1971 (2) TMI 82 - HC - VAT and Sales Tax

Legal ruling upholds search & seizure powers under tax law, deems constitutional

The court held that Section 13(3) of the U.P. Sales Tax Act does not contravene Articles 14 and 19(1)(f) and (g) of the Constitution. The court found that ... - Issues Involved:1. Whether section 13(3) of the U.P. Sales Tax Act contravenes articles 14 and 19 of the ConstitutionRs.2. Whether, even if section 13(3) is ultra vires, any material obtained as a result of the search and seizure effected by the sales tax authorities can be utilised while making an assessment against the petitionerRs.Issue-Wise Detailed Analysis:Issue 1: Constitutionality of Section 13(3) of the U.P. Sales Tax ActNature of Dealer's Proprietary Right:The court examined the nature of the dealer's proprietary right in the accounts, registers, or documents mentioned in section 13(3). The Act imposes a statutory duty on dealers to maintain true and correct accounts of their transactions. These accounts, registers, and documents are not purely private property but have a quasi-public character, akin to public documents. The court referenced cases such as Wilson v. U.S.A. and McClay v. Donovan to support the view that records required by law to be kept for public purposes are not protected by the privilege against self-incrimination.Reasonableness of Restrictions:The court evaluated whether the power conferred by section 13(3) is reasonable under Article 19. It was argued that the power of search and seizure is unguided and arbitrary. However, the court noted several limitations on this power:1. The officer authorized to seize documents must be of a rank not below that of an assessing authority.2. The place of seizure is limited to business premises, vehicles, or places where the officer has reason to believe documents are kept.3. The power can only be exercised when the officer has reasonable grounds to believe that the dealer is trying to evade tax liability and that necessary documents may be found.The court found that these limitations ensure the power is not arbitrary and is subject to judicial review. The absence of a statutory appeal was deemed immaterial as judicial review is available post-search.Public and Trustee Character of Documents:The court emphasized that the dealer's documents have a public nature and are impressed with a trust, as the dealer acts as a constructive trustee for the sums recovered as tax from buyers. This quasi-public nature justifies greater control and inspection by statute.Comparison with Other Cases:The court distinguished this case from others where search and seizure provisions were found unconstitutional, noting differences in the statutory framework and the nature of the documents involved.Conclusion on Article 19:The court concluded that section 13(3) does not disproportionately abridge the dealer's right to property or the right to carry on business, thus not violating Article 19(1)(f) and (g).Article 14 - Equality Before Law:The court addressed the argument that section 13(3) allows arbitrary discretion to the authorized officer. It was held that section 13(3) and section 13(2) deal with different situations, with section 13(3) applying when documents are too voluminous to inspect on the spot. This distinction provides a reasonable criterion for the exercise of power, ensuring compliance with Article 14.Conclusion on Article 14:The court found no violation of Article 14 as the provisions are reasonably interpreted to deal with different exigencies.Final Answer to Issue 1:Section 13(3) of the Sales Tax Act does not contravene articles 14 and 19(1)(f) and (g) of the Constitution.Issue 2: Utilization of Material Obtained from Search and SeizureGiven the court's conclusion that section 13(3) does not contravene the Constitution, the second issue regarding the utilization of material obtained from search and seizure does not arise.Final Answer to Issue 2:In view of the answer to the first question, the second question does not arise.Reference Answered Accordingly:The court concluded that section 13(3) of the U.P. Sales Tax Act is constitutional and does not violate articles 14 and 19 of the Constitution. Consequently, the second question does not need to be addressed.