petitioner strongly submits that there should be "a reason to believe" pertaining to the concealment of a document or evasion of a duty before conducting the search and seizure as held in case of Durga Prasad etc v. H.R. Gomes, Superintendent (Prevention) Central Excise, Nagpur and another reported in AIR 1966 SC 1209 . It further submitted that the non-disclosure which led to an authority "a reason to believe" vitiates the action for search and seizure and relied upon the judgment of the Supreme Court in case of S. Narayanappa & Ors. v. The Commissioner of Income Tax, Banglore, reported in AIR 1967 SC 523 . By placing reliance upon another judgment of the Supreme Court in case of R.S. Seth Gopikisan Agarwal v. R.N. Sen, Assistant Collector of Customs and Central Excise, Raipur & Ors; reported in AIR 1967 SC 1298 , the petitioner submits that once a challenge is thrown to action of the authority for search and seizure, the authorities have to satisfy the existence of a believe upon production of the relevant evidence. The aforesaid proposition is laid down by the Supreme Court in case of Sheo Nath Singh v. Appellate Assistant Commissioner of Income Tax reported in (1971) 82 ITR 147 (SC). The aforesaid proposition is laid down by the Supreme Court in case of Sheo Nath Singh v. Appellate Assistant Commissioner of Income Tax reported in (1971) 82 ITR 147 (SC). By saying that there must have "a reason to believe" as to the concealment, evasion of tax liability before taking any action for search and seizure, the petitioner relies upon a judgment of the Madras High Court in case of Gulab & Co. v. Superintendent of Central Excise (Preventive), Trichy reported in (1975) 98 ITR 581 (Mad). The petitioner further says that the expression "reason to believe" should be interpreted as believe in good faith having connection or bearing to the formation thereof and relied upon a judgment of the Supreme Court in case of Dr. Partap Singh & another v. Director of Enforcement, Foreign Exchange Regulation Act & Others reported in (1985) 3 SCC 72 . Lastly the reliance is placed upon a judgment of this Court in case of Naresh Kumar & Company v. Union of India & Ors; reported in (2011) 38 VST 332 (Cal) in support of the contention that the authorities are not empowered to collect an amount at the time of raid but to take recourse to the measures provided in the statute. 8. Refuting the contention of the petitioner, the respondent says that there was a sufficient materials against the petitioner for evasion of the service tax which led the authorities "a reason to believe" and, therefore, the action of the respondents in conducting the search and seizure is not illegal. It is strongly submitted that the petitioner never disclosed its operation from another premises and have concealed such information and upon receiving the secret information, the appropriate authority issued an order for search which cannot be said to be improper and contrary to the relevant provision of the law. It is further submitted that the summons have been issued to the petitioner on the spot at the time of search and seizure which would justify that there was a conscious and deliberate concealment of the relevant information amounting to evasion of service tax. It is vehemently submitted that the petitioner impliedly waived its right to raise an objection to an action of the authority for search and seizure by issuing a letter dated 27th June, 2013 demanding the return of those documents for smooth running of day to day business activities. It is vehemently submitted that the petitioner impliedly waived its right to raise an objection to an action of the authority for search and seizure by issuing a letter dated 27th June, 2013 demanding the return of those documents for smooth running of day to day business activities. By relying upon a letter dated 7th June, 2013 issued by the authorised representative of the petitioner-company, the respondents say that two cheques covering Rs. 2,00,00,000/- were voluntarily handed over to the authority on admitting the service tax liability for the past period. It is thus submitted that the allegation of collecting those two cheques forcibly is unfounded and false on the face of the admission made in the said letter. Lastly it is submitted that the Writ Court is not supposed to make a full-fledged inquiry whether the petitioner has evaded the service tax or not and prayed for dismissal of the writ petition. 9. The core question involved in this writ petition is whether the Court should set aside the summons issued in course of the search and seizure being wholly without jurisdiction and in excess of the power prescribed under Section 82 of the Finance Act, 1994. 