TaxTMI 
TaxTMI 
1974 (1) TMI 97
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....uddenly raided the factory and office (shop) of the petitioners' firm, Kanhaiya Industries located at Begusarai at about 2.30 p.m. on 5th January, 1973. In the petition they had made out a case that the raid was unauthorised-not with the sanction of the Commissioner of Commercial Taxesbut, in view of the statements made in the counter-affidavit, this point was not pressed and, therefore, I am leaving out the details of statement in that regard. 2.. In the writ application it is stated that "the petitioner was not present at the time of raid nor was any member of his family present and at that time one Sidheshwar Prasad, an employee of the petitioner, was present". In argument, by "petitioner" was meant to convey petitioner No. 1. The case made out in the writ application is that the respondents entered the office (shop) of the petitioners and informed Sidheshwar Prasad that they had come to examine the ledger and account books whereupon Sidheshwar Prasad immediately produced before them all the bahi-khatas, accounts, registers, cash memos, files, etc., in all 64 or 65 in number. And some other papers were also produced by him. The respondents did not examine the account books, s....
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....itioners was conducted simultaneously in pursuance of the programme drawn up at the headquarters. In paragraph 8 of the counter-affidavit, it is stated that at the shop, when the raiding party inspected it, were present Yogendra Prasad, father of petitioners Nos. 3 and 4, and Sidheshwar Prasad, an employee of the petitioners. Jib Narain Sao, petitioner No. 1, was present at the mill. The account books produced by Yogendra Sah at the shop were duly Inspected and an inspection report dated 8th January, 1973, was submitted by Shri S. Ojha, respondent No. 3. No account or any other paper from the shop was seized. The account books produced at the mill premises were also inspected and when a prima facie case of attempt of evasion was suspected, respondent No. 2, after recording the reasons in writing, seized the account books and the papers under section 37(3) of the Bihar Sales Tax Act, 1959 (hereinafter called the Act). A copy of the order recording the reasons in writing and seizing the account books and papers is annexure A to the counter-affidavit. In regard to the receipt, the statement in paragraph 8 of the counter-affidavit is: "It is not a fact that anybody had asked for a r....
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....esent in the mill premises when the seizure took place. The statement in the counter-affidavit that Yogendra Prasad was present in the shop is also not denied in the affidavit-in-reply. 6.. A further reply to the affidavit-in-reply filed on behalf of the petitioners has been filed by the respondents on 16th November, 1973. Since the factum of submission of an inspection report dated 8th January, 1973, by respondent No. 3 was challenged on behalf of the petitioners, a copy of this inspection report has been annexed as annexure D. On behalf of the petitioners, a further reply has been filed on 27th November, 1973. 7.. The following points have been urged on behalf of the petitioners to persuade us to follow the course adopted in some of the cases cited by their learned counsel: (i) That the condition precedent to exercise of power under section 37(3) of the Act was not fulfilled. (ii) That no search or seizure list was prepared. (iii) That no receipt of the documents seized was issued and it was contrary to the mandatory requirement of section 37(3). 8.. Learned counsel for the petitioners, in support of his argument, placed reliance on the following decisions: Income-tax Of....
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.... to produce accounts or documents under sub-section (1). Sub-section (2) is meant for keeping the documents and goods open to inspection of any authority appointed under subsection (1) of section 8 of the Act. Sub-section (4) empowers any such authority to enter and search any place of business of any dealer for the purposes of sub-section (2) or (3) of section 37. Since in this case there was no occasion for exercise of power under sub-sections (1), (2) and (4), it is not necessary to read them in full. The instant case is concerned with the action taken or purported to have been taken under sub-section (3) only. It reads as follows: "If any authority appointed under sub-section (1) of section 8 has reason to suspect that any dealer is attempting to evade the payment of any tax, such authority way, for reasons to be recorded in writing, seize such accounts, registers or documents of the dealer 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 under section 38 and shall thereafter be returned to the dealer in the prescri....
