1994 (7) TMI 324 - HC - VAT and Sales Tax

Court issues writ of mandamus for return of seized documents, stresses procedural safeguards and reasonable grounds

Mahalakshmi Poly Plast Private Limited and Others Versus State of UP. and Others

The court partly allowed the writ petition, issuing a writ of mandamus for the return of all seized documents to the petitioners. The court emphasized ... - Issues Involved:1. Existence of reasonable grounds for believing tax evasion under Section 13(3) of the U.P. Sales Tax Act, 1948.2. Compliance with Sections 100 and 165 of the Code of Criminal Procedure, 1973, during inspection, search, and seizure by sales tax authorities.Issue-Wise Detailed Analysis:1. Existence of Reasonable Grounds for Believing Tax Evasion:The judgment hinges on whether the sales tax authorities had reasonable grounds for believing that the petitioner was evading tax liability as per Section 13(3) of the U.P. Sales Tax Act. The petitioner argued that no material existed to form such a belief, while the respondents claimed sufficient grounds existed, citing the petitioner's business practices and information about sales suppression. The court referenced the case of Agrawal Engineering Stores v. State of Uttar Pradesh, highlighting that reasonable grounds must co-exist objectively and can be tested in court. The court emphasized that the validity of the authorities' belief must be judged by the reasons mentioned at the time of the order, not supplemented later, as per Mohinder Singh Gill v. Chief Election Commissioner.2. Compliance with Sections 100 and 165 of the Code of Criminal Procedure:The court examined whether the provisions of Sections 100 and 165 of the Code of Criminal Procedure were followed during the inspection, search, and seizure. The court noted that the respondents did not produce relevant records to demonstrate compliance with these sections, which prescribe specific procedural safeguards. The court cited Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver, emphasizing the necessity of recording grounds for belief and specifying the items to be searched. The court found that the respondents failed to show adherence to these procedural requirements, leading to an adverse inference against them.Consequences of Non-Compliance:The court addressed the implications of non-compliance with procedural safeguards. It referenced Pooran Mal v. Director of Inspection, which held that even if a search is illegal, the seized material can still be used as evidence. However, the court distinguished this case by noting that Pooran Mal did not address the return of documents seized during an illegal search. The court also cited Radha Kishan v. State of Uttar Pradesh, which stated that illegality in search does not vitiate the seizure but may lead to careful examination of the evidence.Relief Granted:The court concluded that the inspection, search, and seizure were not in accordance with Sections 13(3) and 13(7) of the U.P. Sales Tax Act, read with Sections 100 and 165 of the Code of Criminal Procedure. Consequently, the court ordered the return of all seized documents to the petitioners. The sales tax authorities were directed to open the sealed documents in the presence of the petitioners or their representatives, make photocopies for their records, and return the originals to the petitioners within six weeks.Summary of Judgment:The writ petition was partly allowed, with the court issuing a writ of mandamus commanding the respondents to return all seized documents after making photocopies in the presence of the petitioners. The court emphasized the necessity of adhering to procedural safeguards during searches and seizures and highlighted the importance of demonstrating reasonable grounds for believing tax evasion before taking such actions.