10. The brief facts already been narrated herein above wherefrom it is apparent that there is no case made out in the writ petition and no averment could be discerned therefrom on the point that the authorities have not recorded their satisfaction on reason to believe or conducting the search and seizure. Up to Paragraph 7 of the writ petition, the petitioner narrates the story of service tax audit and the payment of the service tax as and when the spot memos are issued by the statutory auditor. Paragraph 8 recorded the event of raid having conducted at the instance of the service tax authority and in Paragraph 9 thereof, the details of the seized documents and collections of two cheques of Rs. 1,00,00,000/- each are averred therein. However, it is stated that those cheques were collected by compelling the representative to admit the service tax liability. Paragraph 10 to 12 is restricted to the statements on preparation of the summons and compelling the representative of the petitioner-company to sign on it and request to return the seized documents. 1,00,00,000/- each are averred therein. However, it is stated that those cheques were collected by compelling the representative to admit the service tax liability. Paragraph 10 to 12 is restricted to the statements on preparation of the summons and compelling the representative of the petitioner-company to sign on it and request to return the seized documents. Paragraph 13 relates to the issuance of the notice dated June 6, 2013, issued by the Superintendent (Audit), Group XVI, Service Tax Commissionerate, Kolkata and reply to the said notice. In Paragraph 14, the petitioner admits to have paid a sum of Rs. 1,00,00,000/- whereas in Paragraph 15 & 16, there is an averment as to renewal of the prayer for release of the documents including the cheques. The Paragraph 17 contains the statement that those cheques covering Rs. 2,00,00,000/- were forcibly collected which is wrongful, illegal, arbitrary and in colourable exercise of administrative power. From Paragraph 18 onwards, the petitioner states that the respondent authorities have seized the books, documents and other storage devices in contravention to the established principle of law and is liable to be set aside. 11. From the meaningful reading of the averments made in the writ petition, not a slightest whisper, one can discern on the non-formation of "reason to believe" or lack of materials forming such belief are incorporated therein. The petitioner has drifted the stand for the first time in the argument impugning the action of the authorities in conducting the search in absence of any material forming "reason to believe". The expression "reason to believe" is found place in all the statutes which stand pari materia and came to be interpreted before the different Courts. 12. In case of Durga Prasad (supra), a search and seizure was carried out in the residential cum business premises of the appellant therein under the Customs Act. Section 105 of the Customs Act contains the provision for search and seizure provided the authority named therein has reason to believe. The Apex Court held though the power of search and seizure is provided under the aforesaid provision but it is essential that before the same is exercised the concerned officer must have a reason to believe that the documents or the things which is in opinion in secreted is relevant for any provision under the said Act. The Apex Court held though the power of search and seizure is provided under the aforesaid provision but it is essential that before the same is exercised the concerned officer must have a reason to believe that the documents or the things which is in opinion in secreted is relevant for any provision under the said Act. Even in case of S. Narayanappa (supra), the Supreme Court interpreted the expression "reason to believe" appearing a Section 34 of the Income Tax Act, 1922 not to mean a purely subjective satisfaction but should be based on rational connection or relevance on formation of belief. In case of R.S. Seth Gopikisan (supra), the Constitution Bench held though the authority need not give the reason but when the existence of belief is questioned in any collateral proceeding, he has to produce relevant evidence to sustain his believe. However, in case of Sheo Nath Singh (supra), relating to the Income Tax Act, 1922, the Apex Court interpreted the expression "reason to believe" to be an honest and based upon reasonable grounds as opposed to mere suspicion, gossip or rumour. It is further reiterated that "reason to believe" is not synonymous with subjective satisfaction of the officer but should be held in good faith and not on mere pretence. 