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....ct, 1948, similar to those contained in section 37(3) of the Act. 11.. Having thus enunciated the law, I now proceed to examine in this case how far it has been complied with or violated and what is the consequence of the violation, if any. 12.. In this case, it is immaterial whether the raiding party had gone to the premises of the petitioners, namely, the shop and the mill at 2.30 p.m. on 5th January, 1973, as asserted on their behalf, or at 3.30 p.m., as is the case of the respondents. For the purpose of disposal of this writ application, it is not relevant-and I do not consider it necessary-to investigate whether an informatory petition, a copy of which is annexure 1, was filed by Sidheshwar Prasad before the Sub-divisional Magistrate, Begusarai, on 5th January, 1973, at 4 p.m., as asserted on behalf of the petitioners or whether there was no such petition filed. I shall assume in favour of the petitioners that such a petition had been filed. Admittedly, however, a first information report, a copy of which is annexure 2, was lodged at the thana at 6 p.m. by respondent No. 2. In annexure 1, Sidheshwar Prasad stated that on 5th January, 1973, at about 2.30 p.m., the four pe....
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....er No. 1. As I have said above, the informatory petition recites the Incident at the shop. It does not refer to the seizure which took place at the mill. Seizure, as is clear now, was at the mill. In their confusion and attempt to cast cloud on the raid which took place at both the places simultaneously, the petitioners could make out no clear-cut case and, in my opinion, have landed themselves in difficulty in this regard. It was not a case where some members of the raiding party had exercised their power under sub-section (4) of section 37 of the Act, made any search, broke open any lock, even assuming they had power to do so, and then seized the account books or the papers. It was clearly a case where somebody was present on behalf of the petitioners in the mill premises and he had produced the various documents and registers which were later on seized by respondent No. 2. And, since it is not asserted on behalf of the petitioners who that somebody was, I can safely and legitimately infer that it was none else but Jib Narain Sao. 14.. Under section 37(3) of the Act, it is not necessary that the reason to suspect must exist before any raid is made. During the course of inspect....
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....ure; only suspicion about the attempt of the dealer to evade was sufficient. Apart from the other account books, if loose account sheets numbering as many as 382 were found at the mill premises, it could not but lead the authority to suspect that there was an attempt on the part of the dealer to evade the payment of tax. 15.. I may, however, mention one fact at this stage. On our asking for the original, a copy of which is annexure A to the counter-affidavit, it was produced before us from the Guard File by learned standing counsel I. We found from the original that paragraphs 1 and 2 were cyclostyled copies and were filled up by respondent No. 2 and the details of account books and papers seized were necessary to be filled up and were surely filled up by respondent No. 2. Since on the facts of this case the reason mentioned in paragraph 1 of the cyclostyled copy, which probably is a reason in many such cases, was aptly fitting in, we could not persuade ourselves to believe that respondent No. 2 mechanically filled up the form without applying his mind to the reason for seizure. It is, however, for the Commissioner of Commercial Taxes concerned to consider whether he would allow....
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....t and the time of making any inspection or seizure, which on that calculation will be about an hour or so, was quite sufficient. Petitioners cannot have it both ways-fix up 3.30 p.m. as given in the first information report and take 4 p.m. as the time of lodging the informatory petition. 20.. The details of loose sheets were not necessary to be given in annexure A. Only their number was sufficient to be mentioned and it has been mentioned. It is difficult to appreciate the argument put forward oil behalf of the petitioners that the loose sheets can be replaced. Surely if they are to be replaced, they cannot be in the handwriting of petitioner No. 1 or his brother Yogendra Prasad or his molazim Sidheshwar Prasad or anybody in the employ of the petitioners' establishment. What gain will be made by the department by replacing the loose sheets is difficult to understand. 21.. I now come to the question whether the last requirement of the law, namely, the granting of the receipt was fulfilled in this case or not. In this connection, I find on the statements made on behalf of the respondents that they did not grant any receipt. The statements in the first information report and in ....
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....nder the Act. These, in our opinion, are sufficient safeguards and the restriction, if any, on the right to hold property and the right to carry on trade by sub-section (3) must therefore be held to be a reasonable restriction." The Supreme Court, therefore, opined that the dealer shall be given a receipt and this means that the receipt must be given as and when the accounts, etc., are seized; this is stated to be one of the safeguards. In no case, however, a view has been taken or possibly could be taken that for the failure of the authority to grant a receipt, the whole seizure should be held to be illegal. If the first two conditions are not fulfilled, the entire action will be illegal and ultra vires, it will have to be quashed and a writ of mandamus will have to be issued directing the return of the documents or, in a given case, even of the copy made, as was done by the Mysore High Court in Harikisandas Gulabdas and Sons v. The State of Mysore[1971] 27 S.T.C. 434. It may well also be that, in the context of other facts and circumstances of a case, failure of the authority to grant a receipt under sub-section (3) of section 37 may justify the quashing of the whole action or....