Search procedure under sales tax rules governs penalty sustenance; non-compliance with witness and inventory requirements defeats the adverse inference.

Penalty under Section 77(8) of the Rajasthan Sales Tax Act was held unsustainable because the search, seizure and survey were not conducted in the presence of two independent witnesses and the procedure in Rule 50 of the Rajasthan Sales Tax Rules was not followed. The record showed no item-wise physical weighing of stock, no proper list of goods, and no disclosed basis for valuing the alleged excess stock. In those circumstances, the adverse inference drawn from the search lost significance, and the concurrent factual findings were treated as non-perverse. The revision therefore failed.

---

---

Issues: Whether penalty under Section 77(8) of the Rajasthan Sales Tax Act could be sustained when the search, seizure and survey were not conducted in the presence of two independent witnesses and the procedure prescribed by Rule 50 of the Rajasthan Sales Tax Rules was not followed.

Analysis: The factual findings recorded below showed that no independent witnesses were present during the search, seizure and survey, the stock was not physically weighed item-wise, no proper list of goods was prepared, and the valuation of the alleged excess stock was made without disclosed basis. Rule 50 required the search to be conducted in the presence of two witnesses and required proper preparation of the list and seizure memo. Since the prescribed procedure was not complied with, the adverse inference drawn from the search lost significance. The concurrent findings were treated as findings of fact, and no perversity or question of law was found in the order of the Tax Board.

Conclusion: Penalty under Section 77(8) was not justified and the revision failed.

---