13. Assimilation of the ratio culled out from the aforesaid report "reason to believe" is not synonymous to a subjective satisfaction but based on good faith which is opposed to a mere pretence. The belief cannot be formed on mere rumour, gossip or suspicion but based on something which have a relevance and nexus to the concealment or evasion of the service tax. 14. It is a categorical stand of the respondents that though the statutory audit was continuing but there was a concealment of the information that the petitioner is operating from the another premises and has deliberately and consciously evaded the service tax. It is further stated by the respondents that the registration certificate does not show the address where the petitioner was operating its business activities. The scrutiny of the Writ Court in a challenge to an action for search and seizure is very microscopic and limited and is not meant for roving scrutiny on the satisfaction on "reason to believe" upon looking the various documents and the information. The scrutiny of the Writ Court in a challenge to an action for search and seizure is very microscopic and limited and is not meant for roving scrutiny on the satisfaction on "reason to believe" upon looking the various documents and the information. If the satisfaction has been placed before the Court which may remotely suggest that the same may form the "reason to believe", the Writ Court should not embark its journey further to find out whether it amounts to an evasion of the service tax or not. It is an authority before whom the proceeding is pending to take a decision on merit. 15. Apart from the same, this Court does not want to go deep into this aspect in absence of any foundation having led in the writ petition. There is not a slightest whisper in the writ petition on the above aspect and it is only at the time of argument, the same is advanced. The respondents are correct in saying that if such case was made out in the writ petition, they would have disclosed the documents and the materials forming "reason to believe". 16. This Court is not unmindful of the other point raised in this writ petition for which the foundation is already made. According to the petitioner, two cheques covering Rs. 2,00,00,000/- were taken at the time of search and seizure by using force which is impermissible and beyond the authority, power and competence of the authority concerned. 17. To counter the aforesaid stand, the respondents have relied upon the letter dated 7th June, 2013 issued by the authorised representative of the petitioner-company accepting the handing over of two cheques covering the said amount after admitting the service tax liability. The plain reading of the said letter supports the stand of the respondent. Since the petitioner have stated that the authorised representative was compelled to sign on the said letter and issued two cheques covering the said amount, this Court cannot decide whether the same was taken forcibly or was issued voluntarily. Furthermore, a sum of Rs. 1,00,00,000/- has already been deposited with the respondent authorities through RTGS and in terms of the interim order passed on 12th August, 2013, this Court extended the time for deposit for further sum of Rs. 1,00,00,000/-. Furthermore, a sum of Rs. 1,00,00,000/- has already been deposited with the respondent authorities through RTGS and in terms of the interim order passed on 12th August, 2013, this Court extended the time for deposit for further sum of Rs. 1,00,00,000/-. The Writ Court should not embark to decide the disputed questions of fact, which are to be decided on a full-fledged trial. It should not usurp the power of the authority and convert itself into an original authority. 18. The reliance is heavily placed on the judgment of this Court in case of Naresh Kumar (supra) that the authority have no power to collect an amount at the time of raid. In the said case, a challenge was made to a collection of amount at the time of raid under threat and coercion. Though the respondent authorities took the stand that the same was given voluntarily but it appears that immediately upon the collection of the cheque, an objection was raised that the said amount was, in fact, taken under threat and coercion. In the above backdrop, it is held that once the petitioner alleges that the said payment was not made voluntarily and objection is immediately raised, the authority has no jurisdiction to collect any amount at the time of raid simply as it does not empower legally to do so. 19. The aforesaid case is distinguishable, for the simple reason that the letter dated 7th June, 2013 issued by the authorised representative of the petitioner-company records the handing over of the two cheques after admitting the service tax liability. Even in the letter dated 27th June, 2013, the petitioner did not raise any objection against the collection of the said amount rather it admitted to have issued such cheques and further recorded that a sum of Rs. 1,00,00,000/- has already been paid as a part payment of service tax on 17th June, 2013 and prayed for the instalments to liquidate the balance liabilities. This Court, therefore, does not find that the said judgment is of any help to the petitioner. 20. In whatever angle, the Court look at the relief claimed in this writ petition cannot be granted. 21. The writ petition is thus dismissed. 22. However, there shall be no order as to costs. 23. Urgent photostat certified copy of the judgment, if applied for, be given to the parties on priority basis. Petition dismissed.